Small businesses are often founded by entrepreneurial visionaries with one of three things: a burning idea that they simply have to see take form, a time-limited opportunity that’s too good to pass up, or their former employer’s client list.
The world is full of stories about companies that started in mum’s garage to become international billion-dollar cap businesses. But it’s also full of stories about SMEs that collapse into administration, or founders who are ousted by boards, or who quit in disgust at what their creation has become.
Why does this happen?
Well, other than a drive to succeed, there’s something else that most founders of small businesses have in common, and that’s their thinking style.
Typically, entrepreneurs are interested in the big picture, in strategic thinking and synthesis. They are usually less interested in detail, structure, methodical thinking, and systems. What makes them so good at spotting and taking advantage of an opportunity often makes them far less effective at building systems they can use to progress beyond a self-limiting opportunity to build a self-sustaining multi-million dollar business.
Span of Control
An individual manager can only handle managing so many people. When a business first starts, its founder manages everything, usually including the things that are beyond his or her comfort zone. As the business grows, more people join, and eventually there are enough people that there can be a division of labour such that the business can hire specialists in things like marketing, or sales.
Two related things happen as the business grows: more people join than the founder can manage simultaneously, and they begin to bring skills that the founder knows relatively little about.
Both situations lead to circumstances where the entrepreneurial founder can no longer effectively manage the people who make up his or her business.
So what then?
There are three strategies for an entrepreneurial owner of an SME who wants to grow their business beyond their span of control.
Find like-minded people you can trust
I spoke to one business owner recently who described the early work of a small business as ‘finding awesome people who do awesome work’. Author Jim Collins uses the analogy of getting the right people on the bus, declaring “first who, then what”. Hiring the right people and skipping over the wrong people is crucial to a small business, as the right people will make the founder’s life easier, while the wrong people will suck time, energy, and profitability out of the business.
The problem in relying on this strategy for too long, though, is that it’s rather high risk. If a key individual in the business is severely injured or otherwise incapacitated, or resigns, their experience, judgment, and expertise walk out the door with them. This makes it doubly difficult when informal systems have sprung up around individuals’ personal skills or preferences. Finding a like-for-like replacement—especially quickly—can sometimes be impossible.
Step back from the business and hire someone else
You might notice that after founders sell their business, take their business public, or welcome venture capitalists onto the board, often they end up moving from the Managing Director or CEO role into something like Chief Operating Officer or managing the R&D part of the business. Typically that’s because their talents don’t extend to the various activities required to run a more robust larger business.
Bringing in the right talent is another option for entrepreneurial founders who feel that the business of managing the business has become too much bean-counting and not enough innovation and big-picture thinking.
Develop systems and rules
A well-constructed performance management system includes a vision, mission statement, competency framework, a corporate goal and cascaded targets, position descriptions, recruitment and selection processes and procedures, operational process and procedure documentation, and more besides.
Building one is complex, time-consuming, and requires the kind of skills that an entrepreneurial SME owner often doesn’t possess him- or herself. But it’s a long-term solution that also increases the value of the business to potential buyers, should that be the owner’s intention.
Each of these strategies has something in common: the founder has to let go. They have to entrust the fate of their business to other people—often people they’ve hired themselves, if the business is small enough.
Doing so is sometimes the hardest thing for a business owner to do, and plenty of businesses out there have grown and contracted in cycles as the business owner learns to let go, a little bit at a time, before grabbing control back and reducing their span of control to whatever they can handle.
It’s an important lesson though, and one that every founder has to learn. Even Steve Jobs, widely regarded as a controlling but brilliant individual, had others in his business who made decisions for him.
In the end, the old adage really does apply: if you love them, let them go. Your business and the people in it will thank you for it.