For nearly 24 years, I have been helping businesses attract outstanding Managing Directors to their organisations. But in the last year or so, I have observed a significant shift in the primary motivations driving companies to hire a Managing Director.

In the past, many business owners were content with simply maintaining their companies and enjoying the steady income they provided. They had little interest in expansion, as their businesses held minimal value and offered few benefits upon their eventual exit.

Fast forward to today, and the landscape has evolved dramatically. Financial advice businesses are now in high demand, and owners are beginning to recognise the potential for growth and the subsequent opportunity for a profitable exit. This shift in perspective has highlighted the necessity for a skilled Managing Director.

By bringing on a dedicated professional to oversee the strategic direction of the business, owners can step away from the day-to-day operations and focus on other priorities. This approach not only enhances the company's growth potential but also increases its overall value, making it a more attractive prospect for future buyers.

In this edition of Executive Eye we take an in-depth look at the role of the Managing Director in today’s dynamic business environment.

The Role of the Managing Director in 2023

The role of a Managing Director in 2023 cannot be overstated. As the top executive of a business, they are responsible for making crucial decisions that can impact the entire organisation. Their ability to navigate complex challenges, build strong relationships with stakeholders, and foster a positive culture is critical to the success of the company.

A skilled Managing Director brings a wealth of experience, expertise, and leadership skills to the table. They have a deep understanding of the industry, market trends, and consumer behaviour. They can leverage this knowledge to provide strategic direction and make informed decisions that drive growth and profitability.

But being a Managing Director is more than just making decisions. It's about building strong relationships with key stakeholders, including investors, employees, and customers. A great Managing Director knows how to communicate effectively, inspire others, and create a positive culture that fosters innovation and collaboration.

In today's fast-paced business environment, Managing Directors must also be adaptable and resilient. They need to be able to navigate regulatory changes, technological disruptions, and economic uncertainty. For instance, in markets like Wealth Management, where regulation is constantly evolving, a Managing Director with specialist knowledge can provide a competitive advantage.

Six Key Reasons Why Hiring a Managing Director is Crucial for Your Business Success

While some companies may be hesitant to bring in a new leader, there are several situations where hiring a Managing Director is essential for the growth and sustainability of the business. Let’s look at the six key reasons why a company may need to hire a Managing Director.

1.      Change in dynamics!

If a company is underperforming and needs to turn things around, hiring a Managing Director can be a smart move. A Managing Director can bring fresh perspectives and new ideas and may have the experience and expertise to identify and address the underlying issues that are hindering the company's success. By working with the rest of the leadership team, the Managing Director can develop and implement strategies to improve performance and drive growth.

2.      Strategy Change

When a company is changing its strategy, it may need to bring in a Managing Director with a different skill set or experience to lead the change. For example, if a company is shifting from a product-focused approach to a customer-centric approach, it may need a Managing Director with strong marketing and customer experience skills. The right Managing Director can help the company successfully navigate this change and ensure it stays on track.

3.      Succession Planning

If the current Managing Director is nearing retirement or planning to move on to another role, having a plan in place to ensure a smooth transition of leadership is essential. Hiring a new Managing Director in advance can help to minimise disruption and maintain continuity. This approach also allows for proper training and knowledge transfer, ensuring that the new Managing Director has a solid understanding of the company's culture and operations.

4.      Interim Situations

In some cases, a company may need to hire a Managing Director on an interim basis to manage change prior to bringing in someone to run the business as usual. For example, a new venture may need a Managing Director to get it up and running, and then someone with a different skillset can take over. Often, companies hire an interim Managing Director while they are waiting to appoint a permanent member of staff. This approach ensures that the company has experienced leadership in place to manage the business during this period of transition.

5.      Mergers and Acquisitions

When a financial services business engages in a merger or acquisition, it may need to hire a Managing Director to oversee the integration process and ensure a successful outcome. A Managing Director with experience in managing mergers and acquisitions can help to identify potential pitfalls and ensure a smooth transition for all parties involved.

6.      Rapidly Growing Business Managed by Business Owner

A business owner who manages a rapidly growing business may need to hire a Managing Director to allow stakeholders to focus on how to grow the business in the future, rather than how to run it now. This approach can help to ensure that the company is well-positioned for continued growth and that the business owner can maintain a healthy work-life balance.

Identifying the Optimal Time to Hire a Managing Director

Hiring a Managing Director is a crucial decision for any growing business. The right person can ensure continued success, while the wrong one can hinder progress

Proactively addressing growth challenges:

It is crucial to appoint a Managing Director before growth-related issues arise. By doing so, businesses can capitalise on opportunities and prevent potential setbacks that may occur due to a lack of experienced leadership.

If a Managing Director becomes unexpectedly unable to fulfil their duties, having a succession plan in place is essential.

What can a Managing Director deliver for the business?

We have identified five key areas where a Managing Director can deliver tangible benefits for a business:

1.      Establishing and executing company goals:

A Managing Director sets the vision, strategy, and objectives for a company, spanning short, medium, and long-term horizons. They work closely with the entire organisation to ensure all team members understand and work towards achieving these goals.

2.      Driving innovation and future-proofing the business:

By introducing fresh ideas and perspectives, an MD can help a company adapt and evolve to stay ahead of the competition. They can identify emerging trends and opportunities, ensuring the business remains aligned with the future rather than being anchored to the past.

3.      Scaling up the business:

An experienced MD can provide valuable insight and guidance to help a company reach new heights. By sharing their expertise, they can strengthen the current management team and support the company's growth trajectory.

4.      Reducing dependency on existing ownership:

To maximise a company's value, it's crucial to demonstrate its ability to succeed without the current owners. An MD can develop strategies and systems that allow the business to operate independently, making it more attractive to potential buyers or investors.

5.      Implementing succession planning:

For businesses planning to exit in the future, having a solid succession plan is essential. A Managing Director can identify and groom potential successors, ensuring a seamless transition when the time comes. This preparation not only helps retain the company's value but also allows for a smoother handover to new leadership.

By delivering in these key areas, an MD can help maximise a company's potential and secure its future success.

What are the Key Skills of a Good Managing Director?

An effective Managing Director must possess a combination of various skills and qualities. Here are some examples:

Tenacity to succeed: Mental resilience is crucial for a Managing Director. They must be able to handle setbacks and push through failure to achieve the desired results. A good Managing Director should understand the balance between shareholder requirements and employee engagement, ensuring that both are taken into account.

Respect of people in the business: A Managing Director must hold the respect of the people in the organisation, including employees, stakeholders, and customers. They should be able to inspire and motivate others to work towards a common goal.

Ability to build and manage a strong leadership team: An effective Managing Director should be able to identify, recruit, and retain top talent. They should be able to delegate tasks and responsibilities to their team members, while also providing guidance and support when needed.

Cultural fit: Cultural fit is crucial when hiring a Managing Director. The individual needs to fit with the culture of the organisation, as this can affect their ability to lead and inspire others. Psychometrics can be helpful in determining whether a candidate's personality is a good fit for the organisation.

When it comes to cultural fit, it's important to note that different organisations have different cultures. For instance, working for a large corporate requires a different set of skills and personality traits than working for an entrepreneur. Psychometrics can be likened to checking what's under the bonnet of a car before buying it. It helps to reveal the candidate's capacity to handle the demands of the role and the organisation's culture.

Appreciation of the Regulated Market and the Financial Advice Process: It’s simply not possible to run a regulated business with an MD who doesn’t understand this and it’s a surefire way to fall foul of the regulator and wipe out a company’s value. 

How do you find the right Managing Director for your business?

There are a few key strategies you can employ to help you find the right Managing Director for your business.

Firstly, you could try self-sourcing candidates through referrals and networking with your staff, directors, NEDs, and business connections. Alternatively, you could outsource the recruitment process to a professional sector specialist recruitment business, especially if you're looking for successful individuals who aren't actively seeking new opportunities.

It's important to avoid the temptation of hiring people you already know, without benchmarking them against other possible candidates as this could mean you miss out on selecting the best candidates. Instead, aim to put together a diverse group of individuals who complement each other's strengths, rather than simply hiring people who are similar to yourself.

To ensure a successful hiring process, consider implementing a three-stage selection process and make sure each person involved understands their role to avoid repetition. Give candidates the opportunity to meet key people in your organisation and move quickly once you have a shortlist to prevent candidates from losing interest. Assign someone to keep in touch with candidates weekly to maintain engagement.

Consider applying independent psychometrics to minimise the chances of making a bad hiring decision and take informal references to verify a candidate's career claims. Finally, it's important not to get starstruck by the first person who ticks a lot of boxes and to remember that notice periods can be up to six months, so it's essential to start your search well in advance of when you need to fill the position.

SUMMARY

The role of a Managing Director is crucial in driving business success in 2023. Managing Directors bring a wealth of experience, expertise, and leadership skills to the table, and are responsible for making crucial decisions that can impact the entire organisation. They play a key role in building strong relationships with stakeholders, fostering a positive culture, and driving growth and profitability. By understanding the six key reasons why a company may need to hire a Managing Director, the key skills of a good Managing Director, and strategies for finding the right Managing Director for a business, companies can ensure that they have the right person in place to navigate the challenges of today's fast-paced business environment and achieve long-term success.