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Weekly Updates"To make a child easy; to raise the child ... difficult!"
-- Old Chinese Proverb
Entrepreneurs who successfully navigate their firms through the whitewater of the startup stage find that the rapids associated with managing an emerging firm are not just different--they can be even wilder. Navigating growth's rapids requires different skills than those that were essential during the startup stage.
Managing growth is seldom a simple process. It rarely involves doing more of the same but on a larger scale. Growth brings complexity and requires more sophisticated approaches to doing business. Rapid growth compounds the challenges because management does not have the time to learn new techniques and new practices.
Considerable attention has been directed in the last decade to the need for entrepreneurs to "professionalize" their firms. Although entrepreneurs may not have the time or the desire to get an MBA; they are encouraged by their accountants, attorneys, and bankers to introduce "professional management systems." They are also encouraged to develop an "operational infrastructure" so accounts receivable, delivery commitments, cost control, etc. won't fall through the cracks. Entrepreneurs who started their firms because they like "calling their own shots" are now advised to stop "operating without a net."
Professional Management: Bringing Order Out Of Chaos
Most emerging ventures appear to go through a series of evolutionary stages. Eric Flamholtz in his book, Growing Pains, identified these stages as inception, expansion, professionalism, and consolidation. Ichak Adizes's book, Corporate Lifecycles, labeled the stages as: courtship, infant, go-go, adolescence, and prime. Flamholtz and Adizes postulate that emerging firms need to evolve from "entrepreneurially" driven enterprises where procedures are developed on a "as the need arises" basis to "professional management" driven businesses that are characteristic of larger firms.
Entrepreneurs are frequently encouraged to enroll in accelerated management training programs. Some entrepreneurs are encouraged to bring in a general manager or a team of managers to establish a comprehensive set of management systems to help them manage their firms. A few entrepreneurs step aside and let a professional manager run their firms. This was the case when John Sculley of PepsiCo was brought in to direct Apple Computer. It was apparent that Steven Jobs either did not have the ability, desire, or the time at that particular stage in the development of Apple Computer to take it to the next level.
The Shift May Generate Turbulence
Rarely does the process of introducing professional systems go smoothly. Martin York. director of sales at CONF-it said, "Most entrepreneurial businesses are built around a great idea. The biggest mistake most entrepreneurs make is thinking they can do it all themselves. They lack the quality people to execute (the idea). Ideas are actually quite easy to manufacture; people who know how to make things happen are rare. The key to success is to get a great team around you, then you have a chance. This means sharing out the equity!" (1) Most entrepreneurs are reluctant to delegate important decisions. Eric Flamholtz noted that while fledgling enterprises will benefit from a compulsive CEO who knows about everything that is going on and pays attention to every last detail, the CEO's desire for control has a less favorable impact during the latter stages of the firm's development. (2) This situation was the case with Steven Jobs at Apple. According to John Sculley, Steven Jobs wanted to be on the front lines and i nvolved in every decision. (3) Professionalizing the firm means that entrepreneurs who tend to operate with a "hands on" approach to managing must adopt a "hands off" approach. This can be a major stumbling block for entrepreneurs when their advisors exclaim, "It's not your job to get caught up in details; your job is to lead the firm!"
Animosity often arises when the supervisors, who invested their blood, sweat, and tears in the emerging firm, do not get promoted to the positions the new "outsiders" occupy above them. People at lower levels and certain customers who were accustomed to dealing directly with the entrepreneur get frustrated when they are told to go through "proper" channels. Even the entrepreneur, who dealt with key people as the need arose, may even be expected to follow the standard operating procedures established by the professional managers.
Some people in the firm may welcome the systematic rather than the more chaotic approach to conducting business. Other people may yearn for a return to the good old days that may have existed just a year earlier. The entrepreneur who was once everpresent and involved in every decision may now be relegated to spending considerable time reviewing financial data and still not be on top of every dimension of the firm. It is not unusual for the entrepreneur to develop an identity crisis at this stage of the firm's evolution.
The introduction of professional managers presents another interesting challenge to the emerging firm. Professional managers may experience transplant shock. There is no certainty that the professional managers will be able to adjust to the firm's specific technology, markets, personalities, and corporate culture. The entrepreneur also faces the challenge of whether he or she can get the professional managers to work together as a team. For the firm to succeed, its various functional systems need to he integrated into an overall business system. The truest test of a professional manager's value to the firm rests with the manager's ability to function as a member of the management team. Each professional manager may have been hired for a unique expertise, but they all need to work together as a team.
It is now apparent that decisions that once were the sole prerogative of the entrepreneur must be made according to a plan. Although the entrepreneur may have been successful in creating the firm; the management team is now responsible for managing its growth. The management team adds value to the emerging firm by managing by objectives, analyzing markets, identifying staff requirements, and projecting future capital needs.
The management team may also spend considerable time fixing the operational side of the firm that alluded the entrepreneur's time and attention. These areas include developing a pension program, initiating training and development processes. conducting performance reviews, evaluating various types of incentives, and analyzing the overall pay scale. Howard Tullman, CEO, entrepreneur. and now chairman of The Cobalt Group, summed up his experience this way: "I've been very careful to always find somebody I respected to be my No. 2 and CFO. because I don't pay attention to that stuff and I'm not smart about it. And respect was important because if you don't respect the person when they tell you no, you're going to blow him off. The entrepreneur can be the accelerator. but he can't be the accelerator and the brake. " (4)
Is Professional Management the Panacea for the Entrepreneur's Managerial Shortcomings?
Professionalizing the firm represents a managerial "Catch 22." After all the time invested in meetings. preparing the business plan, developing flexible budgets. and setting up computerized inventory control system (time that was spent to enable their firms to continue growing) few firms continue to grow. Granted, these systems may have kept things from falling through the cracks, but many entrepreneurs who have attempted to professionalize their firms have been heard to exclaim. "Weren't these systems supposed to be the means to the end-continued growth?"
Entrepreneurs who prefer to focus their attention on capitalizing on market opportunities are frequently frustrated when they have to redirect their attention to "internal" matters. Many entrepreneurs prefer informality. flexibility, and making their own decisions. They tend to abhor details and formalized procedures. In many cases. they started their own firms because their ideas were squashed by overly formal management systems where they worked. They formed their own ventures so they could operate with more of a "ready ... fire ... aim" approach rather than the "ready ... aim aim ... aim" mentality found in many established firms. Some entrepreneurs see little difference between a professionally managed firm and a bureaucratic quagmire.
Entrepreneurs relish the challenge of making things happen. They share a similar attitude about life expressed by the great aerialist. Karl Wallenda who said. "Being on the tightrope is living: everything else is waiting." (5) To entrepreneurs. the process of capitalizing on an emerging market opportunity is like being on the wire; developing business plans, budgets. and organizational infrastructure constitute just waiting!
Beware of the Tendency To Build The Church and Kill the Creed!
This raises an interesting question. "If professionalizing the firm is so important. then why doesn't the firm continue to experience the type of growth that got it to the point where it needed the management systems in the first place?" The answer may be found in John W. Gardner's classic essay. "The Life and Death of Institutions". He observed. "Human beings are forever building the church and killing the creed. They give such loving attention to organizational forms that the spirit is imprisoned. " (6)
Efforts to build a professionally managed firm may inadvertently kill the entrepreneurial spirit that served as the driving force for the creation of the venture in the first place. The intent may not have been to do so. but efforts to professionalize a firm may cause it to lose the entrepreneurial strategy and culture so desperately sought today by more established firms.
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