Stepping out of the circle: Business Owner vs Employee

I’m often asked why a good employee makes a bad business owner, or why people may struggle to run their own previously successful business when it gets bigger.? There are many aspects to consider, so I’ve split this into two articles.

Part 1 (this one) includes areas such as decision making, risk management and leadership.? Part 2 will include marketing and sales, brand management and legal responsibilities.? Read on…

1. Decision-Making Authority

You, as a business owner, hold the ultimate decision-making authority in your company. This encompasses strategic decisions like the company's overall direction, markets to enter, products or services to offer, and the business model to follow. You'll need to consider long-term goals and the sustainability of your business. Your decisions involve high stakes, significantly impacting the company's success or failure. While you may rely on input from managers and employees, you are responsible for the final say. This role requires a deep understanding of the industry, competitive landscape, financial acumen, and an entrepreneurial mindset to navigate uncertainties and seize opportunities.

As an employee, your scope of decision-making authority is typically more limited. Your decisions usually pertain to your specific job responsibilities and are often guided by company policies, procedures, and the direction provided by your supervisors. You are expected to follow established guidelines and contribute to the company’s objectives within your role. While you can suggest improvements and innovations, significant strategic decisions are outside your purview. Your focus is usually more short-term and task-oriented, ensuring that your specific duties are performed efficiently and effectively.

2. Financial Responsibility

As a business owner, you are responsible for the overall financial health of your company. This includes managing budgets, overseeing financial planning, securing funding, and ensuring profitability. You'll handle cash flow, investment decisions, expense control, and financial reporting. Often, personal financial risk is involved, especially in smaller businesses where your personal assets might be tied to the company's success. You'll need to understand financial statements, tax obligations, and possibly engage with investors or financial institutions, balancing short-term needs with long-term financial stability.

?As an employee, your financial responsibilities are generally limited to managing budgets or expenditures related to your specific role or department. You are responsible for ensuring you work within the financial constraints set by management and may be involved in budgeting and cost control activities within your area. Your financial accountability is usually more operational, such as processing invoices, managing departmental budgets set for you, or ensuring cost-effective practices in your tasks. While you may contribute to financial efficiency, you do not bear the ultimate risk or responsibility for the company's overall financial health.

3. Strategic Planning

In your role as a business owner, strategic planning is critical. You must set long-term goals, identify opportunities and threats, and develop plans to achieve your company’s vision. This involves market research, competitive analysis, and aligning resources to meet strategic objectives. You need to think about where your business will be in 5, 10, or even 20 years and create a roadmap to get there. Staying ahead of industry trends, technological advancements, and shifts in consumer behaviour is essential. Strategic planning requires foresight, innovation, and the ability to adapt plans as circumstances change.

As an employee, while you may participate in strategic planning sessions or contribute ideas, your primary role is to execute the plans developed by higher management. You provide valuable insights from the operational level and help ensure that strategic initiatives are feasible and effectively implemented. Your focus is on aligning your daily activities and short-term goals with the company’s strategic objectives. You help translate strategic plans into actionable tasks and ensure that your work supports the broader goals of the business. Your involvement in strategic planning is often more supportive and execution-oriented rather than directive.

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4. Risk Management

As a business owner, you have significant responsibility for risk management. You must identify potential risks that could impact your business, from financial uncertainties and operational failures to legal liabilities and market competition. Developing strategies to mitigate these risks is crucial, such as diversification, insurance, contingency and disaster planning, and implementing robust operational procedures. Staying informed about regulatory changes and ensuring compliance to avoid legal risks is also part of your role. Effective risk management requires a proactive approach, balancing risk-taking with caution to protect your business and ensure its long-term viability.

As an employee, you play a role in risk management within the scope of your responsibilities. You are often tasked with following established protocols and procedures designed to mitigate risk in your specific area. This can include adhering to safety standards, ensuring data security, complying with regulatory requirements, and reporting potential risks to management. You contribute to risk management by maintaining high standards of work, being vigilant for issues, and suggesting improvements to reduce risks. Your role is more about execution and compliance, with the primary responsibility for overall risk management resting with the business owner or higher management.

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5. Operational Oversight

As a business owner, you oversee all operational aspects of your company, ensuring that each department functions effectively and aligns with the overall business strategy. This includes setting operational goals, monitoring performance, and making adjustments to improve efficiency and productivity. You must ensure that resources are allocated correctly, processes are streamlined, and there is coordination between different parts of the business. Addressing any bottlenecks or issues that arise and ensuring that the business runs smoothly to meet customer demands is part of your role. This requires a broad understanding of all business functions and the ability to manage complex interdependencies.

As an employee, you are responsible for the day-to-day operations within your specific role. You perform tasks according to established procedures and contribute to the efficiency and productivity of your department. Meeting performance targets, following operational guidelines, and ensuring your work aligns with the company’s standards and objectives are your key responsibilities. You provide feedback on operational processes and suggest improvements. While your oversight is limited to your area of responsibility, you play a critical role in ensuring that the business operates smoothly on a day-to-day basis, focusing on execution and maintaining the quality of your work.

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6. Leadership and Management

In your position as the highest authority in the company, strong leadership and management skills are essential. You need to inspire and motivate employees, set the company culture, and often lead by example. Building and maintaining a cohesive team, resolving conflicts, and ensuring employees are aligned with the company’s vision and values are your key responsibilities. Effective leadership requires clear communication, empathy, and the ability to make difficult decisions. Managing relationships with key stakeholders, including investors, customers, and suppliers, is also crucial. Leadership at this level is about creating a positive, productive environment and driving the company toward its goals.

As an employee, especially if you hold a managerial position, you are responsible for leadership within your team. This involves managing day-to-day activities, providing guidance and support to team members, and ensuring that your team meets its objectives. Motivating your team, handling performance issues, and fostering a healthy and collaborative work environment are key aspects of your role. You need to communicate effectively, delegate tasks appropriately, and support the professional development of your team members. While you may not set the overall company culture, you play a significant role in shaping the culture within your team and ensuring alignment with the company’s broader goals.

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7. Innovation and Growth

As a business owner, fostering innovation and growth is one of your top priorities. Constantly seeking new opportunities for expanding your business, whether through new product development, entering new markets, or adopting new technologies, is essential. Encouraging creativity and risk-taking among employees and allocating resources to research and development is crucial. Growth strategies might involve mergers and acquisitions, partnerships, or scaling operations. Your role is to envision and drive growth initiatives that will ensure the long-term success of your business.

As an employee, you contribute to innovation and growth through your creativity and expertise in your specific role. Often, you are the source of new ideas and improvements that can enhance the company’s products, services, and processes. Thinking creatively and proposing solutions that drive efficiency and effectiveness are encouraged. If you are involved in research and development or product design, you play a direct role in innovation. Even in non-creative roles, you can contribute by identifying inefficiencies and suggesting improvements. Your role is to support the company’s growth objectives by executing innovative ideas and continuously improving your work processes.

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8. Customer Relationship Management

Maintaining strong relationships with customers is a critical function for you as a business owner. Understanding customer needs and ensuring that your company delivers value and satisfaction is essential. You are often involved in high-level customer interactions, especially with key clients or in negotiating major deals. Setting the tone for customer service standards and ensuring that your company’s policies and practices align with creating positive customer experiences is part of your role. Effective customer relationship management can lead to repeat business, positive word-of-mouth, and customer loyalty, which are essential for long-term success.

As an employee, you interact with customers on a more day-to-day basis, providing service and support that directly impacts customer satisfaction. Following the company’s customer service guidelines, addressing customer concerns, and providing timely and effective solutions are key aspects of your role. If you work in sales or support, you play a particularly crucial role in building and maintaining customer relationships. Your responsiveness, professionalism, and ability to handle issues can significantly influence customer perceptions and loyalty. Gathering valuable feedback from customers to improve products and services is also part of your responsibilities. Your role is to ensure that each customer interaction is positive and reinforces the company’s commitment to customer satisfaction.

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9. Regulatory Compliance

As a business owner, ensuring regulatory compliance is a major responsibility. Staying informed about relevant laws and regulations affecting your industry and ensuring that your company adheres to these requirements is crucial. This includes compliance with employment laws, environmental regulations, health and safety standards, and financial reporting requirements. Implementing policies and procedures to ensure compliance and engaging legal or regulatory experts to navigate complex requirements might be necessary. You are ultimately accountable for any compliance issues that arise, and failure to comply can result in legal penalties, fines, and damage to your company’s reputation.

As an employee, you are responsible for following the company’s compliance policies and procedures in your daily work. Understanding and adhering to the regulations relevant to your specific role is crucial. For example, if you handle financial transactions, you need to follow accounting standards, while in manufacturing, you must adhere to safety protocols. Maintaining compliance by executing your tasks correctly and reporting any potential issues is part of your responsibilities. Regular training and updates on regulatory changes are often provided to ensure you remain compliant. Your role is to ensure that your actions and decisions align with regulatory requirements and company policies.

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10. Human Resources Management

As a business owner, human resources management is a critical area, especially in small and medium-sized enterprises where you may take a more hands-on approach. Defining your company’s HR policies, including recruitment, training, compensation, and performance management, is your responsibility. Ensuring that your company attracts and retains top talent and that employees are motivated and productive is essential. Addressing complex HR issues such as employee relations, conflict resolution, and compliance with labour laws might be necessary, often achieved with outside help, but the ultimate responsibility lies with you. Creating a positive work environment and culture directly impacts employee satisfaction and retention.

As an employee, particularly if you work in HR, you are responsible for implementing and managing the day-to-day HR activities. This includes recruiting and onboarding new hires, managing payroll and benefits, coordinating training and development programs, and handling employee inquiries and issues. Ensuring that the company’s policies are followed and providing support to both management and staff is part of your role. Maintaining employee records, facilitating performance reviews, and ensuring compliance with HR regulations are also your responsibilities. While you may not set HR policies, your work is essential in executing the HR strategy and maintaining a positive and productive work environment.

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Conclusion:

The roles and responsibilities of business owners and employees differ significantly in scope and focus. While you, as an owner, are responsible for strategic decision-making, financial management, and overall company direction, your employees contribute to the execution of these strategies and the efficient operation of the business. Both roles are essential for the success and growth of the company, requiring collaboration, communication, and a shared commitment to achieving the company’s goals.? In part 2 we’ll explore further into marketing and sales, brand management and legal responsibilities as well as a few other areas.

However, the additional stresses that come with ownership are not for everyone. If you find that you’re struggling with ownership, come and have a chat and we’ll see what you may need help with.

#business #strategy #advice #businessowner #employee