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Making transition from Entrepreneur driven to Professionally managed business

The transition from entrepreneurship to professionally managed enterprise remains one of the most critical challenges for any successful entrepreneur.

In over a decade of my consulting practice, primarily with owner-driven organisations, I have seen many such enterprises making spectacular success by seamless transition and reaping the benefits in the form of growth and stabilisation. One of my clients grew from a modest turnover of Rs90 crores in 2003 to approximately Rs800 crores in 2009 by changing the contours of the organisation from entrepreneur driven to completely professionally managed.

There are three distinct qualities that I found in most of the successful entrepreneurs: An innate ability to spot an opportunity, the creativity & spirit of innovation and the ability to take risks. This works well when the entrepreneurial vision gains momentum and generates growth. However, the irony is that, when one as an entrepreneur tastes success, it is time to move on to the next step of transition, failing which the successful enterprise can turn into a fledging business.

As Bill Gates said, “Success is a lousy teacher. It seduces smart people into thinking they cannot lose.” And yes, Smart people can lose.

So, why does this happen?

Firstly, as business generates growth, it puts tremendous strain on the resources. 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 organisation 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 the following myths:

  • 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. (It 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 risk. Yet the myths suffocate these very characteristics which are necessary in the company’s managers for future growth and success.

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 that it is a moot question as some of the finest and professionally managed companies are indeed family owned. For instance, Wall Mart and closer home, AV Birla group.

It is therefore important to understand what it takes to make the transition smooth and effective.

Some of the steps the enterprise needs to take are:

  • Establish a structure that will support the current and future requirements of the organisation in terms of growth and consolidation.
  • Clearly define the roles and responsibilities for each key role occupant in the organisation 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.
  • Standardise all critical systems and processes.
  • Establish and communicate Performance Goals and Performance Measures. Let go: Let the experts manage the business.

HR Challenges

In the above scenario, human resource professionals play a pivotal role in ensuring smooth transition by:

  • Attracting the right people,
  • Ensuring their retention by adding values to them, 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,
  • Creating pride in the job by recognising and demonstrating that each job is important and everyone can make a difference,
  • Making employee accept the ownership and get problems solved,
  • Making employee customer-centric by bringing the belief that customer pays their salary and
  • Making every employee understand that quality of service is most important.

As one can see from the above charter, to advance beyond entrepreneurship is not easy, but it is the road to transform the enterprise into 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”.

Dr R Srinivasan, CEO, HR Strategist

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