Leadership Challenges in making transition from Ownership driven to Professionally Managed business
Dr. R. Srinivasan
The transitioning from entrepreneurship to professionally managed enterprise remains one of the most critical challenges for any successful entrepreneur.
There are three distinct qualities found in most of the successful entrepreneurs. An innate ability to spot an opportunity, the creative spirit of innovation and the ability to take risks. This works well when the entrepreneurial vision gains momentum and generates growth. However, here is the irony, when you as an entrepreneur taste success; it is a signal to move on to the next step of transition to turn your enterprise into a flourishing business.
As Bill Gates said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose”. And yes, Smart people can lose.
So Why does this happen?
Firstly, as business generates growth, it puts tremendous strain on the resources. As business grows, you need robust systems and processes to ensure predictable performance.
Secondly, in entrepreneurially run business, the emphasis is on growth and innovation and less on profit. The structure is loosely defined which works well when organization is small and entrepreneur knows the stakeholders on a personal level.
However, in spite of acknowledging the fact that the business needs to be professionally managed, many entrepreneurs fail to do so and mask their actions by following certain preconceived notions;
- My Business is different; Strange because every business is different in the same way.
- My people do not have the experience (that I have) to understand the business the way I do.
- It is my money and therefore I am the custodian. (This is my BABY and I must protect it).
In order to become professionally managed, the entrepreneur must empower managers to be individualistic, self-reliant and take risks. And yet the myths suffocate these very characteristics, which are necessary for growth and success.
So what must “We”(Entrepreneurs) do?
In several of my discussions with “Professionals” I am often asked, “is the enterprise family owned or professionally managed?” I always tell them this is a moot question as some of the finest and professionally managed company’s in the world are indeed family owned. Wall Mart for instance or the AV Birla group in India are a few examples of this assessment.
It is therefore important to understand what it takes to make the transition from an owner driven enterprise to a professionally managed business.
Some of these steps are as follows;
- Demonstrate transparency and equitable treatment by having well defined HR Policies.
- Put in key processes in all functional areas to make organization process-centric and move away from being individual-centric.
- Develop leadership bench by training its KMPs (Key Management Personnel) in Leadership excellence.
- Establish a structure that will support the current and future requirements of the organization in terms of growth and consolidation.
- Clearly define the roles and responsibilities for each key role occupant in the organization structure.
- Develop appropriate authorization matrix so that managers are empowered to take decisions.
- Clearly identify the competencies required, for superior performance, for each position.
- Select the right people having the desired competencies.
- Ensure each key personnel and his/her department has clear and quantified profit objectives to inculcate a disciplined profit oriented approach to doing business.
- Establish & communicate Performance Goals (PG), Performance Measures.
- Let go: Let the experts manage the business.
In the above scenario, human resource professionals play a pivotal role in ensuring smooth transition by;
- Attracting the right people
- Ensuring their retention by providing clear growth path, providing “operational band-width” and internal brand equity
- Creating a culture of performance by suitable Rewards & Recognition Systems. (Employee must do more than show up)
- Developing management capabilities by establishing suitable talent management process
- Create pride in the job by recognizing and demonstrating that each job is important
- Making employees to own their work
- Making employee customers-centric by bringing the belief that customer pays their salary
- Making every employee understand that quality of service is most importance.
- Develop credible employee engagement strategy by aligning individual aspirations with organizational goals.
As one can see from the above charter, to advance beyond entrepreneurship is not easy, but the above is the road to transform the enterprise in the 21st century.
Needless to say “Failure of the entrepreneur to build a professionally managed organization will result in the company having a great history and no future.