Learning to Let Go

When potential clients call interior design firm Bobi Leonard Interiors Inc., they want to speak to Bobi herself. Never mind that the Santa Monica company has a team of designers with a slew of successful projects under its belt, Leonard’s high profile means she is the firm in the public’s eye.

Leonard is proud of her success, of course. Her signature look--a neutral palette of clean-lined furniture set off by unique art and accessories and accented with potted palms--is a timeless style especially suited to Southern California.

She’s designed celebrity homes, as well as spas, offices and hotels around the world. Traffic at the Main Street showroom, which accounts for about 25% of company revenue, is up. And overall sales, of which design fees are the lion’s share, are climbing again. Annual sales at the 14-person firm have ranged from $1 million to $2 million in the last few years.

After more than a quarter century in the business though, Leonard said she is ready for a break.

“I’m at the point in my life where I don’t really want to work every day,” said Leonard, who owns several Main Street buildings, including the one that houses her showroom and design offices.

“I have to learn how to let go of control,” Leonard said. “The problem is once you let go, knowing where you fit in.”

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That’s the classic dilemma for a successful entrepreneur, said consultant Eric G. Flamholtz, an author and UCLA professor who co-founded Management Systems Consulting Corp. in Los Angeles in 1978.

At some point, a company has to learn to stand on its own, without the minute-by-minute ministrations of its founder. The major challenge for an entrepreneur is to create an infrastructure and company culture that will make that possible, he said.

Flamholtz, who wrote “Growing Pains: How to Make the Transition from an Entrepreneurship to a Professionally Managed Firm” (Jossey-Bass Inc., 1990), conducted a “mini-organizational audit” of Leonard’s firm.

Flamholtz visited the showroom and design offices in the building Leonard built 12 years ago. (She was an early believer in the once-decaying Main Street area.) He interviewed Daniel Schultz, the company president, sat in on management meetings and asked the management team to fill out the “growing pains” questionnaire featured in Chapter 3 of his book, which he gave to Leonard and Schultz.

He found a “very intelligent . . . likable and open” owner in Leonard, an energetic, upbeat office environment at the company and a product line that differs from the competition in its unusual accessories.

The company carries the work of several hundred artists, ranging from giant Italian baskets made out of grapevines to stone-framed mirrors to ceramic artwork. Flamholtz said he was impressed with the glass fish tank hanging from the showroom ceiling, “almost like a light.”

What Flamholtz didn’t find was a professional management structure or a strategic plan for organizational development.

“What they lack is the management mind-set and management tools to become a more professionally managed business and to develop that infrastructure,” said Flamholtz, a professor of management at UCLA’s Anderson School.

“They are in the red zone. They already have some significant growing pains for the size they are at.”

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To the company’s credit, this hasn’t interfered with its ability to meet clients’ needs, Flamholtz said. But without a professional infrastructure, the company’s growing pains will only increase as sales rise.

Leonard has been aware of the problem for some time. She has taken a number of steps to remedy the situation, including hiring a president to handle operations and formalizing communications in the form of weekly written reports from her top managers.

“We tried very hard to start what we call the more corporate thinking,” Leonard said. The problem came to a head when sales began to soar. “We couldn’t seem to adjust quick enough.”

Organizational planning is not an easy task, Flamholtz said, but it’s critical to take that comprehensive approach for long-term success.

An effective strategic organizational plan lays out what the company wants to achieve in all the key areas of the firm, not just the sales department.

He recommended that Leonard’s managers put together a three- to five-year plan detailing seven areas: customers and markets, products and services, resources, operating systems, management systems, corporate culture and anticipated financial results.

Before the company gets too far down the strategic planning road, the consultant said, it needs to determine its core customer--the “customers and markets” part of the plan.

“They know who that is in a broad, vague sense, and they know it has changed,” Flamholtz said. Without specific customer information, it will be difficult to focus the strategic plan.

He suggested the company begin to gather information on showroom customers, such as their income levels. A more formal effort to find out what the customer wants, needs and values would benefit the company, he said.

Shoppers are changing, Leonard explained. She said they are younger and compare prices more aggressively and buy less spontaneously than in the past.

“When we sell a piece of art, they want to know everything about it. Ten years ago, they didn’t care.”

That means her staff has to take the time to become better educated about the products and spend more time with each customer, Leonard said.

That resource drain needs to be figured into the strategic plan, Flamholtz said.

The lack of clarity between Leonard’s role in the company and the role of Schultz, the president, is also an issue the organizational plan must address.

“Each has a somewhat different concept of what the roles should be,” Flamholtz said.

Leonard, he said, wants the president to handle overall operations, which the consultant thinks is the correct strategy. But, in part because the company doesn’t have the structures in place to permit him to do that, Schultz has been forced into the role of a “doer, not a planner,” spending his time trouble-shooting and putting out fires, Flamholtz said.

It’s a common problem at companies trying to make the transition from entrepreneurship to professional corporations. The solution is to address another key part of the organizational plan: the organization chart.

Flamholtz suggested Leonard and her managers put together a job description for each employee and have employees prepare their own version. By comparing and adjusting expectations, a consensus can be reached.

An effective job description should include a statement of the overall purpose of the job, key responsibilities and performance measurements.

The issue of roles spills over into another area: company meetings. A red flag was raised for Flamholtz when the managers’ questionnaires came back with “unproductive meetings” ranked as a top concern.

“It’s very unusual for meetings to be high on the list,” Flamholtz said. “I think it has great significance. They are very smart individuals. They are not an effective team. Can they become one? Absolutely.”

Leonard previously had hired a consultant to help coach the managers on setting agendas. Flamholtz suggested additional coaching in team dynamics, particularly conflict resolution.

During meetings Leonard and Schultz do most of the talking, he said. And their dynamic, given her two decades of experience versus his seven years, is what even Leonard termed “mother and son.”

“She’s got to stop it,” Flamholtz said. “She means it in a positive sense, but you can’t treat employees like they are children. . . . You have to learn to treat them like young professionals.”

In turn, Schultz has to learn how to manage up. Leonard is “a strong, assertive woman, and I like her,” Flamholtz said. “But she hardly let him answer.”

It’s a dynamic that is played out at almost all companies founded by an entrepreneur with a strong personality. As the company grows, the power eventually has to be shared with the management team, he said. It’s typically not a smooth process.

Leonard recognizes all of this intellectually and was able to objectively analyze the state of the business, he said. The next step, or leap, is to make the emotional commitment to change.

“She’s a very good businesswoman. She has been very successful,” Flamholtz said. “But when you build a larger business you need to worry about the infrastructure, and that’s not her strong suit.”

Without a strategic organizational plan in place, “the firm’s growth is going to be stunted, and if it did expand, it’s going to be hard to manage,” he said.

That’s the last thing Leonard plans to have happen. The owner has brought back a consultant the company used in the past, this time to work full time with the president on strategic planning.

She recently hired an employee-leasing company to provide professional human resource services, as well as employee benefits the design firm wouldn’t have been able to swing on its own. And Leonard put showroom manager Dennis Hanson in charge of the design team and named him design director to provide more structure in that part of the organization.

Her timing is good. Sales have started to climb again in the last few months, but with the company creating the tools it needs to handle growth, Leonard has felt more comfortable cutting back to three days a week at the firm, a longtime goal.

“I’ve learned that my best benefit to the company now is in a public relations role and in making the transition to be a teacher to my designers and a mentor--not to be a designer,” Leonard said.

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This Week’s Company Make-Over

* Name: Bobi Leonard Interiors Inc.

* Headquarters: Santa Monica

* Type of business: Interior design, furniture and accessories

* Status: Private corporation

* Owner: Bobi Leonard

* Founded: 1973

* Start-up financing: $500 in loans

* 1997 sales: Between $1 million and $2 million

* Employees: 13

* Customers/clients: Residential and commercial, domestic and international

Main Business Problem

Lack of organizational structure

Goal

To make the transition from an entrepreneurship to a professionally managed corporation.

Recommendations

* Develop strategic plan for organizational development.

* Clarify role of founder/chief executive and that of the president.

* Improve communication at management meetings.

* Define core customers.

Meet the Consultant

Eric G. Flamholtz has written several books on organizational management and development and is a professor of management at UCLA’s Anderson School. He co-founded Management Systems Consulting Corp. in Los Angeles in 1978 and serves as its president.