When to Go Pro
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Sooner or later almost every Inc. 500 company hires an ace management team. But how soon -- or how late?
There may be a clear pattern to the order in which the average Inc. 500 company hires its top brass (see "The 1995 Inc. 500 Almanac," [Article link]), but averages sometimes aren't half as interesting as the plot points on the outer edges of a poll. As they stake out their positions on when to hire the pros, the only thing these two Inc. 500 CEOs have in common is their distance from the center.* * *
Take your time. Do it right! Dennis Pence waited at least 6 years (and as long as 11) before hiring key managers for the company he cofounded in 1984, $43-million catalog house Coldwater Creek (#307). "I think it's really foolish to assume that just because you grow to a certain size, you need a Fortune 500-style chain of management," he says. "If you add levels too early, you risk spending more time managing the structure than managing your business."
And manage he did: for six years, Pence and his wife and cofounder, Ann, relied on their own expertise in marketing, advertising, and finance to run the company themselves. Pence confesses that they weren't ready to relinquish control of those areas. "It's ridiculous to bring in managers if you're not willing to delegate," he says.
But didn't Pence risk missing the big picture? "Absolutely," he admits. As the business grew, and 80-hour weeks began to take their toll on employees, Pence realized he needed more structure. He began to gradually bring on a top team -- a management-information-systems director, an operations vice-president, a merchandising vice-president, a chief financial officer, and a human-resources director. Too gradually, perhaps? Not so, he says. "We waited until we really needed the person, and then we took our time and found the best."
To hire the CFO, Pence used a headhunter, put ads in the Wall Street Journal, and conducted more than 100 phone interviews. It paid off: this year he hired a former Neiman Marcus executive. "Because we're a little bigger, we were able to attract people of a much higher caliber," says Pence, who, after enduring years of killing workweeks, is now more than ready to delegate.* * *
No, front-load for fast growth! "I wanted to build a very large company, and I wanted to do it very quickly," says Doug Mellinger, whose $14-million company, PRT Corp. of America (#42), provides software planning, training, and development. "The only way to do that is to bring in very good people from the beginning." So if he hadn't done it that way? "We probably wouldn't be more than a $10-million company today," he says.
With $12,000 in capital from his family, Mellinger didn't have big bucks to hire big guns. But he recruited the best managers he could afford -- a vice-president of marketing and sales, a CFO, a human-resources director, and a vice-president of project management who also functioned as an MIS director -- within the first 18 months. "Every time profit margins grew, we'd hire the next person," he says. The dedicated lieutenants allowed Mellinger to concentrate on what he did best: meet with customers. And they brought immediate benefits, such as the ability to close the books on a financial reporting period within days.
But wasn't Mellinger concerned about PRT becoming top-heavy? "I was much more worried about creating a middle-heavy organization," he says. "What really kills you is when your top managers start to think they need people reporting to them." So at first Mellinger kept things tight: the marketing vice-president, for example, was also the telemarketer.
Mellinger's strategy hasn't been painless. "Some of the people we brought in in the beginning were too advanced, and they tried to push us in the wrong direction," he concedes. "Others we outgrew." Of the original managers Mellinger hired, two remain. Mellinger sees the experience as a growth-related problem.
Do Pence and Mellinger have any regrets? Each swears he wouldn't have done it any other way.
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.