The org board. How to develop a company structure - стр. 3

We call this the Manual Stage, where the business founder, holding the vision and being competent, manages a small team quite well. He knows the technology for producing the product, as well as what his employees need to achieve in order to get results. As the company engages in small-scale activity, there aren’t executives and management issues do not come up. Regardless, the business is still gradually approaching the First Management Crisis. When the company hits the crisis depends on how fast the company is growing.

Once the idea proves successful and you have to turn it into a real business, then we move to the next stage. The owner begins to understand that to further expand, he needs to shift from directly managing individual employees to managing parts of the company – he needs to create a second level of managers. Whether the business owner promotes his best employees to managers or tries to hire experienced ones, the First Management Crisis deals the inevitable blow. After managers or executives are hired and established, overall efficiency usually drops.

CEOs of smaller companies come to a seemingly logical conclusion that the drop is due to the incompetence of his new hires or their unwillingness to work. Have you ever heard executives complain about employees who don't want to work? Yet, these same employees had previously produced good results under direct management – and suddenly everything changed.

The real reason is not that people transform overnight, but that the leader- usually, the owner of the company – is only good at directly managing rank and file employees and not his new level of executives. The owner knows the production technology and competently directly guides employees to the desired results. The owner is just not able to effectively manage the executives who must now manage the other employees. It's one thing to fly a plane, which in itself is not an easy task and requires special skills, but it’s a completely different job to lead a team of pilots. A pilot has to competently handle the machine, an executive needs to competently handle people. Additionally, they use completely different bodies of knowledge and tools.

This is the main reason why small and profitable companies, even those with great products, rarely expand beyond a certain point. They weren’t able to overcome the First Management Crisis and grow out of their small business "pants". Thousands of examples illustrate the First Management Crisis. One of the most famous is the incredibly successful small family restaurant owned by brothers Dick and Mac McDonald. It was well known locally and produced a steady income for its owners. The brothers made numerous attempts to create a network of fast food restaurants, but it wasn’t until Ray Kroc