Leadership success

Effective leaders understand their role.

Recently, I met with the leader of a very successful family-owned business. His company employs more than 200 people in multiple locations, yet maintains a flat organizational structure. The owner has daily involvement in the business but is not hands-on or involved in the details. He is confident that under his leadership, people will act appropriately, serve customers’ needs and protect the interest of the company.

According to him, there is only one way to run a company successfully: “You need to pick the right people and then hold them to the right standards,” he says. “By doing that, I can be scarce.”

This owner is committed to his leadership ideas. He hires people for management positions based on his personal “good people” rating system. It is not easy for him to explain, but the system is weighted heavily toward strong entrepreneurial and independent managers.

Once he has good people, he holds them to high standards. His managers know his expectations and standards because he continuously communicates them. He feels this is one of his most important responsibilities.

He has unwritten, but understood, agreements with his managers that define how they will operate, including how they will satisfy customers and treat employees.

Offer incentives for good decisions

The company’s compensation program is another important factor that helps this leader be “an unimportant part of the daily operations of the company.” He designed and implemented a compensation system to reward managers and other key personnel for making good decisions.

The system doesn’t simply reward a manager for running a profitable operation. It is designed to ensure the operation is meeting or exceeding operational and cultural standards and expectations. This reinforces his belief that operating the company the “right” way and fostering the “right” culture are important to producing a healthy bottom line.

This is proven in the fact that the company’s net profit percentage is very high for its industry, while its managers are among the most highly compensated.

Combined strength

It’s no surprise this company is doing so well. It is simply one more example of the power and practice of good leadership getting a team rowing in the same direction, without the leader even being in the boat.

This organization excels because it combines:

* A strong leader with a clear understanding of his leadership style who knows the strength of his company lies in the strength of his team.

* Management carefully selected to excel under his style of leadership.

* Managers who understand the leader’s expectations, have clearly defined standards to operate under, and are given the freedom to lead in their areas.

* A compensation system that rewards management for making the right decisions and operating according to clearly understood standards. Joel Strom ([email protected]) is director of Joel Strom Associates, LLC, the growth management practice of C&P Advisors LLC, which works exclusively with closely held businesses and their ownership, helping them set and achieve growth objectives while maximizing profitability and value. Reach him at (216) 831-2663.