Q. My question concerns my son. After thirteen years in the catering trade, he decided to join in a venture with a very good friend.
His pal had opened a health food cafe some 18 months ago and succeeded in establishing a popular business.
He joined him as a partner, and invested in another cafe, which opened within the last month. This too has gone well.
My question is although both businesses are still quite young, and they are both working hard, they have both realised that in order to make this really work they will have to open more outlets.
What would be your view on when this should happen?
A. New businesses are often in a hurry to get bigger but it is wise not to rush.
Your son and his partner have just launched a second outlet and still enjoy the advantage of hands-on management.
As soon as they open another they’ll have to hire a manager who will need supervision.
Why is your son so desperate to get a bigger business?
Big doesn’t always mean better. If the current restaurants make a loss the more outlets they open the more money they are likely to lose.
If, however, as I hope, the two restaurants both make money, before starting to grow them into a chain, why not see how much money can be made by running the two of them even better and building a great reputation.
I’ve already hinted that running lots of outlets can bring lots of complications.
When I studied Industrial Economics at Nottingham University I learnt all about economies of scale, so I understand why managers are tempted to think that a bigger buying power will increase margins and transform profits.
But growing companies can find that overheads, created by a “head office”,soak up all the money made on the shop floor.
We reckon the employment cost of an extra office colleague wipes out the profit of an average shop!
Too many growing companies bring in an expensive general manager who spends all the profit without improving the business.
Your son and his partner are starting a long learning experience. Once they decide it is time to expand, as well as keeping a tight control on overheads, they will have to find the right sites at an affordable rent and resist the temptation to overspend on shopfitting costs.
Most of all they will need to trust colleagues and delegate. It will be vital to pick positive people with the right personality to help them grow their business.
One day your son could have 50 or over 100 restaurants. But, on the way, he and his partner will need plenty of patience and a lot of luck.
Q. Talented people with a strong personality are sometimes difficult to manage. What strategies would you suggest to ensure that such people stay onside?
A. I want people with a strong personality and like colleagues who take responsibility and use their initiative. But you ask a very good question.
Even our free upside down style of management must make sure that we only have team players. Some strong personalities are simply not for us.
We certainly don’t want selfish, bloody-minded rebels with a chip on their shoulder. Extreme characters must be quickly encouraged to find their happiness elsewhere.
Forceful personalities need the guidance of a strong company culture.
The way good management works best is when the chief executive and senior team create the strategy, set the culture and then give colleagues freedom to deliver the detail.
Management are there to help their team. Culture and strategy set the scene, there is no process, no KPIs and no need to issue orders.
Given trust and authority, your strong personalities will deliver the goods.
This is very different from the Corbyn School of Management, which expects party members to help set the strategy and then puts policy into practice by taking away individual freedom and making everyone follow a process policed by central government.
In contrast I’m in favour of “Upside Down Government”.
To succeed, a business needs big personalities but no one should think they are bigger than the business. You will interview plenty of self-confident extroverts but make sure you pick Mr. Happy, Miss Punctual, Mr Smart and Mrs Helpful and avoid Mr Greedy, Miss Selfish, Mr Rude and Mrs Bossy.