Having worked with fast growing firms for over 20 years, I have found that one of the major barriers to the further expansion within small firms is the lack of strategic skills amongst entrepreneurs and their resistance to change. Many also fail to create a balanced management team and an organisational structure to support the delegation of decisions.
Academics studying entrepreneurship have long recognised this as ‘Founder’s Disease’ i.e. entrepreneurs who start up their new venture founders are unable to adapt to the needs of organisation as it grows. In some firms, this becomes such a major issue that if the founders continue to lead the business beyond the start-up phase, its performance will suffer and, in some instances, it may fail.
To deal with this problem once it has been identified, the entrepreneur either has to learn a new set of skills or relinquish authority to someone else. Unfortunately, many entrepreneurs cannot or will not break old habits to learn new skills and, as result, the company goes out of control. Profits will turn to losses and the steady progress experienced by the company changes into one of confused direction.
Many are also reluctant to bring anyone else in to do part of their job as all too frequently, the founder is reluctant to lose control of the business, wanting to do it all rather than manage others. As a result, the growth potential of the business is strictly limited by his/her personal energy and capacity.
To deal with founder’s disease, owners of businesses that are growing quickly may want to consider four key management factors which are important going forward.
The first is the owner’s goal for himself/herself and the business or, simply put, what do they want to achieve as the firm grows? Do they want to stay in the business or build it into a profitable venture before selling it on?
The second factor is the owner’s operational abilities in doing important jobs such as marketing, sales, people management and developing innovation. They may be good at one or all of these things at the beginning of the business, but may want to focus on one key ability as the company grows.
Related to this is the third factor, namely the owner’s managerial ability and willingness to delegate responsibility and to manage the activities of others.
And finally, founders’ strategic abilities for looking beyond the present and matching the strengths and weaknesses of the company with their goals.
Understanding these factors is critical in ensuring how the role of the founder changes as the business grows. Certainly, if the company is run by individuals who ignore these key factors and grows to the stage where strong leadership and delegation is required, there could be considerable problems going forward. And if such an entrepreneur continues to lead the venture beyond the start-up phase, then the performance of the company may begin to suffer.
Whilst one potential solution could be the replacement of the entrepreneur with a professional team of managers (which many founders will rarely admit to), such an action could result in the loss of the company’s ‘entrepreneurial thrust’ and as a result, these businesses companies will become professionally-managed ‘little large companies’ and stop growing.
Therefore, the whole question of balancing entrepreneurial and management skills is a major issue for many firms wishing to grow and it is critical that the founder of any business recognises this, identifies their own strengths and weaknesses, and fits them around the strategic aims of their business.