The Challenges of Being a Partner in a Small Company
Blog Barista: John Leigh | Sept 11, 2019 | Business Practices | Brew time: 8 min
I have never viewed myself as a “boss.” Rather, I view myself as a “partner,” which is my title in reality. A partner and a boss are similar, but different. In my mind, a boss is a single owner of a business who is able to make their own decisions and then has to live with the rewards and impacts of those decisions. A partner can also be an owner, but his decisions and the resulting impacts are shared among the other partners in the company. Being a partner of a small start-up company comes with its challenges. Here’s some insight on how we, as partners, addressed the challenges we faced from KL&A’s inception and growth.
Identifying Roles and Responsibilities
With any organization, the roles and responsibilities of each of the partner need to be defined. In a large corporation with many partners, these are clearly defined in organization charts, position descriptions, etc. In a small start-up company, they are informal.
KL&A started with two partners, Jim and I, and as a result we organically evolved to our current roles within the company. There was no formal discussion of who was responsible for sales, administration, delivery, etc. Rather, each of us assumed the appropriate leadership role for a specific task, initiative or client.
As KL&A matured as a company, both Jim and I naturally assumed leadership roles in specific tasks with no detailed discussion of who was in charge. We both had a mutual understanding of each other’s strengths, weaknesses, and the skills required to tackle the assignment and roles. We also had a common commitment to the company with a shared vision of where we wanted to take the company. This allowed us to make decisions without direct consultation with the other. We both understood that if our thoughts and directions were consistent with a common vision and direction of the company, then we had the complete approval of the other to undertake initiative.
On the other hand, if an initiative conflicted with our vision and required us to change, we reached out to each other to discuss our approach. This type of partnership has served the company well over the last 27 years because of our trust and shared vision.
However, we now have six partners since our recent addition of four professionals. These additional partners added complexity to our approach outlined above. But, I continue to believe that the roles and responsibilities of each of the partners will still be defined organically. As the company grows in size, there may be a need for a formal role definition within leadership.
Defining the Company
We had three initial questions that needed to be answered when starting KL&A. First, what kind of business were we? System Development. Secondly, how were we funded? Self-funded. Lastly, where were we going to be located? Michigan. These three items drove the initial activities of the company.
Being in the System Development business meant that we ultimately would need to add staff for service delivery. It also meant that growth in revenue would also translate to growth in staff size. Our initial challenge was to define our market for system development activities. Much of the IT activities in 1994 were beginning to focus on the Y2K problem, which many companies were remediating their legacy systems with new software. These systems were predominantly mainframe based which did not fit our business model of client/server applications. Jim and I passed on this wave of business opportunity because it had a short shelf life. We have since upgraded our development activities to reflect web-based systems, mobile applications and cloud-based applications. Simply stated, our strategy was and still is to stay current with the industry and our clients.
Our funding approach slowed our growth. We subscribed to two principles. The first, pay ourselves before we pay others. This meant that we did not hire anyone until we believed that we had adequate revenue to fund the payroll of our staff on an ongoing basis. To this date, we have not had to borrow money to fund our operations. This discipline coupled with a no-layoff policy objective, means that we make our hiring decisions in the context of our long-term business backlog. The second principle, do not grow the company on the backs of our employees. This meant our employees would receive good benefits while our engagement decisions balanced the needs of the client, the company and the staff. Stated differently, we recognize that great staff would be the key to great client service and overall quality of our products.
Once we were able to establish a stable environment, hire a great staff and remain profitable, we began to look for opportunities for growth. Our growth in the first 12 years was very slow but gradual. In our 15th year of operations, we were only a company of ten professionals. In the context of a small business we were a success (most startup companies do not make it 5 years). However, in the context of our plans and expectations we needed to do more. But with only 10 people, we could not provide career opportunities to our staff nor did we have the critical mass to do the large, complex engagements that would excite our company. Clearly, we had to grow.
We had to expand our services into new areas and take measured risks for new engagements. We did this on a project control office (PCO) engagement in which we were a subcontractor. We bought the contract and become the prime contractor while retaining all the project staff. This project quickly expanded our staff to over 20 people. The successful implementation of the new system greatly enhanced our reputation within the client, and formed the basis for our project management approach and Testing Center of Excellence. It also allowed us to bid on and win several new contracts, which exceeded one million dollars and moved us toward developing web-based applications versus client/server applications. Since that time, managed growth has been a clear objective for the company.
We have successfully tackled new technologies, such as mobile functionality and cloud-based systems, as well as large complex systems with budgets exceeding $5 million dollars. We also tried geographic expansion, opening new offices in Ohio and South Carolina with mixed results. Our growth is such that KL&A now has over 100 professional staff and revenues approaching $20 million.
As we proceed we will always have controlled growth as an objective. Our growth plan may have several starts and stops but our vision will always integrate the needs of the company, the client and our staff.
Hiring & Retaining Good People
I’ve often said, “the service industry is a people business.” Jim and I realized this from the first day. We knew we needed to hire good people to accomplish our objectives. But, who would want to come work for a new startup company of two? We needed highly skilled people.
Our first hire was Donna, a professional who had worked previously with both myself and Jim. Hiring her allowed us to tackle the new development with new clients. However, our subsequent hires were more challenging. We were not able to attract professionals with the direct skills we needed. As a result, we recruited professionals with similar skills (development on different platforms) and business professionals who wanted to transition into the IT world. This introduced training and mentoring issues.
Our next venture into recruiting was the internship arena. Beth and Marty were our first interns. Both are still with the company after 20 years, and Marty is one of our new partners. We have continued to have good success with recruiting and retaining interns, and it remains a key part of our recruiting strategy.
As we expanded, our recruiting strategy married the need for highly skilled individuals with up-to-date technology experiences with the need to integrate these individuals into the KL&A culture. Our interviews and hiring processes balanced these needs. As a result, even after expanding to over 100 professionals, our culture remains the same, our vision and ethics remain strong, our quality remains high and our turnover remains low.
In order to hire these good people, we also needed to address benefits. We knew that our small company competed with large companies to attract high-quality professionals. As such, we implemented a rich benefit program including health care, bonuses, 401K matching and vacation from the start. This allowed us to compete for talent and for benefits to not be an issue in employee retention. Rather, our employees focused on our culture, the ability to grow their careers and the sophistication of our projects. Again, as a result, we are looked at as one of Michigan’s premier IT firms and have been elected as one of Michigan’s top workplaces.
Lastly, we had to deal with establishing personnel policies. When we started, our personnel policy manual was comprised of one sentence, “we will treat you like a professional, and we expect you to act like a professional.” As we grew, we had the need to expand the manual to include specific guidelines about roles, responsibilities, behaviors, etc. While the manual is clearly smaller than other corporations, it is much larger than my expectations and desires.
As we move forward, personnel issues remain our number one challenge. Over 70% of our staff are under 35. Therefore, their career objectives, interests, etc. are different from baby boomers, Gen X’ers and previous generational groups. KL&A has to recognize employees interests and needs and balance against the needs, values and principles of the company. Like the technologies we practice, KL&A has to adapt to a changing world.
As a leader in the company, it is my job to help the company and the other leaders to adapt to any new challenges. As well as help to maintain a balance between the needs of our clients, our staff and our company while still focusing on growth and opportunities.
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