Small business, big mistake: Allowing my investors to handpick my management team


Don’t let the appeal of an all-star management roster overshadow the importance of team chemistry, Kim says. (Bigstock/Bigstock)
April 15

Welcome to “Small Business, Big Mistake” where small-business owners face up to their biggest mistakes and share advice to help your company avoid the same fate. Check the On Small Business web page every other week for the latest entry.

Many entrepreneurs have played witness to the way investors, with their money, expertise and connections, can help grow a company — and grow it quickly.

When I started a yogurt franchise eight years ago, for example, with some money from friends and family, it took me a (long) year to open my first store. It took me another (even longer) year to add my second and third locations.

Then I secured $12 million in financing from a private equity firm. A year later, we had opened more than 50 stores. Now, Red Mango has 300 locations across North America. I’m now convinced that, with that yin and yang, blending an entrepreneur’s passion with an investor’s resources, you can achieve anything.

Well, almost anything.

After a round of financing, one of the most important things an entrepreneur will want to do is to hire experienced professionals who can help the business grow stronger. Of course, investors know this well, which is why they’ll help the company find and recruit highly qualified candidates with successful track records.

For many entrepreneurs, especially those doing things for the first time, having money to hire great people and direct access to talented candidates presents a major advantage.

However, in the same way making a first-round pick in sports doesn’t automatically produce a winning team, access to impressive resumes doesn’t guarantee success.

Before I started Red Mango, I knew very little about retail or franchising, so finding investors who could help me in both of those areas eased many doubts I had about my ability to do something I’ve never done before. Naturally, when the time came to hire highly experienced people, I welcomed all hiring recommendations from my new network of investors. Not long after that, mostly due to self-doubt and my lack of experience, I started turning over hiring decisions to those who financed my company.

It wasn’t until some key hiring decisions later yielded a short but unforgettable list of corporate blunders that I realized there is a lot more to building an effective management team than the quality of each person’s reputations.

One memorable mistake was a seasoned manager’s decision to remove iced teas from our menu because his “professional experience” had determined the supply chain responsibilities required to support those beverages were not worth managing. Although the teas had not represented a large portion of our sales, we developed them in an innovative way that not only helped us earn industry accolades, but more importantly, they gave our guests another reason to consider our brand unique and interesting.

In business, the importance of teamwork is as well-known as it is trite, so it can sometimes be overshadowed by the idea of working with an elite roster of all-star professionals. But just like a basketball team can’t win if its star players are unable pass the ball to one another, a company can’t succeed with managers who are individually awesome but together unable to spark a greater synergy.

Going through some unsuccessful hires was certainly disappointing at the time, but it helped me learn the importance of finding people who not only have strong resumes, but who can work with me in the same ways basketball players can make blind passes to each other. Keep in mind, the confidence one might garner from somebody’s past can be quickly shattered by asynchronous thinking in the present.

I have always advised fellow entrepreneurs to surround themselves with people who are smarter and more experienced than they are. But I now qualify that guidance with that which might be obvious but is often overlooked: No matter how impressed you are by someone’s qualifications, make sure you’re convinced beyond doubt that you can work with that person in an effective and synergistic way. Being comfortable with your team is important, but being happy with them can guarantee success.

Dan Kim is the founder and chief concept officer at Red Mango, a national frozen yogurt and smoothie franchise with more than 300 locations, five of them in the Washington metropolitan region.

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