Article: Indian SMEs and the delegation dilemma

Entrepreneurship

Indian SMEs and the delegation dilemma

The 'do it yourself' attitude' of an entrepreneur can jeopardise profitability, incurring losses of funds and resources
Indian SMEs and the delegation dilemma

Do you aspire to be the next Ratan Tata, scaling your family managed business beyond its zenith? Are you ambitious about churning your business’ potential, emerging into a large business house? It is intriguing to know that despite every entrepreneur’s penchant for growth, about 80 percent SMEs are dying out before their 5th year! In addition to external challenges like infrastructure, technology, finance and competition, Indian SMEs are plagued with the ‘Blocked Mindset Challenge’, internal to the organisation.

As a company grows from mid size to a large organization, the entrepreneur needs to focus on larger areas like increasing profitability, sales and marketing, brand development, geographical expansion, new product development, etc. Second in line people need to be developed to ensure that the entrepreneur can focus on these larger goals. However, the entrepreneur who has been involved in the day-to-day processes of the company since its inception, tends to concentrate power with himself and is unwilling to delegate authority to his employees.

The business owner of an SME spends almost 87 percent of his time in handling day-to-day operational / non value-adding issues.For him, a mundane task such as vendor management, which he had been spearheading over years of established rapport, may seem easier than passing it on to his subordinate. Knowing the process inside-out, he can extract additional benefits from the vendor. The question is, would it be a good investment of the entrepreneur’s time? Or would it deflect his attention from the larger goal and hinder the creation of a leadership pipeline? Meaningfully involving employees in crucial projects, leads to the development of their proficiency and ability. Certain similar tasks can be delegated and entrusted with a high degree of confidence that it will be done well, thus adding to the employees’ credibility.

The ‘do it yourself’ attitude’ of an entrepreneur can jeopardise profitability, incurring huge losses of funds as well as resources. A potent, emerging enterprise may fall like a stack of cards! Take the recent case of an owner-driven metallurgy company, wherein the owner stocked an unstable metal worth a few hundred crores, in the absence of the storage facility in the company. The plant head lacking the authority to make decisions couldn’t initiate the construction of the roof, which was crucial to protect the metal from monsoon rains. By the time the construction was approved, the rains had done the damage. Had the plant head been empowered to take decisions, there could have been a possibility of the situation being averted. Delegation brings in accountability and develops the employees’ faith in the organization. An entrepreneur needs to keep aside the fear of delegation, along with the fear of loss.

Entrepreneurs often face the dilemma as to ‘How do I delegate?’, ‘What do I delegate?’, and ‘Whom do I delegate to?’

Delegation can be a win-win when done appropriately. It is imperative for the entrepreneur to diagnose the criticality of decisions and accordingly the competency level of employees. The first step is to map the processes, considering the project goal, timelines/deadlines, expectations from the task, quality of output required, risks and the impact of failure. Based on the above, the employee’s experience, knowledge, skills, attitude, working style, current capacity to perform the task and workload are to be considered.

Creating a ‘decision/delegation of authority matrix’ based on mapped processes, may be an immediate step you want to take, but implementing the outlined plan of delegation needs to be done judiciously. The real challenge lies in getting the owner to give up his ‘know-it-all’ tendency and make the employee imbibe the ‘I can do it’ attitude.

Also, it is vital for the entrepreneur to have an open outlook towards gaffes which may arise out of delegation. As per Albert Einstein, ‘A ship is always safe at the shore but that is NOT what it is built for’. Employees cannot learn unfamiliar tasks if not given a chance to perform and practice them.

Of course, not all tasks or responsibilities should be delegated to employees. Small business owners need to take care of basic strategic and planning issues themselves, and other management duties- conflict resolution, performance evaluations, etc. should be delegated carefully.

While a perfect match would lead to constructive results, a mismatch between the delegated task and the employee’s competence can lead to two consequences- defensive behaviour from the employee which could be either aggressive or passive and work output not being delivered at maximum performance level. To counter that, delegation can be evaluated by means of feedback on the tasks allotted.

Ultimately, small business owners need to recognize that delegation can help a business grow and prosper and that good employees, when used intelligently, can be a significant advantage in the marketplace. Diligent delegation of authority leads to meticulous distribution of responsibility, thereby creating true leaders in an organisation.

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Topics: Entrepreneurship, #ChangeManagement, #Trends

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