In part 1 of “Becoming an Entrepreneurial Organization” I made the case that in successfully transitioning from an entrepreneurial business to an entrepreneurial organization there are critical issues regarding operations and value creation that need to be addressed. Here, in part 2, I’ll focus on people, finances and you.
3. People: From performance mayhem to performance management
In a small, entrepreneurial business you can get by with people not having clear reporting relationships. You may benefit from flexible roles and responsibilities. Yet as your company grows, the ambiguity around reporting, roles and responsibilities can start to create mayhem. People don’t know who to take direction from or what the priorities are. Performance suffers. But who’s accountable for what?
Successfully transitioning to an entrepreneurial organization means instituting a solid foundation of performance management that helps your people give you their best. Communications are at the heart of this. Your people need to know the answers to these six questions: 1) Who do I report to? 2) What am I responsible for? 3) What are our goals as a company? 4) What is expected of me to support those goals? 5) How will I know if I’m doing a good job? 6) What support will I receive to help me improve?
Ensuring that you continually answer these six questions can help avoid the mayhem that arises when the informal and flexible structure of an entrepreneurial business leads to ambiguity and confusion.
4. Finances: From watching the cash to wagering the cash
Most fast-growing entrepreneurial companies know to be protective of their cash. They know that fast-growing companies are likely to die not because of the P&L but because of cash flow. The double-edge sword of this mindset is it can produce an overly conservative view towards investment. And without sufficient investment, a company’s ability to grow will be limited.
Keith McFarland, in his first-rate book, The Breakthrough Company, (think “Good to Great” but for mid-sized companies) researched fast-growing companies to identify which ones ultimately produced superior, long-term financial results and why. Amongst his conclusions was that breakthrough companies are those which are willing to place bigger and bigger bets, with the skill to pick the right bets. An example of a big bet: Tony Hsieh of Zappos moving the entire company from San Francisco to Las Vegas to find the right employees to staff their call center.
How do you pick the right bets? A combination of information and intuition. Utilize information but don’t dismiss the learning that underlies intuitions. Value your intuitions but don’t disregard the richness of information. Embrace the dynamic tension that results when considering both information and intuition. Assess opportunities with both “I’s.”
5. At the top: From leadership icon to leadership team
The most difficult part of the transition involves you, the iconic founder. It’s the critical issue that every entrepreneur must ultimately face: for your business to continue to grow and thrive, it has to evolve beyond you.
The more your business depends on you the greater its exposure. Is the vision and roadmap locked in your head? Do you alone possess key information about your customers? Do critical supplier relationships depend on you? Are you the brand? So, if a bolt of lightning strikes you, then what happens to the company?
Need more convincing? You’re not scalable. You can’t do it all. At some point your business will outgrow your capability to do it all. And that’s good. That’s why you need to extend your company’s leadership beyond you to a true leadership team. People with the right skills, traits, motives and values to oversee and transform the various parts of the business. Yes, you’ll need to relinquish some control. Yes, they might not do things exactly as you would. And, yes, they simply might not be as good as you. But you still can’t do it all. So find the best people you can, support them, develop them, and then let them help you win.
Small and medium-sized enterprises are not the same. Growing from small to medium-sized means transitioning from an entrepreneurial business to an entrepreneurial organization. This requires some major changes to how you, as an entrepreneur, think about operations, value creation, people, finances and your own role. Are you committed to making the transition?
Michael Canic is president of Bridgeway Leadership, a strategy + execution consulting firm with offices in Canada and the U.S. Bridgeway’s focus: Making Strategy Happen through a relentless focus on alignment, commitment and execution. As a consultant and advisor, he has helped dozens of businesses and other organizations across North America achieve quantifiable results. Michael can be reached at firstname.lastname@example.org or 303.947.4999.