Layering Your Employees

Q. I have an employee who has been with me since the start. He has always reported to me. While he is a good salesman, he’s not a sales manager. I know that the time will come when I need to bring in a sales manager over him, but I’m worried about that transition. How can I do this smoothly?

A. This is a difficult issue. It can be exacerbated if you have done what so many entrepreneurs do, which is to hire friends and family. We strongly suggest that if business owners are going to hire friends and family, they do it with their eyes open. Recognize that the time may come when the person has to be layered or worse yet, replaced.

Unfortunately, any time you layer an employee, there is the risk of hard feelings. However, we’ve found that following the five tips below will increase the probability of a smooth transition.

Don’t promote automatically – The best widget maker is not necessarily the best manufacturing manager. Too often, entrepreneurs hire a widget maker (let’s say, Uncle Fred). When a second widget maker is needed, he or she naturally reports to Uncle Fred because Fred is experienced widget maker. Before long, Uncle Fred is managing a staff of widget makers―he has been automatically promoted. Unfortunately, if Uncle Fred doesn’t have the skill set to be a manager, you’ve got a problem. Make sure that promotions into management positions are explicit decisions, not unconscious progressions.

Assess employee’s skills early – Make a conscious decision regarding the ability of your first employees to grow into management positions within the organization. Make this assessment long before you need a manager. Don’t give people management responsibilities if they don’t have the skills to succeed. It seems you have done this. Good for you. Now, don’t make the mistake of having people report to your sales person.

Invest if appropriate – You may have an employee who you believe could develop the skills to manage with some training. This is a process. It’s not something that happens in a single seminar. Begin investing long before you need the employee to accept management responsibility. Give him or her opportunities to practice the new skills before being promoted. For example, give him or her responsibility for managing a taskforce or a special project and provide feedback on performance. It is unclear whether your salesman could develop the skills to manage. If so, you’ll need to start developing him immediately.

Keep salaries in line – One of the biggest problems we see occurs when employees who lack the skills to succeed as managers are promoted and their compensation is increased to match the job. When such employees fail, the company is left with unattractive alternatives: (1) Let the failed manager continue to underperform (the worst possible choice for the enterprise, but one we see small businesses make too frequently). (2) Terminate the employee. (3) Demote the employee and reduce his or her compensation. (4) Demote the employee but allow him or her to keep the higher compensation. There are no good choices here. Which one is the “least bad” will depend on the situation. The decision is more difficult when the employee is a friend or family member. Our advice is to not raise a new manager’s compensation until he or she is succeeding in the new role.

Set expectations well in advance – Have candid conversations with employees about their aspirations and your perspective on their abilities. Don’t let employees develop false expectations. It will only result in a disgruntled employee at some point in the future.

Layering employees is always difficult and nothing you do will guarantee success, but following the tips above will significantly improve your chances.