Chain Reaction

Links in the Chain

It's not just vendors and customers who feel more comfortable--employees often view expansion as beneficial, too. In some cases, growth enhances your ability to hold on to good people by providing additional opportunities for them. When employees see there's a range of jobs within your company they can grow into, they might take a longer-term view of their tenure with you.

Staffing is, in fact, the central issue for the head of a growing chain. Business owners and experts are unanimous in their belief that stocking expansion locations with the right people is fundamental to a budding chain's success.

"In the computer business, I've seen a lot of people who have one store and haven't been able to expand because they haven't hired the right people," Petr says. "If you hire people who work hard and give them an environment in which they can succeed, you'll grow."

Nevertheless, for the entrepreneur who has built a successful operation by single-handedly juggling the roles of chief salesperson, accountant, personnel manager and who knows what else, staffing--and the delegating that comes with it--can be a very high hurdle.

"Suddenly you have no choice but to delegate authority," says Donald Hoy, director of Executive Education at Milwaukee's Marquette University. "If you're [opening multiple] sites that might be pretty spread out, you have to face the fact that one person can't be everywhere at once."

The downside of having many more people among whom to divide the work is that you may start to feel like a kindergarten teacher, Hoy says. "You have 30 kids all demanding the same level of attention," he explains, "and especially if the chain is expanding rapidly, management isn't going to be in a position to provide all [of it immediately]."

Collier says that with stores, as with kids, "You tend to get stuck focusing on the ones with problems and not having the time to look in on the ones that are doing okay." Which in turn leaves the better-off locations with room to generate problems of their own.

Solution: Put each location in the steady, capable hands of an employee who will act like an owner. Give managers both the responsibility to make their locations work and the power to make it happen. Lacey suggests choosing people already working for you who are ready to take on more responsibility instead of bringing in new people.

Promoting from within is a smart tactic because it moves up the employees who have proved themselves to be both good at the work and supportive of the company's methods and objectives. "[They're] the kind of [people] you're going to trust to do things the way you'd do them if you were there," says Chuck Wolf, 56, who built a seven-store film and photo-processing chain into a nationwide network of 770 locations over the past 25 years. "You've seen them work, and you know they're up on the goals you've laid out for your stores."

For the small chain, however, Hoy warns that the most obvious staff source for the new location might not be the best. If the original location is bursting with motivated, effective employees, move some over to the new place, he says, but be selective. Moving too many people out of the original location can make it the weakest link in the chain--when it ought to be the strongest.

"It might be that store No. 1, because it's up and running, is easier to manage than store No. 11," Hoy acknowledges, "but if you hurt store No. 1, it will probably be harder to recover there than at the new stores because [its] loyal clientele are going to think they've been abandoned."

On top of that, employees of the old store might start to sound like the older kids griping that the baby of the family gets all the breaks. "They'll start to notice that they don't have new carpet or shiny new equipment," Hoy says. "They worry about their place in the chain."

Collier feels a good way to combat that attitude is to remind employees at the older location that they're the big brothers and sisters with important responsibilities now. "People working in our original store know that we make the merchandise selection for the other stores, so a lot of the success of the rest of the chain depends on them," he says.

It's also essential to keep in mind that a chain of stores need not be a string of clones. Trying to duplicate the existing business in a new location might render some subtle differences invisible. Collier found that out when one of his new stores wasn't living up to projections. He carefully examined which items at that store were selling and discovered he'd misjudged the local market. "Our higher-priced merchandise, which sells well at other stores, was out of reach for the people who shopped in the store," he says. After Collier did a little strategic reshuffling of its product line, the started performing as expected.

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This article was originally published in the August 1999 print edition of Entrepreneur with the headline: Chain Reaction.

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