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A recent study from researchers at Duke, Vanderbilt, and Harvard Universities took a look at entrepreneurs who started their own businesses with the aim of addressing a long-debated question: Are the people who start companies actually good at running them?
So, what do you think they found? I’ll give you a hint: It doesn’t look so good for the founders!
The research, which included hundreds of private and public companies, determined that a CEO who is also a company’s founder is “significantly less likely to implement basic management practices, even if these practices are associated with better firm performance.” In other words, no, people who start companies aren’t, in general, very good at running them once they reach a certain size.
Why is this true? The study concluded that many CEO founders basically don’t admit that they aren’t good managers. They’re not as open to changing their company’s environment to allow better management practices and tend to be reluctant to give up control.
I can see that. I have a client who, after 20 years of running his business, finally recognized this about himself. He started an equipment distribution business back in the 1980s and has since grown it to more than 100 employees.
But, unfortunately, he still runs the company like a startup. He insists on reviewing small invoices. He micromanages his employees. He is autocratic in his decision-making. He is reluctant to share financial data about his operations even with key people who could use that data to make better decisions. He keeps a tight rein on the company’s spending and is very cagey about bringing in any “outsiders.” He’s a fantastic entrepreneur. But a lousy manager.
And that’s where most of us go wrong: We don’t recognize our failings as a manager. We’re excellent at inspiring, selling, raising money, creating a vision, and building new products. But we’re just not very good managers.
Being a manager is a special skill set. It requires a great deal of talent to supervise, monitor, evaluate, and motivate a group of people. It requires patience, documentation, attention to detail, empathy, and trust in others. Many of us — business owners who founded our own companies — lack these skills.
The client I mentioned above started his business right after college. He never worked for a larger company. He was never taught managerial skills. He doesn’t know the ins and outs of effectively working with others. He’s used to barking out orders and getting his way without a consensus. This is all good for a startup or a very small company. But once you reach a certain size, these characteristics can be debilitating.
Now, at the age of 50, this reality is sinking in. He wants to build more value in his business and plans to sell it one day. To do this, he needs the help of outsiders. So, he’s bringing them in. Recently he hired a general manager and new controller. It’s a lot of money, a big risk, and — more significantly — a huge change in culture. He’s doing the right things, as challenging as they are.
The takeaway is this: Look in the mirror. You’ve done a great job starting up and growing your business. But are you really the right person to run it, now that it’s reached a certain size? The research says that you’re probably not. Accept this. Bring in experienced managers. You can still lead, inspire, create, and innovate. But welcome the opportunity for others to run things day to day. Long term… you’ll make more money.
Gene Marks writes a daily column for The Washington Post on business and public policy. He also writes weekly for Forbes, Entrepreneur Magazine, Inc. Magazine, and periodically for FoxNews.com. Gene also regularly appears nationally on Fox News, MSNBC, Sirius/XM Radio and ABC radio. Gene has a weekly podcast with The Hartford at https://sba.thehartford.com/category/podcast/. His work reaches an audience of more than half a million business owners, managers and executives each week.
Gene is the author of six books on business management and is a Certified Public Accountant. He also runs The Marks Group PC - a 10-person technology and management consulting firm located near Philadelphia. Prior to starting The Marks Group, he spent nine years with the international firm KPMG most recently as Senior Manager.
Gene speaks frequently to groups such as ours so that we can better understand the trends affecting our businesses and – most importantly – the actions we can take to continue to grow and profit.