How Entrepreneurs Can Hone Their Management Skills to Fuel Production
Productivity has become a national obsession. Countless books, articles, podcasts and videos promise the secrets to wringing a few extra minutes out of the workday or boosting organizational output. But, for all that talk, the United States hasn’t exactly been setting any productivity records.
After several years of meager growth, the U.S. Bureau of Labor Statistics reported a productivity decrease of 0.2 percent in 2016. For the first time since the global financial crisis of the late 2000s, production decreased for consumer goods such as cars and furniture.
The reasons for this drop remain unclear. Some experts suggest that the multifactor decline represents only one aspect of the economy. In their view, the rise of service-based businesses makes it difficult to get a full picture of American productivity. Others claim that a lack of investment in multifactor infrastructure is responsible for the change.
Most likely, several variables are affecting the measure. For one thing, the slowdown reflects a long trend of declining U.S. productivity, so the latest dip isn’t particularly alarming. The confusion over the cause, however, is a different story.
A measure of success
Measuring progress is difficult without clearly defined goals. Consider a baseballor basketball player who trains regularly to get “better.” Better at what? Missing fewer baskets? Landing more right hooks? Improving his batting average? An athlete who doesn’t have definitive objectives will struggle to make any meaningful gains.
“Keeping your eyes on the prize” is impossible if there is no specific prize you’re looking toward.
The same holds true for businesses. Business owners need milestones, hard numbers and output goals to determine whether they’re doing well. Measurable goals help identify real and relative weaknesses, which indicate where improvements are needed. A company might have passable sales numbers that keep the lights on and salaries paid, but those numbers could be abysmal compared to competitors'. The only way to truly gauge success is to home-in on the numbers.
In the case of the U.S. productivity slowdown, experts are looking at the numbers from several different angles. No single metric determines productivity, so there's no consensus.
In most companies, measurement is the managers' domain. They’re supposed to keep their teams on task, ensuring every project is undertaken in the service of meeting the company’s specified goals. But, in startups, the founder is often also the manager. That's usually not a good thing.
Different strokes for different folks
Generally speaking, good entrepreneurs are terrible managers. These roles require vastly different skill sets and mean disparate things to companies.
Entrepreneurs are visionaries. They inspire their teams with lofty goals and are comfortable taking risks based on unsubstantiated hunches. Managers take over existing businesses and analyze what works. They implement best practices and uphold the organizational model, producing the good or service at the lowest possible cost.
In short, entrepreneurs emphasize creating value while managers worry about cutting costs. Both are vital functions for any company, but they’re completely different mindsets. So, how do you adopt a managerial mindset?
How to adopt a managerial mindset
Entrepreneurs rarely make smooth transitions into managerial roles, as their startups mature into firms. However, it’s not unheard of -- Henry Ford and IKEA’s Ingvar Kamprad come to mind as entrepreneur-turned-manager success stories.
Here are a few strategies to help you make that leap yourself:
Use numbers. Instinct might lead you to innovative new products or great hires, but numbers create sustainability. Top-performing companies are 5 percent more productive and 6 percent more profitable than competitors because their leaders rely on numbers when making decisions, according to a study by a team at the Massachusetts Institute of Technology.
Whenever possible, measure inputs, outputs and resource use. If something can be measured, track it. Numbers are a universal language, and it’s much easier to win people to your side when you have the stats to back up your strategy. Concrete figures are also great indicators of whether your instincts align with reality.
Study the data over time. A record of sales performance, product engagement and other metrics is necessary to accurately assess any company’s health. Periodically compare your numbers from last year and this year and your forecasts for the next few years to track trends. Doing so will help you identify which departments are doing well and which are a drain on your bottom line.
This exercise will also help you plan for your company’s future. In a global survey of workers published in the Harvard Business Review, 72 percent of participants said they wanted their leaders to be forward-looking. If you want to retain your best team members, you should become more comfortable with data.
Be consistent in your process, but don’t be a perfectionist.
Here’s a scary statistic: Only 4 percent of top managers surveyed said they understood their companies’ front-line problems, according to Sidney Yoshida’s acclaimed Iceberg of Ignorance study. If you get too hung up on specific numbers and minutiae, you could miss the larger trends occurring in your organization.
Using ballpark figures is fine as long as you’re taking a holistic view and not letting major warning signs go unaddressed. Be sure to use the same method each time to ensure you can compare measurements over time.
Set clear goals for every management level. The higher you go up the management chain, the broader your goals become. At the top level, it’s sufficient to say the profit margin should be "X percent of costs of goods sold." At the middle and lower levels, managers should adopt more specific goals. If your departments operate as independent sections within the larger business, their individual goals must jive with the combined bigger-picture targets.
Make sure each department is working on separate but complementary objectives. Not only does this alleviate adverse incentives, it also minimizes confusion and frustration. When Zappos announced its radical move toward a holacracy -- replacing a traditional management hierarchy with a peer-to-peer accountability system -- 18 percent of employees quit during the radical experiment. Clarity and specificity can save a lot of management headaches as your company grows.
Successful management creates measurability and comparability, but that doesn’t mean you need to sacrifice your entrepreneurial spirit to become a great manager. Continue seeking new opportunities for your organization, but look before you leap.
Managers maximize productivity within business constraints while entrepreneurs look far outside the box. If you can manage to marry these two mindsets, you’ll build a business that’s innovative and financially solvent -- every entrepreneur’s dream.