What to Consider When Hiring a General Manager

If your home improvement business is generating $5 million to $8 million or more in annual revenue, you may be asking yourself what could go wrong if you turn day-to-day management over to a general manager—a title of position defined by Wikipedia as someone who “oversees most or all of the firm's marketing and sales functions as well as the day-to-day operations of the business” and who “has overall responsibility for managing both the revenue and cost elements of a company’s income statement, known as profit & loss (P&L) responsibility."

Company owners come to the point of considering hiring a general manager for essentially two reasons. The first is growth. It takes time to manage the day-to-day, and at some point it doesn’t leave enough time to plan and execute the kind of double-digit growth plans that many home improvement companies put together.

The other reason is that owners, for whatever reason, simply want a different quality of life. Speaker and business adviser Les McKeown (via Vimeo) says that this tends to happen in sales-driven companies after the first flush of success, when the fun is over and operational and organizational problems reveal themselves.

And, if they’ve never done it before, says Negar Riazati, at Linked In, once owners do get around to thinking about hiring someone to run the business, they come up against the first of several practical issues: “Can I afford a general manager?”

How Much Will This Cost?

Whether or not you can obviously depends on how profitable your company is. But let’s assume you have a good management team in place and that you’re generating not only a healthy 5 percent to 10 percent net profit on, say, $8 million in revenue, but are also paying yourself a well-deserved quarter million dollars in salary, while functioning as your company’s general manager. Would you be prepared to part with some considerable chunk of that and call yourself, simply, president?

Anyway you cut it, hiring a senior-level manager is going to cost. According to the website PayScale.com, a “General/Operations Manager earns an average salary of $60,651 per year” and the requisite skills associated with the position are “Sales Management, Budget Management, and Project Management,” depending on city, experience, skill, and employer.

However, that’s a mean figure, which would likely be inappropriate at any large company, considering that that’s about what a midlevel salesperson might make in commission, and possibly not that much more than your marketing manager earns, with bonus money factored in. The number on the high side of the PayScale.com scale is about $120,000, which would be far more realistic in terms of a home improvement company GM. You will need to think in six figures—the high end of the scale—if you want someone who can actually do the job the way you want it done and need it done.

And as you look around, or inside the organization, your ideal candidate will likely be someone with experience running a department in a home improvement company who is also, incidentally, familiar with how the other departments work. A production manager who understands sales, and/or a sales manager versed in production practices and procedures, might be a good fit, but only providing that he or she can take overall charge of the operation, including decision-making.

A general manager, says website Investopedia.com, “must have a thorough understanding of their departments or company’s operations, be skilled at managing and leading the employees they supervise, and make sound decisions for the company.”

So, returning to the topic of compensation, if you’re looking at someone whose previous job was sales manager at, say, a competitor, you can assume he or she was earning six figures managing a sales team of six to 10 people. Now she will be responsible for that and much more, and will expect to be compensated accordingly.

Home Improvement Experience

What about hiring outside the industry? Here’s the challenge: In theory, anyone skilled in running a multimillion dollar business with marketing, sales, and admin “legs” should be able to manage an operation selling roofing, siding, and windows. It’s just a larger retail ticket, right?

Yes and no. A home improvement company differs from other types of business-to-consumer sales organizations. At a large home improvement company, for instance, the marketing expenditure might be anywhere from 10 to 15 percent of revenue or more, with lead generation the clear and continuing priority and daily focus. And then there’s sales. Selling in the home is not an activity most businesses engage in anymore. And finally, not to forget that ‘home improvement’ translates to construction. To create a product that delivers consistent customer satisfaction requires teams of skilled installers and someone adept at managing them.

The learning curve involved in all this may well be too steep for someone with no background in, say, in-home sales or residential construction. Just because a person runs a $5 million restaurant doesn’t mean he’d be successful managing a $7 million roofing and siding company. Only aptitude and shared values make that possible.

Short-Term to Long-Term Thinking

So, say you elect to hire someone who has home improvement management experience. That may or may not be a good strategy. The sales-driven sales manager hired to be a home improvement company’s GM may focus on sales (and lead gen) to the exclusion of all else, resulting in an unproduced backlog of work and, soon enough, customer service issues as well. Because, as Roger Trapp notes in Forbes:

“… moving into general management involves shifting from short-term to long-term thinking and from thinking about a single area of responsibility to considering the impact on the entire organization. Successful general managers resist the temptation to oversimplify the job by focusing on a few narrowly-defined short-term performance indicators and instead maintain integrity by looking at the long-term, organization-wide impact of any acts or decisions.”

Stepping Out of the Stress Machine

If you’ve never done it, the requisite steps to take are these:

• Create a job description. That would involve all essential duties and tasks. Click here to see one retail home improvement company’s description.
• Develop a profile of the person you’re looking for. “To know when you have found the right manager, it is important to paint a very clear picture of the type of manager you seek,” write Gary Turner and Emily Durham. They are referring to specific character traits, rather than managerial skills.
• Budget for the position. Calculate how much you can pay a general manager, in salary and benefits, including bonuses for growth benchmarks that will be met.

You should also think carefully about how much latitude you’re prepared to give up in the interests of making this transition from yourself as general manager to whatever it is you want to become—owner/founder, CEO ...—as you transition out of the day to day, to either build the company or to have more personal time and enjoy life more.

Experts advise taking your time and proceeding deliberately when hiring a general manager, especially if it’s the first time you're doing so. “If you hire the wrong person, you have an unending series of crises,” Shel Horowitz, at the Family Business Center, points out. “Look at what the person you're bringing in has changed, and talk about that in the hiring process. You're preparing yourself for change and looking at how the person does those things. People go for character, for those who are philosophically aligned, as much as the specific technical skills. Character, honesty, believability—that's what you build a company around.”