Entrepreneurs can avoid many of the problems associated with growing a business by recognizing the differences between employees and entrepreneurs. There are two important distinctions we can draw between entrepreneurs and employees.
As a business grows and adds employees, the entrepreneur is often required to become a manager. In many instances, this poses a dilemma for entrepreneurs. When you hire someone, the decision is based upon “trust” which entails belief about the person’s capabilities to perform in the role. “Do you trust him in that role?” means “Do you believe he can do it?” The role you assign an employee in your organization reflects the trust or confidence you have in their capability to perform the assigned work.
Most entrepreneurs start their businesses because they love what they do, not because they love being a manager. Most are experts in their chosen field, not in management.
In the start-up phase, most entrepreneurial organizations have cash flow challenges and focus on getting and serving clients more than on building organizational capability. As a result, they often have no formal structure or role descriptions.
Initially, entrepreneurs hire those who they know and trust, rather than those who are fit for a role. Hiring decisions are based upon relationship and not necessarily competence and suitability in the role.
Since entrepreneurs are also concerned about overhead, they prefer to pay bonuses based on profit or output to share the risk. Often, entrepreneurs expect employees to think and act like them.
As a consequence of these ad hoc decisions, employees are often confused about what the entrepreneur expects of them and of their accountabilities. Through lack of role clarity, work is duplicated or falls through the cracks.
In turn, entrepreneurs are frustrated because:
As a result of all of the above, employees burn out and leave, quit or stay. The organization becomes more dysfunctional. With the cycle of constant staff turnover and the learning curve associated with each new employee, client service suffers. The pattern of seamless service that’s necessary not only to keep clients satisfied, but also to keep up with the workload, is constantly disrupted. As you struggle to keep up with servicing existing clients, the opportunities to attract new clients slip by. As a result, the business does not grow or goes through ups and downs.
When entrepreneurs get to this point, they often begin to lose their zest or passion for the business. It just isn’t fun anymore. The good news is that there is a solution to the problem. I'll describe the solution in an upcoming blog.