The founder’s dilemma
Dynamic entrepreneurial spirit and the daily grind of managing a thriving organisation are both vital ingredients in developing sustainable growth in the early stages of a business. But such skills are rarely found in the same individual.
Building a business to a turnover of say £50 million takes a different mind set and approach to innovating and creating a start-up business from scratch. Furthermore, taking it from £50 million to £150 million requires yet another skill set. Deciding when to bring in professional management is something which should be addressed at the earliest possible stage in a company’s development.
The 23-year-old founder of a business we advise is far sighted enough to recognise that he/she needs to invest in a strong CFO and COO in order to achieve the growth which he envisions. However, such foresight is rare and often the fear of increasing overheads mitigates against such a hire.
Generally speaking, by nature entrepreneurs are bored by the day to day management of a business. Their strengths lie in innovating and being creative thinkers. However, entrepreneurs often migrate into a management role as the business grows, failing to realize that this does not play to their strengths and can be holding back the development of the business.
Infosys, the Indian multinational IT giant with a market capitalisation of $31 billion, have recently announced that 67-year-old co-founder and executive chairman NR Narayana Murthy, alongside two other co-founders, 59-year old vice chairman S Gopalakrishnan and 59-year-old CEO SD Shibulal, were stepping down after 33 years with the company, indicating a recognition that they needed to step back and allow their newly appointed CEO, Vishal Sikka a free hand in running the company.
It could be argued that they left this a little late. Infosys had started to lag behind its competitors and many believe that the passion, focus and discipline which the founders brought to the organisation in the early days dissipated once they were having to spend more time managing the business.
Some experts suggest that company founders should not only know their limitations, but when the time comes to hand over the reins they need to do so completely, without interference. Entrepreneurs such as James Dyson have successfully handed over the “management” reins, allowing others to take over those roles.
It can be extremely difficult for founders to step aside from a business that has become their life and in which they have an immense emotional, as well as financial, investment, irrespective of whether the company is an SME or a large plc. Founders often believe that no one knows the business better than they do and that therefore they are indispensable. While it may be true that they have a wealth of embedded knowledge, that does not mean that they are indispensable nor that they are best placed to take the company to the next stage of its development.
After all, scaling innovation is about commercialisation and for that even the most brilliant business mind needs the support of a solid managerial team to maximise growth potential.
There are a number of ways to address this. First of all, founders need to be aware from the outset that the challenges they face at start-up will change as they grow, requiring them to make difficult choices. They need to prepare for this at the earliest possible opportunity and be prepared to recruit people who will challenge them and not be “yes men”.
Secondly, they need to be cognisant of their motivations, strengths and weaknesses and how these will impact on the development of their company. They need to identify how their strengths can be enhanced and their weaknesses alleviated.
Thirdly, they should fully understand the benefits of management succession planning soon after the business is off the ground. As with our young client, this is when they need to start putting in place the right management talent.
Finally they need to be aware that their role within the business will change as the business grows and decide how their attributes can be best deployed at each stage in the company’s development.
Understanding the mechanics of creating an experienced management team that supports a new business venture and can optimise their business accordingly is key to an organisation’s successful growth.
The founders of Infosys are unusual in their decision to totally relinquish executive control of their company after so many years at the helm. It can’t have been an easy decision and in their case it may have been right. But, while successful entrepreneurs have stayed with the company through many stages of growth (from Jeff Bezos at Amazon to Akai Morita at Sony), they have all surrounded themselves with a strong, independently minded management team who can debate robustly and enhance the founder’s vision. However, such foresight is not easy for those who have put their heart and soul into the creation and development of a business.