Seven years ago, when John DiPasquale Jr. was a broker, he tried to sell some property to Brad Elliott, the 47-year-old owner of Elliott Building Group. Elliott passed on the land, but DiPasquale made quite an impression on him. "I saw that he had a lot of dealmaking energy, which is what you need in this business," says Elliott. He soon offered DiPasquale, now 39, a job as head of marketing and land acquisition for his Langhorne (Pa.) home construction company, later elevating him to CEO, the No. 2 spot in the company. "I wanted him to help drive me and take the business to the next level," says Elliott.
He seems to have gotten his wish. In 2004, the 45-employee company had $43 million in revenues, up from $5 million when DiPasquale joined. Elliott handles operations and finance. DiPasquale does the vision thing. A few years ago, for example, DiPasquale persuaded Elliott to build several $500,000 houses in a part of Bucks County, Pa., that had very few expensive homes. The houses would be the priciest Elliott had ever built. But Elliott agreed, and all 22 houses have since sold for more than $1 million. "I'm a big-picture guy," says DiPasquale. "And he walks behind me to make sure the pieces are where they should go." Says Elliott: "We balance each other like an old couple."
If Elliott and DiPasquale are yin and yang, Frank Bell and Travis Lewis were oil and water. When Bell, CEO of Intellinet, an Atlanta software company, hired Lewis, 36, as his chief operating officer five years ago, he hoped the Harvard MBA's Internet experience would lead to a rapid expansion of his 70-employee, $12.5 million company. But the company stagnated. Bell, 39, says Lewis wasn't capable of leading it through unexpectedly tough times; Lewis says that he was prepared to help the company grow, but instead he had to struggle to keep it afloat. Lewis left in May, 2004, to found Atlanta-based Technology Vendor Management.
Hiring a deputy is one of the most important decisions a business owner makes, but few give it the attention it deserves. A great second-in-command such as DiPasquale can catapult a company forward and make an entrepreneur's job much easier. But the wrong person can hamper growth and drive an entrepreneur to distraction in the process. "Optimizing this relationship often isn't a priority for entrepreneurs, who are normally overwhelmed by the work they're doing in the trenches," says Ray Silverstein, head of President's Resource Organization, a Chicago company that facilitates networking among entrepreneurs. While there are no hard-and-fast rules, you can increase your odds of finding the right person by first carefully assessing what you and your company really need, casting a wide net, and then vetting candidates thoroughly.
Of course, that can be a lot harder than it sounds. And it isn't unusual for business owners to get a pit in their stomachs soon after a new deputy starts. To make the relationship work, you'll need to explain the new hire's responsibilities clearly and communicate them to all employees. At Intellinet, for instance, Bell admits that Lewis' job wasn't clearly defined, and that the two didn't meet often enough to set expectations. In some cases -- such as Bell's -- an entrepreneur may have to admit the match just isn't working. "It's better to act than not," says Dennis Zeleny, a human resources executive and consultant in Wilmington, Del. "It's a critical period of time."
THE RIGHT MOMENT
Entrepreneurs tend to seek out a second-in-command at either of two times, neither of which is ideal. Often an owner realizes he needs help when the business starts growing too quickly for one person to keep all the balls in the air. "Once the company starts to get some momentum, a lot of times the founder is still in the 'fake-it-till-you-make-it' approach," says Thomas Taulli, an adviser to small companies and a lecturer at the MBA program at the University of Southern California. "But things start to fall through the cracks." Hiring when you're already overwhelmed can lead you to act rashly, jumping at the first likely candidate.
Other entrepreneurs consider bringing in a strong right hand only as they start thinking about retirement. But choosing someone to help you run your company is much different from picking someone to succeed you. "It's not easy to find both," says Silverstein. "There are a lot of good maintainers, but impact players are hard to find."
The trick is to anticipate. The right time to hire is when you can see that your business can make it to the next level but before you actually make the leap. "Business owners need to have the confidence to know when they could use a little help, whether that's because the business is changing and they want to bring in some expertise they don't have, or [because they want to] break into new markets," says Zeleny. A good time to hire, says Steve Katz, an executive coach in Potomac, Md., is when "there are too many demands from people in the company for the owner's eyes and ears." But he cautions owners not to bring in someone until the position can pay for itself. "Creating a job just to strengthen your executive team isn't a good enough reason," says Katz. "That person should bring some ability or knowledge to grow the company."
WHAT YOU NEED
Before you call a search firm or place an ad, assess your own strengths and weaknesses -- honestly. Carl Robinson, a management psychologist and principal at Advanced Leadership Consulting in Seattle, says owners have to be very clear about their own abilities. "Then they can figure out what they want in this other person," he says. Business owners who are sales and marketing dynamos may need an organized lieutenant to bring order to operations and finances. And entrepreneurs with specialized talents or knowledge often need someone who can actually build a business around their innovations.
Imagine the ideal candidate: What skills does that person have? What personality traits? Those answers will help you profile the person who will best mesh with your style and needs. "Nine times out of ten, an entrepreneur wants to bring on board an operations person who knows how to execute and create efficiencies to optimize the organization," says Robinson. In some cases, turning to a team instead of a single deputy may work.
Entrepreneurs tend to choose either a person with similar traits -- a clone -- or a complement who fills in their weak spots. In most cases, the complement is the better choice. "I've never seen a situation where hiring a clone works -- because owners almost always need to hire someone to do certain tasks they don't like to do," says Chuck Pappalardo, managing director of Trilogy Ventures Search, a Burlingame (Calif.) executive search firm. However, if you expect your hire to take over the company one day, Pappalardo suggests finding someone who shares some of your own traits to provide continuity to the business. And Katz thinks some overlap in the two personalities is crucial. "They need to share some of the same style so they can communicate effectively," he says.
WHERE TO LOOK
The first place to hunt for a qualified second-in-command is inside your company. But grooming a COO within a small company can be difficult. "It's hard to have someone in a small company who has enough profit-and-loss and development experience," says Robinson.
Still, some entrepreneurs find success with unlikely choices. When Carolyn Gable started New Age Transportation, a Lake Zurich (Ill.) trucking company, 12 years ago, Jenny Talley was her children's nanny. Gable suspected Talley could do much more. Gable, 53, hired Talley in 1993 as an office assistant for the $18 million, 48-employee company. Later, Talley took on accounting, dispatching, and other duties, learning on the job. In 2002, Gable promoted her to vice-president for operations, the second position in the company. And although Gable was initially concerned that Talley didn't have a college education and lacked self-confidence, she's pleased with her choice. "She manages all our employees, and they voted her our company's Leader of the Year," Gable says of her 32-year-old prot?g?e. "That's a great testament to how she has developed and matured."
Most business owners will have to look farther afield for the right person. Hiring an outsider does make it more likely you'll get burned, but you can hedge your risk. Working with a search firm is one option because the best ones have stables of prescreened candidates. The midlevel ranks of a large company are also a good hunting ground. Maybe the head of a division wants to flex some entrepreneurial muscles or get equity at a startup. And looking at acquaintances and peers in a new way can uncover a gem. That manager working for a longtime customer who has always struck you as capable might be ready for more responsibility. Or your racquetball partner may have the skills you need.
Robinson suggests forming an ad hoc group of leaders in noncompeting businesses to expose you to potential recruits. That committee can also help you interview candidates. "They can tell you if you're B.S.-ing yourself and help you objectively assess candidates," he says.
You may also want leading candidates to meet with everyone at your company, at least in groups. That can minimize any resentment employees may have about adding another layer of management between you and them. "The injection of a new person above all the rest of the employees creates a whole new cultural dynamic, and you don't know right away how that's going to work out," says Pappalardo. As Zeleny puts it: "There's the prestige of being connected, and old habits die hard. So for people who had access to the owner, it will be difficult for them to change their behavior."
No matter where you find candidates, be sure to do a thorough vetting. Prospects may have shining track records, but, warns Taulli, "maybe they just got lucky at the other company and they were in the right place at the right time. Or maybe they don't have the fire they once had." Owners should personally handle reference checks. "Don't leave something this important to a search firm," says Zeleny. References are more likely to open up when an entrepreneur calls, Zeleny says, often resulting in information and insights about the candidate that a search firm couldn't have obtained.
If possible, suggest a trial period before making things permanent. Executives, particularly in volatile industries such as technology, are increasingly willing to "date before marriage," as Taulli puts it. Orbital Data Co. founder Paul Sutter, 39, and his venture-capital investors got Richard Pierce, 46, to agree to a "no-strings-attached" 30-day trial at the 45-employee, $10 million software company in San Mateo, Calif. Pierce had been in line to become CEO of Inktomi () before that company faltered in 2001, and he had a good reputation in the industry. Sutter hoped the trial idea would help snag him. The two men immediately clicked after Pierce started in January, 2004, but extended the trial to 120 days to be sure. "We spent many a weekend, four or five hours at a time, getting to know each other," says Pierce, who is now chief technology officer. Sutter, who hoped his hire would help chart Orbital's expansion, is pleased. "He came in and helped set the size of the company," says Sutter. "Now we've got large multinational customers -- Disney, Sony -- and we're on our way."
By Dale Buss