The Founder’s Dilemma: Moving from Entrepreneur to Professional Manager

A client recently engaged me to help her with problems she was having in her business. Her small, ten-year-old, privately-held company was reaching a tipping point. The company had a strong client list with a decent backlog of business. She had good people working for her, and the upside was significant. What was the problem then?

The founder was beginning to experience what all successful founders do ultimately—the limits of being able to run the business by themselves. Like most entrepreneurs, she had built her organization opportunistically, based initially on survival, and then based on sustaining survival. She was wearing multiple hats, including finding new customers, managing inventory and quality, hiring and firing—plus keeping an eye on cash flow. She found herself on a treadmill with employees to manage, overhead to meet, and a feeling that she needed to both manage operations and “feed the beast” through ongoing business development. She was a tired and frustrated victim of her own success. The irony was that she had everything she dreamed of and yet had come to resent it. Her predicament added credence to the idea of “be careful what you pray for.”

Upon initial assessment of the business, primarily through employee interviews and observations in key business meetings, the solution was clear. The founder needed to fundamentally change the paradigm of how she ran her organization. The company needed to evolve from one in which she controlled all of the pieces to one in which the business would become professionally managed. The implications all sounded logical and made sense to her; however, the reality was fraught with difficulties that started with the founder’s reluctance to give up control.

By necessity, entrepreneurs view their businesses as “their baby.” They have “birthed” the business, nurtured and fed it, and helped it move from crawling to standing and walking. Like any parent, they are very proud as they see their fledgling business move past a point of surviving to the point of thriving. It would be impossible to hire anyone who would know the nuances and history of a business better than the founders.

The growth of the business is usually a product of the founder’s persistence, instinct, and cunning. The way of conducting business is mostly in the head of the founder. It is common for there to be a paucity of documented processes or procedures that others can follow. Deals may be cut with customers that are haphazard and “spur of the moment,” with more of an opportunistic and short-term approach than one that is more strategic and intentional. Hires are typically made out of extreme necessity; roles, responsibilities, and job duties are poorly defined, if at all. Employees tend to gravitate to what needs to be done now, using the particular skills they already possess rather than what is good for the business long-term.

Once a business reaches a “critical mass” that moves it from surviving to thriving, the founder then faces the consequences of their short-term planning. With the absence of repeatable processes, multiple people are involved in decision-making and tend to overlap or “run into” one another. The potential for customers to experience this internal confusion can be catastrophic, with potential quality lapses, inventory shortages or overages, and missed deadlines. This is where my client was. A thriving business can risk “the wheels coming off” if some drastic steps toward professional management are not taken.

It is human nature not to want to change until there is a compelling need to do so, a point at which the pain of the situation exceeds the benefits. Even with a recognition that change is required, founders have great difficulty relinquishing control and trusting others to help in the process of “caring for their baby.”  This is the typical dilemma of entrepreneurs: stay small and continue to manage it themselves, or grow larger and trust others to help in the process.

The thriving business structure needs to move eventually from everyone on the staff being generalists and managing multiple tasks to having specialists. This requires looking at the structure of the organization and determining where specialists will truly add value. Because of the way entrepreneurs have created and grown the business, they tend to be micromanagers. The fear of others “screwing-up” the business, over-spending, hurting customer relationships, not managing operations tightly enough, and, especially, not doing things the way the entrepreneur has done them keeps these founders from hiring strategically and trusting people to do their jobs.

In order for businesses at this inflection point to become more professionally managed, they need to move:

 

Needless to say, this takes a significant leap of faith on the part of the founder. To be certain, there are inevitable fits and starts in changing one’s business to being more professionally managed. At times, there will be “bad” hires. Customers may not want to change their relationship with the founder to a relationship with a senior business development professional. Suppliers that have become friends of the founder may find their prices or quality undercut by a competitor, causing distress for the founder. Favorite employees of the founder may be found to have been lacking in their performance. The chances for missteps are clearly present. In addition, the founders may see each bump in the road of transition as confirmation that they would have been better off to have stayed the course and never to have moved to a more professionally managed organization.

The biggest challenge is for the founders to redefine their roles and move from tactical “doers” to more professional leaders, learn how to delegate and keep their focus at a higher and more strategic level. This allows them to look out for the future of the business and leave the managing of the current business to their staff. As always, a “trust but verify” posture is prudent, but it cannot be one of micromanaging, criticizing, or not giving people the opportunity to grow.

Unfortunately, the risk of making changes often keeps founders from making them. They start down the path, only to retract and become once again over-involved in the business. As my client understood that to grow her business she would fundamentally need to change the way she thought about the company and her new role, she was met by feelings of both excitement and fear. She was determined to grow her business and choose the path of making the changes. Fortunately for her, she had the courage to make the changes to keep growing and the tenacity to stick with her plan.