Case Study: The Abdicator
“I’m ready to work on the next project, so I took a business partner to keep my business running. But he’s dropping the ball, and I’m constantly being called in to fight fires!”
Suzanne owns a daycare. It’s a great little spot: she has private rooms, a bit of green grass outside, and a waiting list for enrollment. Or, at least, she did.
Last year, Suzanne had a great idea: to open a kids’ used clothing store. As a parent, she knew how quickly kids outgrew expensive sweaters and jeans. And as a daycare owner, she already had a huge mailing list for potential clients. Everything about the idea was solid, so she leased a storefront downtown and opened up.
Knowing that her daycare business was really the “golden goose”, Suzanne was worried that it would falter without her constant presence. Her idea was to give the daycare manager, Shawn, a share of the business: Shawn would have some “skin in the game”, some upside to growth, and an incentive to work hard. After all, no one works harder than an owner. Or so Suzanne thought.
The first week, Shawn wanted to repaint one of the kids’ rooms. Suzanne had chosen blue for a reason–it’s calming for little kids–but she wanted Shawn to feel like a real owner, so she let him make his first decision. After all, it would defeat the purpose to micromanage him. Right?
Over the next few months, a few little hiccups happened. But Shawn’s attitude toward the daycare began to cool: he started wearing jeans and a t-shirt to work; started showing up late; and began yelling at staff. He adopted the privileges of ownership but seemed to avoid the mantle of responsibility.
More and more frequently, Suzanne gets texts from other staff, calls from parents, and emails from creditors. Last week, she had to rush to the daycare to open the door for the staff because Shawn was late without warning. She feels herself getting sucked back in. Worst of all, enrollment is declining, and Suzanne is afraid she’ll have to chip in some money to cover payroll. She called me because she was dreading the conversation with Shawn: as a shareholder, he’ll have to put some money into the business, and Suzanne doesn’t think he can afford to.
Here are Suzanne’s real problems:
She didn’t clearly lay out the potential downside to Shawn; she simply handed him a winning lottery ticket
She didn’t consider other options instead of giving up shares (revenue splits, bonuses, salaries)
She didn’t test her processes to see if her daycare really COULD run without her
She didn’t test Shawn’s leadership skills
She’s trying to abdicate instead of delegate.
She didn’t ask Shawn if he WANTED to be an entrepreneur.
In the words of Jay Williams, a senior TwoBrain mentor: “Everyone thinks they want our job. But nobody REALLY wants our job.” The lure of entrepreneurship is sexy, and staff often only see the upside: freedom of time, and extra money. But no one hears about failing businesses, because the entrepreneurs don’t talk about them.
Suzanne’s first step should be to ask the question she SHOULD have asked first:
“Shawn, do you want to want to own part of this business?”
Is it too late to ask? Maybe, but Suzanne can give Shawn an opportunity to bow out gracefully, save herself a very hard conversation and allow Shawn to escape the upcoming cash call. Even if there’s a 10% chance Shawn says “Yes, I want to go back to being an employee!” it’s worth asking the question first.
Next, Suzanne must lay out the crisis without pointing fingers or laying blame. She must advise Shawn of the upcoming cash call and ask him if he can make his contribution. From there, the conversation can take one of three paths:
Shawn can say “Yes, I’ll pay” and they can begin dissecting the problem.
Shawn can say “I don’t have the money!” and Suzanne can offer to cover the cash crisis in return for his shares.
Shawn can say “What the hell happened? This can’t be true!” and try to derail the conversation.
Of all the options, #2 is the most likely. Shawn is unlikely to doubt Suzanne’s motives, and the bank balance supports her case. The crisis is actually a huge opportunity for Suzanne to get her company back…and for Shawn to get what HE wants, which is really a secure job.
Outcome:
Though Shawn loved to say “I’m an owner”, he didn’t really want the responsibilities of ownership. He felt as if Suzanne had “abandoned” him to the business, and was unreachable. Suzanne admits that she had been focusing all of her attention on the clothing store, believing the daycare was in good hands. If not for the cash crisis, Shawn and Suzanne might have been able to work through their problems as partners. But ultimately, Shawn didn’t have the money to cover his share of the costs, and had to sell his share of the company back to Suzanne. It was a costly lesson for her. First, the business should never have reached the cash crisis point. And second, though Shawn sold his shares and is back to employee status, he’s suspicious of Suzanne, and probably looking for a job elsewhere.
Suzanne said: “I wish I’d just paid him to be a manager, or at least tried to explain the downside of ownership before I gave him a share of my baby.”
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I don’t often hear “My business is a cash machine”, but when I do, I love it! I get excited for the entrepreneur, because I know they ALWAYS have another big idea in mind. This is the entry point of the Tinker Phase, and it’s incredibly exciting. The next trick is to keep the first business thriving while the entrepreneur shifts his focus to new opportunities. That means leaving a Farmer behind, and, sometimes, taking a partner. But before you take a partner, make sure they REALLY want to be an entrepreneur!
