Diluted Entrepreneurship
Most entrepreneurial companies hit a road-bump at some point when their growth slows and they can’t seem to brake through to the next level...
They may have $5-$20 million in sales, 20-100 employees, depending on the industry and the team of the founders. Single-entrepreneur companies will hit the wall earlier, partnerships and family businesses may grow bigger before reaching that “no-man’s land” as described by Doug Tatum in his identically titled book.
Strategies to get unstuck at that point include: hiring “professional” managers, bringing on “partners” or selling the business to someone that can develop management, markets or processes. Consultants that introduce strategies to organize and manage better may also be of help for a while, but eventually these improvements start to fizzle out.
What exactly is going on here?
Most founders face the growth-challenge when they can no longer maintain personal control, i.e. get the job down through order-takers. There are so many hours in the day and at some point they will need to entrust underlings to make their own decisions … and allow them to make some mistakes.
This works in-principle, until the founder wakes up to find that the person he hired in not an entrepreneur. When he realizes that his staffer had focused on his personal agenda, furthering his career, building his power, taking credit for success and protecting himself from criticism.
In fortunate cases, most of his agenda will overlap with that of the business, but full alignment is rarely possible.
In the rare cases when there is a high alignment between the founder’s and his protégé’s agenda, the latter is likely to be a lot less driven and possibly a lot less skilled than his entrepreneur boss. If he was as good, he would probably be running his own business or selling his services to a Fortune-sized company.
Most founders are aware that they cannot clone themselves, but they get blind to what “cloning” means. For example when the founder is getting burnt out (i.e. haven’t figured out how to do the job himself) managing under-performing salespeople, they hire a sales manager to fix the problem.
Or the entrepreneur will be looking for a sales manager with experience in managing salespeople and will likely end up hiring someone who had been “made available to industry” for under-performing elsewhere.
His mistake was trying to bring in a high performer from the outside, instead of building a superior process for the task (an entrepreneur’s job) and find people capable of executing that process under his supervision. It is like appointing a mercenary as general to run your army.
The force that builds companies is entrepreneurship. The challenge to the entrepreneur is to avoid the dilution of his craft as the company grows.
To expand his business the leader must be able to attract entrepreneurs and empower them or to invent and develop processes that can be taught to his employees. In most cases it will be a mix of both.
At one end of the spectrum are high-growth venture-backed companies that can raise capital to pay for attracting entrepreneurial staff, who then can tied to the business with bonuses and stock-options. At the other end are franchised businesses that rely on a small number of entrepreneurs or quasi-entrepreneurs, (franchise-owners), assisted by scripted processes in building and running a formulaic business.
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