Failure to give up authority is costly

December 1, 2002 By    

Many long-time owners of independent propane operations struggle with turning over the reins to someone else. While understandable, it can do irreparable harm to the company. Here’s an example.

Randy Wilmouth, general manager of Riley Propane, had learned that his latest design for operational changes had begun to fall apart. The changes were part of an overall shift in operational strategy jointly developed by Randy and the company president, Stanton Riley. The objective was to streamline operations, increase effectiveness of collections, and position the company for future growth.

Randy was excited about the plan because results would be significant, plus the improvements would come at no additional expense. Just the day before, he had outlined the plan in detail to his three plant managers.

Overall, Riley Propane was successful. It had 28 full-time employees and three retail facilities. The original Plattsburg plant, started in the mid 1970s, had grown and gained sufficient geographic expansion that two other plants had been started, Gainesville in 1982 and Bethany in 1990. Randy had been hired just after the Bethany plant was started and was elevated to general manager in 1995.

Randy and Stanton agreed that the three Riley propane plant managers had been allowed a very broad and undefined set of responsibilities. Both felt that because the accountabilities were too broad, each of the managers had an excuse when it came time to deal with tough issues, like tackling past due accounts or seriously going after new customers and tank sets.

Randy expected the changes would meet with some resistance from the managers, but he had clearly explained how the changes would provide overwhelming benefits to them and to the company. The new procedures took away some decision-making authority from each manager, as the objective was to narrow their focus toward the most productive issues.

Resisting change

Two days into the plan, Randy took a call from a driver saying the changes were not being followed at the Gainesville plant. Further, plant manager Charlie Jones stated he would continue to run his operation unchanged.

Charlie was the most senior of the three plant managers. If he was bucking the new procedures, then it was almost certain the other managers would follow his lead and the whole plan would collapse.

Charlie had managed the Gainesville plant since the early 1980s. Previously, he had been a driver and gained experience in service work. Charlie’s demeanor and trustworthiness were what led to his selection to take over the Gainesville start-up operation.

Randy knew that his well-crafted plan was doomed. The clincher was learning that Charlie had gone over Randy’s head and called the company’s owner to protest the changes, something Randy had seen happen before. Whatever was said between the owner and Charlie was sufficient to allow Charlie to believe he didn’t need to heed Randy’s authority.

Randy knew there was nothing he could do. He figured the business would go on as in the past, and the same problems that prompted the changes would continue.

Common area of weakness

One of the most significant issues – and in the case of this story, weaknesses – that I observe in family-owned and -operated businesses is the extent to which authority and control is retained at the ownership level.

In this story, breakdown of authority was the result of the owner giving in to a long-time employee’s protest because it was easier than supporting the new manager. Or perhaps the owner could not relinquish complete control of the plant managers to the general manager.

The primary consequences of the owner’s action is to undermine the very person he identified as most important to his business. He has placed a roadblock to the plan that would improve efficiencies, increase the company’s returns, and fuel significant future growth. This particular plan was dead on arrival.

It is always a challenge for individuals and managers to relinquish control, but apparently even more difficult for owner/managers. This issue may be the single most important reason businesses stop growing.

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