Expanding management: The delicate art of sharing control

This article was originally published by Fortune.com on Monday, Jan. 24, 2011.

While the thought of sharing control of your company can be nerve-wracking, those who have been through the transition swear by having a second set of hands. As long as they're the right hands.

By Katherine Reynolds Lewis

Since founding Secure Enterprise Computing in 1998, chairman Randall Bennett has seen business boom -- and bust. But when the demand for security technology began to crest a couple years ago, he knew that he didn't want to miss the opportunity to grow his company. He also knew that to ride the wave, he'd need to expand his leadership team and share control of the business.

"You can have 100% of nothing or 50% of millions," Bennett says. "I've seen a lot of entrepreneurs fail over the years. They're not able to give up [control]."

The solution: bringing on Robert Pickens as president and chief operating officer of the Morrisville, N.C.-based firm last year. Pickens advocated a narrower strategic focus and implemented quarterly reports and a suite of metrics that give top managers an up-to-date picture of how the business is doing. With Pickens heading up operations, Bennett now has more time to develop new business and serve as the face of the company at community and industry gatherings.

Expanding the leadership team is a natural step when a company's growth outpaces the skill set or capacity of its original founders. Google's Larry Page and Sergey Brin looked to Eric Schmidt when the time was right (The company has entered a new phase, with Page soon taking the CEO reins and Schmidt moving into the executive chairman role.). Facebook's Mark Zuckerberg sought out Sheryl Sandberg. It's a tried and true part of a start-up's growth path, but it's no simple task.

"How do we make sure we preserve the culture and all the wonderful insights and talents that our founding team members were able to inject, while making sure we have a management bench that will maximize our chances of success?" asks Phil Dur, managing director at Investor Growth Capital, an expansion-stage venture firm. "You can have a good product and good market opportunity but if you don't have good management, you don't have much at all."

Determining what kind of person you want to add to the team is the most important step in this process, closely followed by making the transition carefully enough to ensure support from your staff and any investors. Done right, the new team will inject energy and ideas into your business without diluting your core mission or changing the culture of the company.

Dur recommends having multiple, extended contacts with any candidate, with vetting by the chief executive, senior managers, board members and any investors.

At Secure Enterprise Computing, Pickens began as a consultant and won the respect of top executives as he learned the business. It soon became clear that he was a good fit for the company.

"It's an art when you're a small company and you put someone in a management position because you need the rest of the group to respect and want that person" in the new role, Bennett says. "Sometimes people come in and think what they have to do is rock the boat. He [Pickens] spent a tremendous amount of time staying quiet, talking to everyone."

Angela Cauley was reluctant to add a top manager at Coalescence, the Columbus-based custom seasoning company she founded with her husband in 2005.

"It was trying to make sure the timing was right and we could really afford to bring in somebody of that caliber," Cauley says.

So rather than jumping into a search for candidates, she brought in industry veteran Theresa Potter to work on a specific marketing project on a volunteer basis and invited her to participate in advisory board meetings to get to know the business.

"I had a really good opportunity to work with her over the year and understand what her core strengths were," says Cauley.

Potter's management and personnel skills complemented Cauley's expertise in research and development, quality control and technical sales. It was a no-brainer to hire her as president.

"It was really exciting. It was a reward for me to provide myself with another person who could take my desires and run with it," Cauley says. "She does things that I never even thought of."

After vetting a new senior manager closely, it's important to give that person authority and autonomy, advises Melinda Emerson, Philadelphia-based author of Become Your Own Boss in 12 Months.

"You have to figure out whether your ego can take bringing another person to the table who's really making decisions that affect your business," Emerson says. "Not only do you have to have clearly defined roles for you and your new manager, but you have to make sure those roles are clear to everyone at your company."

You don't want employees pitting you and the new manager against each other, or coming to you in hopes of getting a different answer than what they heard from the new executive.

It's also important to honor the history of the company and the qualities that built the business. Peter Cobb, a co-founder of eBags, was impressed by Vince Jones's approach when he took over as chief executive officer of the Denver-based retailer.

Shortly after taking the reins, Jones marked eBags' 10-year anniversary with a party at which the previous CEO, Jon Nordmark, gave a teary speech about how proud he was to have Jones leading his company.

"A lot of new CEOs would say, 'I don't want the ex-CEO within 100 miles of this place because people might throw their allegiance behind him,'" Cobb recalls, marveling at Jones's ability to balance appreciation for the past with a need to kick the business into high gear. "For me as a founder, investor, shareholder, that's the best of both worlds."