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Professional Management vs. Entrepreneurial Management

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An entrepreneur has a dream. Skill, hard work, and luck turn that dream into a business success. At some point, as the company grows and matures, the founder faces a decision - should he/she continue to manage the company or stay with the dream.

Should the founder continue with entrepreneurial management or is it time to engage professional managers so the founder can devote more time to the company's core idea? It is a question that must continue to be faced as the company continues to grow.

When To Give Up Control

When is the right time for the founder to relinquish control of his dream to a professional? Some would have you believe it has to happen as soon as the founder begins to look for outside capital. Others would have you believe it is never the right time.

The Merriam-Webster dictionary defines entrepreneur as "one who organizes, manages, and assumes the risks of a business or enterprise" and manager as "one that manages: as a : a person who conducts business or household affairs or b : a person whose work or profession is management".

As you can see from those definitions, there is a lot of overlap between the two. That's what makes the decision so hard. Many entrepreneurs are excellent managers. Often the founder's decision to manage the company or "manage the dream" is a win in either case for the company. In many cases, the decision hinges on the founder's definition of success. Does the founder want to grow the company into the biggest enterprise in its industry? Or would the founder rather limit growth to something that provides simply a good income and allows him/her to retain full control of the company and its goals and direction?

An Example

A gentleman I know started a small software company based on his skill as a programmer. He has a real talent for programming languages, a good feel for what the market wants, and the resultant ability to produce specialty applications for select large companies. He also has keen business sense, an excellent ability to market his company's capabilities, and has earned an enviable reputation for quality and innovation. He has built a network of contacts among the top levels of his biggest customers. He has been able to see new trends coming and has been agile enough to adjust to take advantage of them.

As his company started to grow beyond the "three guys in a garage" stage, he found himself spending more time running the business than writing programs. So he hired a friend to manage the company so he could continue programming. He quickly learned that managing a growing company requires more skill than just friendship with the founder. He took the unpleasant, but necessary, step of eliminating the manager and resuming those duties.

I met him several (no growth) years later. He was continuing to struggle with his dilemma of running the company or continuing to program. He was doing both, but was concerned that he just didn't have the time or energy to do both of them well. In under a year, I had helped him more than double the size of the company. It was a move that provided new possibilities at the same time as a watershed change in the industry provided new opportunities. He chose to retake full control of the business himself.

A couple of years later, after turning the company to a dramatically new course, he again stepped aside and again brought in professional management. The company has been very successful in their new market. And the founder again may find himself facing the decision of how much control he is willing to sacrifice to continue to grow. Will this be the time he surrenders majority control of the voting stock in exchange for a top-caliber management team? Or will he decide that his current reward from the company is adequate for his needs?

A tough choice

It is tough for any entrepreneur to decide when, or whether, to relinquish control of their dream for the growth and freedom a professional management team can bring to their company. If you have made the choice, let us know how you decided, and when. If you are facing the decision, post your situation on our Management Forum, and see what guidance your peers can give you.

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