Why Entrepreneurs Can’t Manage

Why Entrepreneurs Can’t Manage

By Joanna L. Krotz

Entrepreneurs who can drive startups are often not the leaders who can also steer businesses into the big time. When a founder does insist on managing his maturing company, trouble tends to follow.

Are you out to defy this trend? We welcome you to the challenge, and appreciate your fortitude. But you owe it to yourself to read on.

5 traits of entrepreneurs

Entrepreneurs generally turn into lousy CEOs for the very reasons they thrive on startups. Below are five traits of entrepreneurs — which often work against them as managers.

They’re perfectionists. “Entrepreneurs like to micro-manage everything,” says Houston management consultant Linda Talley.
They’re disinterested in consensus or feedback. “They herd departments,” says Dave Rohlander, founder of a two-year-old software company, RFQsolutions, in San Diego. “The energy and vision and aggressiveness it takes to be an entrepreneur doesn’t sit well with larger groups of people.”
They’re mavericks. “Entrepreneurs are typically risk-takers,” says ArLyne Diamond, a psychologist and management consultant in Santa Clara, Calif. “In the rush to get it done, they don’t have the patience to manage people.”
They prefer to do everything themselves. “The challenge is believing that anyone else can do it better,” admits Emory Mulling, chairman of his own 15-year-old executive outplacement, coaching and search firms in Atlanta. “For too long, I worked with every individual in our training program,” he says of his own personal experience. “It took four years for me to find someone else.”
Their focus is one-sided. “Male entrepreneurs tend toward vision and analysis. They’re comfortable with numbers,” says profitability consultant Karen Lund in St. Paul, Minn. “Women entrepreneurs tend to focus on how well people are doing and not on operating and financials. When they don’t focus on both sides, entrepreneurs fail.”
When a manager’s skills are needed

The dream of starting a company often begins with the love of doing something — programming, designing, investing, taking photos.

“The job of entrepreneurs is to create a commercial idea from nothing,” explains Ben Oviatt, director of the Entrepreneurship Center at Georgia State University in Atlanta. “They put the deal together and control the thing they create, so it is of high quality, making investors and customers see the high quality of their idea.”

But as a business grows, most entrepreneurs must stop doing what they love, hire others to do it and then oversee results. Once the money, technology and deal are in place, the job becomes coordination and improvement, Oviatt says. Those are very different skills.

The now-defunct Value America might look like a poster child for this good entrepreneur/bad boss fable. Yet Craig Winn, one of the firm’s founders, argues just the opposite.

You may remember Value America, the online mass-market discounter, which garnered major buzz and bucks, going from nothing to a $3 billion company within three years. Bankrolled by Microsoft co-founder Paul Allen and Federal Express founder Frederick Smith, it had a spectacular public offering in 1999 and a spectacular demise 16 months later.

Sounding bitter and angry in a phone interview, Winn insists the company was destroyed only after he turned it over to “professional managers.” Today he believes that was a big mistake. On-the-job training is qualification enough to run a business. “CEOs of startups must know about finances, raising money, management, inventory control, law, banking, marketing, how to sell and more,” Winn says.

Would the company have done better if Winn had stayed on? Hard to tell from this vantage point. At the time, media reports said he continued to meddle and micro-manage, even after stepping down. Gee, that has a familiar ring.

Winn’s response: “The press totally made it up.”

Chief stereotypes

Let’s say Winn’s right and everyone got it wrong. Let’s even say that the stereotype of the startup personality to explain bad managers is just that — a partial, generalized truth. What else turns entrepreneurs into bad bosses?

“The dirty little secret of chief executives is the fear intrinsic in the job,” says Walt Sutton. He should know. Sutton started, owned, grew and sold four businesses himself, all of them computer-related.

“The CEO is fundamentally responsible for the survival of the company,” Sutton says. “He can’t share that burden with anyone, though he thinks he can. That goes for hired CEOs as well as entrepreneurs.” That means chief execs, as a group, are far from warm and fuzzy. They’re don’t coach staff across finish lines. They don’t mentor or cheerlead. Think of Jack Welch, suggests Sutton.

CEOs are the only ones in a company who can make what Sutton calls “god moves” — that is, transforming changes such as, “We will now stop making buggy whips and begin mass-producing automobiles.” By definition, then, all CEOs must be entrepreneurial and all are bad bosses. That’s the job.

But large organizations have a tier of middle managers who buffer the CEO by developing staff and dealing with day-to-day details. Growing companies can’t afford that luxury.

Telltale signs it’s time to move on

Face the inevitable. Entrepreneurs are controlling and passionate about the baby firm to which they give birth. It’s hard to let go. But if the company is to succeed, at some point most founders must step aside or up or out — take your pick. How do know when it’s time?

Staff turnover increases.
“You go home and kick the dog,” says Talley.
“Everyone starts hiding things from the CEO,” says Diamond.
The mission is diluted — everyone’s going in different directions.
“When you hear: ‘We don’t have access to you,'” says Mulling.

In response, you can promote yourself to chairman and hire a strong manager. You can also keep working at what you love and hire a CEO. One client who started a graphics design company, Talley says, hired a company chief while remaining creative director.

But if you do stick around, make sure you really empower your CEO or chief manager — otherwise, don’t bother.

Basically, Lund says, it comes down to two questions: “Is the business generating revenues? And how well are goods and services being delivered?”

When either area needs fixing, it’s time to change your title.


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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.


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