An Entrepreneur's Top Leadership Challenges -- and How to Meet Them

For first-time entrepreneurs, expanding the businessand hiring those first employees is an exciting adventure. But it can also be rife with challenges and sometimes mistakes. The reason: The skills needed to successfully lead a growing enterprise are markedly different than what it takes to run a one-person business.

We spoke with three business leaders about challenges they faced as their companies grew, and how they dealt with them.

Challenge No. 1: Hiring the right people -- and keeping them
Many first-time leaders make regretful hiring decisions early on. They choose people too much like themselves when what they really need are employees with complementary skills. They also sometimes recruit people who may have the right skills but lack solid values.

Tom Sullivan, founder and chairman of Lumber Liquidators

Courtesy of the company

Tom Sullivan, founder and chairman of Lumber Liquidators, a Toano, Va.-based hardwood floor retailer, learned his lesson the hard way. When expanding operations beyond his first store in the Boston area, he needed store managers and truck drivers in other cities, but some of his earliest hires didn't pan out.

Related: What Entrepreneurs Can Learn from Costco's CEO

One store manager admitted to stealing money from the cash register, which he later repaid. Then there was the truck driver who disappeared on his first delivery, taking both the truck and the cash he had collected. "The biggest thing was getting people you could trust," says Sullivan, 52, now chairman of the 2,000-employee public company. He didn't do enough due diligence at first, but after those experiences, he quickly began conducting background checks on all new employees.

He also realized he needed to do more to motivate workers and build a more entrepreneurial culture. Instead of paying drivers by the hour, he gave them 60 percent of all delivery fees. He also began paying store managers 0.5 percent to 2 percent commissions on their sales. The new compensation policies led to higher retention rates. "Some of our sales managers made over $150,000, even $300,000, based on their sales," Sullivan says.

Challenge No. 2: Expanding prudently, not prematurely
When a company starts expanding, it's tempting to keep growing based on promising newbusiness opportunities. But it's far better to be cautious, as Jon Black painfully found out.

Jon Black

Courtesy of the company

In 2001, when Black reacquired GetProof, a physician credentialing company that he'd founded, it had about 10 to 15 employees. About five years later, a Fortune 500 health company signed a contract with the firm, and GetProof's operations manager suggested hiring 20 people to scale up before the contract took effect. Black agreed, but the contract never came to fruition.

Black says he ultimately had to lay off the people he'd hired, along with his operations manager. "The problem was I kind of abdicated my responsibility as CEO," says Black, 50. "We were so caught up in being lured by a very large company that was wielding a lot of power."

Related: 10 Secrets of Successful Leaders

Today, Black is far more careful about hiring at his new firm Terillion, an Alpine, Utah, company that has developed technology to help companies weed out fake online reviews. He waits longer after contracts are signed to increase headcount so he's sure the work will really come in. He also typically hires people on a part-time basis or as independent contractors before making them full time. That way, he can be sure they're a good fit for the position.

Challenge No. 3: Managing through big changes
Many first-time leaders struggle with maintaining the culture of their firms as they grow. That's particularly challenging in times of turmoil.

Nancy Kramer

Courtesy of the company

Nancy Kramer, for instance, wasn't prepared when her company's fortunes changed. She founded Resource Interactive, a Columbus, Ohio, marketing firm, in the early 1980s, scoring Apple Inc. as her first big client. The company grew quickly throughout the 1980s and 1990s, reaching about 150 employees by 2000.

But when the dot-com bust hit, business dropped by 90% "almost overnight," says Kramer, 56, now chairman. The company had to retrench and lay off about 50 employees.

Kramer felt terrible, giving the departing employees generous severance packages and condolences. But in hindsight, she realized she didn't do enough to console her remaining workforce. Morale in the office tanked. "The office got really bad for a while," she says. "The people who stayed were probably worried about their own futures with the company."

Kramer says she wishes she'd given less generous packages to the people she terminated and diverted more of the money to boosting the morale of those who stayed. Today, Kramer says, the company is more thoughtful about how it handles layoffs and maintains a positive culture. The company gives employees development opportunities and encourages them to have fun at work. "We put a lot of emphasis on making our office a place where people want to come every day," Kramer says.

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N.E. Partners: 14 Ways to Get Insanely Motivated

It's the beginning of the year, so with the holidays out of sight, its appropriate to go over 14 quick strategies to get and keep yourself motivated in the new year:

1. Condition your mind. Train yourself to think positive thoughts while avoiding negative thoughts.

2. Condition your body. It takes physical energy to take action.  Get your food and exercise budget in place and follow it like a business plan.

3. Avoid negative people. They drain your energy and waste your time, so hanging with them is like shooting yourself in the foot.

4. Seek out the similarly motivated. Their positive energy will rub off on you and you can imitate their success strategies.

5. Have goals–but remain flexible. No plan should be cast in concrete, lest it become more important than achieving the goal.

6. Act with a higher purpose.  Any activity or action that doesn’t serve your higher goal is wasted effort--and should be avoided.

7. Take responsibility for your own results. If you blame (or credit) luck, fate or divine intervention, you’ll always have an excuse.

8. Stretch past your limits on a daily basis. Walking the old, familiar paths is how you grow old. Stretching makes you grow and evolve.

9. Don't wait for perfection; do it now! Perfectionists are the losers in the game of life.  Strive for excellence rather than the unachievable.

10. Celebrate your failures. Your most important lessons in life will come from what you don't achieve. Take time to understand where you fell short.

11. Don’t take success too seriously. Success can breed tomorrow's failure if you use it as an excuse to become complacent.

12. Avoid weak goals.  Goals are the soul of achievement, so never begin them with "I'll try ..."  Always start with "I will" or "I must."

13. Treat inaction as the only real failure.  If you don’t take action, you fail by default and can't even learn from the experience.

14. Think before you speak.  Keep silent rather than express something that doesn’t serve your purpose.

N.E Partners: Organizational Leaders Conference in NYC

This past weekend our company had the opportunity to attend an Organizational Leaders conference in New York City. It was a really great opportunity for everyone to learn from leaders in different markets, share the success of this previous year as well as go over some of the goals for the organization for 2012. There are many new developments for our clients and great markets opening up. NEP is poised to make a lot of growth in the following year and we are extremely excited for whats to come!

Pictures from the holiday party to come up soon...

N.E. Partners: Focus!

That's a 20 minutes video but it's worthwhile your time. Mel Robbins talks about how to do what you want to do: force yourself out of your head, feelings and comfort zone. It's so simple but not easy.

9 Qualities of a Leader

A leader with vision has a clear, vivid picture of where to go, as well as a firm grasp on what success looks like and how to achieve it. But it’s not enough to have a vision; leaders must also share it and act upon it. Jack Welch, former chairman and CEO of General Electric Co., said, "Good business leaders create a vision, articulate the vision, passionately own the vision and relentlessly drive it to completion."

A leader must be able to communicate his or her vision in terms that cause followers to buy into it. He or she must communicate clearly and passionately, as passion is contagious.

A good leader must have the discipline to work toward his or her vision single-mindedly, as well as to direct his or her actions and those of the team toward the goal. Action is the mark of a leader. A leader does not suffer “analysis paralysis” but is always doing something in pursuit of the vision, inspiring others to do the same.

Integrity is the integration of outward actions and inner values. A person of integrity is the same on the outside and on the inside. Such an individual can be trusted because he or she never veers from inner values, even when it might be expeditious to do so. A leader must have the trust of followers and therefore must display integrity.

Honest dealings, predictable reactions, well-controlled emotions, and an absence of tantrums and harsh outbursts are all signs of integrity. A leader who is centered in integrity will be more approachable by followers.

Dedication means spending whatever time or energy is necessary to accomplish the task at hand. A leader inspires dedication by example, doing whatever it takes to complete the next step toward the vision. By setting an excellent example, leaders can show followers that there are no nine-to-five jobs on the team, only opportunities to achieve something great.

Magnanimity means giving credit where it is due. A magnanimous leader ensures that credit for successes is spread as widely as possible throughout the company. Conversely, a good leader takes personal responsibility for failures. This sort of reverse magnanimity helps other people feel good about themselves and draws the team closer together. To spread the fame and take the blame is a hallmark of effective leadership.

Leaders with humility recognize that they are no better or worse than other members of the team. A humble leader is not self-effacing but rather tries to elevate everyone. Leaders with humility also understand that their status does not make them a god. Mahatma Gandhi is a role model for Indian leaders, and he pursued a “follower-centric” leadership role.

Openness means being able to listen to new ideas, even if they do not conform to the usual way of thinking. Good leaders are able to suspend judgment while listening to others’ ideas, as well as accept new ways of doing things that someone else thought of. Openness builds mutual respect and trust between leaders and followers, and it also keeps the team well supplied with new ideas that can further its vision.

Creativity is the ability to think differently, to get outside of the box that constrains solutions. Creativity gives leaders the ability to see things that others have not seen and thus lead followers in new directions. The most important question that a leader can ask is, “What if … ?” Possibly the worst thing a leader can say is, “I know this is a dumb question ... ”

Fairness means dealing with others consistently and justly. A leader must check all the facts and hear everyone out before passing judgment. He or she must avoid leaping to conclusions based on incomplete evidence. When people feel they that are being treated fairly, they reward a leader with loyalty and dedication.

Assertiveness is not the same as aggressiveness. Rather, it is the ability to clearly state what one expects so that there will be no misunderstandings. A leader must be assertive to get the desired results. Along with assertiveness comes the responsibility to clearly understand what followers expect from their leader.

Many leaders have difficulty striking the right amount of assertiveness, according to a study in the February 2007 issue of the Journal of Personality and Social Psychology, published by the APA (American Psychological Association). It seems that being underassertive or overassertive may be the most common weakness among aspiring leaders.

A sense of humor is vital to relieve tension and boredom, as well as to defuse hostility. Effective leaders know how to use humor to energize followers. Humor is a form of power that provides some control over the work environment. And simply put, humor fosters good camaraderie.