Thursday, 14 January 2010

Keeping the entrepreneurial flame alive

I had mentioned in an earlier column how it is very hard for a large company to be entrepreneurial. And how start ups usually lose much of their entrepreneurial spirit and agility as they scale – the founders usually get involved in other stuff – managing investors, putting in processes, being the public face of the company, managing conflict, hard coding the business model and rolling it out – doing stuff that is supposed to build the organisation and take it to the so called next level.

So while the organisation is getting built – the founders often take their eye off the entrepreneurial ball. This may not happen immediately however over time as the organisation gets larger and more complex to manage it usually happens.

After a few years what was a mission for the small focussed team that started the company becomes merely a job. You are no longer trying to change the world, you are simply going for more mundane things like sales growth, maintaining EBITDA margins, ensuring you meet investors’ quarterly result expectations, employee retention and so on. Things that are traditional and managerial rather than entrepreneurial.

Somewhere when transitioning from a start up to a big organisation – companies run the risk of losing their entrepreneurial soul.

While being a bigger company has many advantages it is important that companies try to also retain the entrepreneurial culture while becoming big.

Basically the problem is that the founding entrepreneurs usually create a cadre of managers under them and not entrepreneurs. There is massive capacity building of people who will execute and not enough of those who will create and build.

Retention of the entrepreneurial spirit has to be driven from the top. The founders have to recognise the problem and be committed to solving it. Although many pay lip service to this very few actually walk the talk.

The first and most important thing to do is to ensure that you hire the right kind of people. You need a rare breed – entrepreneurial managers. People who have the experience of having worked in a large organisation and despite having performed well there are dissatisfied with excessive controls and have a yearning for far greater independence than what they were ever offered. People who are somewhat irreverent but at same time understand the need for organisation building and the right kind of controls for ensuring performance and governance without stifling creativity. All this without compromising on the competencies required to actually do the job.

Such managers are rare to find but if you don’t recognise that these are the kind of people you need you will get them only by accident and then you would not know what to do with them.

Once you have a few of these on board what you need to do is agree with them on expectations and then empower them. If you don’t, you will be wasting a precious resource and chances are they will leave in some time anyway. So give them all the assistance they need and ensure you don’t get in their way.

Of course the risk here is that if you make a wrong hire and then empower that person you could have a serious problem on your hands. However after a couple of mistakes you will soon figure out who the right persons are and what to look for.

You are now no longer an entrepreneur alone – you have to assume the role of creating other entrepreneurs internally.

Close the loop by ensuring you have a generous wealth sharing plan – these are the people who will take the organisation to the next level. Ensure that they are rewarded well for their performance – way beyond market, usually through ESOPs. A performer must never even think of looking elsewhere.

In any company there will be people who will resist the empowerment of others – most notably the people under them. Get rid of the control freaks no matter how good they are technically – in the long run they will ensure that the organisation remains small.

Break up operating units into small teams. Large teams usually create more ground for conflict and creating alignment among a larger number of people is more difficult. Smaller teams work faster. What this means is that you need to get the same output from a smaller team as you would have from a larger team – so you need to raise the bar for hiring and recruit only very high quality people – at all levels in the company.

Finally you need to ensure that everyone has the freedom to speak his or her mind. Encourage a culture of independent thinking with a high tolerance of dissent.
Build an argumentative company.


ellora said...

Basically the problem is that the founding entrepreneurs usually create a cadre of managers under them and not entrepreneurs.
You need a rare breed – entrepreneurial managers....
Very rightly ponited out : we need to create a cadre of entrepreneurial managers...But when it is to be linked to the Organizational culture , are all stakeholders prepared for this paradigm shift?
The implementation needs to have agreater degree of buying in internally as well alingned to at all levels...
It is high time we started looking at creating entrepreneurial managers...
I agree with you..It is a refereshing learning form an entrepreneur who has each thought of his reflected in the life he is living

Anonymous said...

Hi Sanjeev,

The article "no where" shows the way to identify the talent hunt within the organization which is the most crucial factor.

Anonymous said...

Enterpreneurial flame, I will say Volceno comes from within the heart, and does not need Post greduate educations, or working with big orgenisation, it just need the spark of faith from inside to grow, to grow with team, to grow with others, to grow the people who puts the faith in you. This kind of people are easy to find, as all are like that from inside. Only thing is top-peoples, should wake up people from inside, and see people will die for you. KETAN THAKOR BHATT,

Kushal Arora said...

As always awesome sir.. I have read a lot of your posts as well as your story in Stay hungry stay foolish.. have been really inspired by your thoughts and ideas and practical rather than emotional approch towards entrepreneurship.

Mukund said...

This is an extremely well written article Sanjeev.One of the toughest thing in todays world is to prevail with Bold CEOs to convince them it works.The risk & payoff matrix should begin with the CEO desk.He needs to ask himself what 5 initiative i took to make this happen the preceding year & what is my agenda for additional initiatives doing this the next year.Business development is unfortunately the least resourced team in India.

P C Vinoj Kumar said...

Inspiring article. Valuable lessons for any aspiring entrepreneur. A fantastic blog. Hope to stay in touch with you.

Akshay Kothari said...

Respected Sir,

"To dream is human and to do is entrepreneurship".

Though i m too young to speak on that great word "Entrepreneurship" but i have practically experienced these learnings-

1)World has 1000s of shortcuts to make Money but,it's hidden in LONG TERM.
2)To accumulate money is a very long process but to loose it is the shortest.
3) World has the Formula to test the WORST of your PATIENCE and if you don’t panic in that Process it also has the FORMULA to make you Rich Overnight.
Last but not the least-
"World is ready to FOOL you on each and every RATE its you who have to Decide on which RATE you can afford to Become FOOL "
Thats why that flame of entrepreneurship keeps burning and brain is always ready to learn different aspects of money making.
Really world itself teaches a lot.

Thanks for the great blogpost and beautiful insights.

Akshay Kothari

Manoj Misra said...

Agree with you fully Sanjeev! Have seen it first had with several times!!

ReeshReeni said...

A very well written article. I work for a big firm and am doing very well, but I crave for more independence in decision making and in contributing to the overall profitability. Maybe I should be an entrepreneur.