The Entrepreneur and the Transition to Professional Company Management

published in: Leadership

28 Sep
2011

Imagine I started a business from scratch.  I worked a lot - 10-12 hours per day, 6-7 days a week.  For 3-5 years the company achieved turnover of USD 5-10 000 000 (depending on the industry) and staff 50-100 people.  At this moment I am a successful entrepreneur.

Imagine now I have continued to work as hard as always for another 5 years.  But the turnover remains stable at the same level USD 5-10 000 000, the staff - about 50-100 people.  In this situation I should describe myself as "I was a successful entrepreneur."


Why the company has stalled?  I have achieved so much, it is not possible the problem to be me, right? I started from a scratch, have market intuition, I am a specialist in my industry, I'm smart and intelligent ... so where is the problem?

Let’s investigate the most common symptoms of such "stalled" companies:
• planning is occasional, and when plans are drown - they are either executed too late or never
• most employees think briefings are pure waste of time
• there are no quality managers in the company
• many employees are afraid to lose their jobs
• employees do not know where the company headed.
• each department has its own vision of the responsibilities of other departments in collaborative processes.
• there is a group of owner’s friends or relative for which company rules do not apply.
• many of the young newcomers leave the company within 18 months.

What should I do, as a successful entrepreneur, to walk the path from "family" company to a professionally managed company?

Consider the following table:
entrepreneurial stage manager stage
profit just happens profit forecasts
no budget and planning a budget and plan for each department
no systems for staff training and evaluation at least one year personal development plan for each employee
obscure staff obligations clear written rules and obligations
poor management control
system for regular reporting and controling
poor accounting professional accounting

 

The rules of the game are changing the very moment the entrepreneur reaches success.  Regardless what the Entrepreneur’s will is, the company needs a change of the management style.  After the success, the company has began its own life.  According to Eric G. Flamholtz  and Yvonne Randle’s book "Growing Pains: Transitioning from Entrepreneurship to a Professionally Managed Firm" the founder, has 5 options:

• To hire a professional manager and continue to be involved in the business, being a consultant to the CEO and determining the strategic plan of the company - as Howard Schultz of Starbucks, in that case the entrepreneur-founder should not interfere in the operations.
• To hire a professional manager and withdraw from the business - as did Phil Knight of Nike.
• to sell the firm - as Steve Jobs of Apple Computers and launch new entrepreneurial company.
• To change his/her management style - extremely difficult to achieve but not impossible.
• To continue to manage without any change, hoping the problems will evaporate eventually – this is the most painful for the entrepreneur-founder solution.


The entrepreneur is the most valuable subject in any economy. He explores market niches, creates products and services, new industries and jobs... But when his/her firm matures s/he must make the painful transition to free the company to grow as parents give their children freedom when they grow up.


And now, in what company do you work?  Does its management style benefit your skills and ambitions?
 

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