Key Steps for Transitioning from Entrepreneurial to Manageable Companies
Daniel Tavčioski
“Necessity is the mother of entrepreneurship,” Mark Twain, long before academic authorities, wrote. Numerous opportunities in the transitional market have distinguished those among us who saw further, thought faster, and fully invested themselves to seize these opportunities. Thirty years later, many founders of family companies have been succeeded by their children and family members, along with managers who have grown with the company… Some companies have disappeared, along with the important lessons that each problem brings…
Family companies have always been the backbone of the economy everywhere. They develop much more dynamically, employ more people, and do so more frequently. However, in order to continue to develop and maintain their positive impact on the economy, family companies must be manageable.
In the development journey, the needs of a successful family company quickly outgrow the professional knowledge and skills of the founders, which inevitably slows down development and leads to a management crisis. Although family well-being is one of the strongest motivators for entrepreneurs, management problems become a dramatic burden for both the family and the health of the founders.
This period can last for years. During this time, the founder will seek an external manager to help establish control. In most cases, these attempts are unsuccessful, but despite this, founders continue to search for a “better” manager than the previous one… There is a universal list of founder complaints about managers’ attempts to run the company. The items on the list (it can’t work here as it does there; he said he knows, but he doesn’t, too focused on/not focused enough on people, lacks initiative…) are consistent in different countries, regardless of the economic environment or specific mentality. This consistency suggests that there are more objective reasons that we can influence, certainly with the consent and understanding of the founders.
“When the student is ready, the teacher will appear,” reminded me once, the founder of a large family company that is now successfully managed by his children and a team of managers who grew up with them. Wisdom, of course, did not come without the deep drama of personal change in understanding both the job of a manager and the responsibilities of parenthood. But it was this change that opened the space for personal improvement among all employees…
Is it possible to accelerate the development of a family company?
Of course, first by making it manageable.
Problems in organization and management daily squander what the company earns, demotivate everyone involved (including the founder and his family), undermine customer satisfaction, and weaken competitiveness… The company weakens without even realizing it.
Solving manageability issues, with partial changes in separate parts of the company, does not yield sustainable results. Chaos from different parts of the business process will inevitably disrupt the part of the company where order is being established. For organizing the company, coordinated common activities and careful linking of process parts that occur in different sectors are necessary. The result of organizing the business process is clear basic tasks for each position and the ability to measure performance – of all employees, the organization method, and the quality of management.
“What you cannot measure, you cannot control,” William Deming long ago warned us, thus laying the foundations of modern management.
If we do not have a business process, there is no point in having managers. Founders intuitively employ managers to establish a business process but often exempt themselves from this task, so it takes a long time for the organization to “settle.” The process is based on a set of rules that are equal for everyone, so often, even without conscious intention, the founder himself undermines what he asked to be established… Thus, disorganized agreements between the management, managers, and associates, without measured and recognized results, further weaken competitiveness, profitability, motivation, and performance, as well as the health of the founder, his family members, and all employees.
No external financial aid, either from the state or additional investments by the founder, produces the expected results in such an organization. A good opportunity in the market or increased customer orders, instead of improving the company, disrupts the already ill-considered organization, damages profitability and reputation with customers, and in the long run, demotivates employees. Such “episodes” are probably also the key cause of increased employee turnover…
A defined business process and methods for monitoring and measuring are the basis for the work of company managers – whether they are family members, experienced workers promoted to managers, or newly hired managers with experience from other companies. Unmanageability is the key reason for numerous failed attempts by very educated children of founders to take over company management. When the business process is clear, it is clear how to manage the company, and it is possible to introduce management tasks to both family members and new managers.
How to recognize and retain the best employees?
Our associates do not come to work just for the salary. Poor organization and management deficiencies push them into such an attitude. A lack of initiative and failure to take responsibility are forms of self-defense in which they themselves do not manage well.
Without an organized business process and clear tasks at the workplace, it is not clear what a well-done job is and what an acceptable candidate for that position should look like. Even when we get lucky with an excellent new associate, it isn’t easy to utilize and develop their potential if the tasks at the workplace are neither clear nor measurable. There is no company that has not wasted at least several such opportunities. It is not possible to avoid demotivation and so-called “burnout” if our associates work on tasks whose results are not substantiated by the purpose of the position. It may be less visible, but this happens daily, even to the children and family members of the founders in family companies.
In the long run, this fundamental oversight in company management encourages “competition” in loyalty to the founder instead of expertise and company results. Unmanageability erodes trust and encourages employees to play a “game of silence and excuses” (hiding information and avoiding responsibility). It doesn’t take long for only those who fear they are not good enough for anywhere else to remain in the company…
Organizing the business process allows us to introduce associates to the job. When the job is clear, the company introduces employees to workplace tasks through a thought-out process of several steps and checks after each of them. During the introduction, we build both the expertise and motivation of future colleagues and prepare them to become independent and fit into the team.
When the process is not well organized, a new associate is usually introduced by an experienced and patient older colleague, by personal example, amidst numerous daily tasks. Although we know that this method is neither productive nor sustainable, unorganized companies are unusually persistent in these attempts.
An established business process also allows us to control that managers do not support only weaker associates due to their personal fear of competition in hierarchical advancement.
Job introduction is necessary to maintain and improve the manageability of the company. The importance of job introduction is especially evident:
- When promoting a quality associate to a new manager, to timely determine whether they have managerial potential and the ability to lead and motivate associates,
- When engaging a manager from another company, to avoid the trap of incompetently changing the established way of working just because the company he comes from worked differently,
- When including family members of the founder in company management to avoid the pitfalls of manipulation by lower levels of management and to help them build strong informal authority, which does not rely on family ties.
Only what is measurable can be improved. Well-designed and documented jobs, supported by appropriate practical training and a process of tracking results, allow the linking of a manageable process with manageable associates. During job introduction (managed by the immediate manager, not the HR associate as has become fashionable), candidates go through a complex path – from getting to know the tasks and way of working, through developing necessary professional skills and healthy business motivation to becoming independent and able to improve the part of the process entrusted to them and the work of colleagues in the team.
The organization thus “comes to life” from within, and the potential of all employees becomes visible. Self-respect due to achieved personal results accelerates their personal development and change for the better, and the link between personal and company goals becomes clear to them and their managers.
How do we create value for the customer?
The dramatic process of the creation of almost all family companies is extremely simplified in books with the comment that they are “born in the founder’s vision.” This phrase points to the unusual ability of entrepreneurs to easily recognize an opportunity and quickly combine ways to create “value for the customer” around it. Through their work and immense enthusiasm, they inspire associates to follow them in winning customer favor. These extraordinary abilities and persistence of the founders are fundamental to the rapid development of family companies.
However, what helped the company grow is not enough for the company to continue to develop. A well-organized organization must replace inspired improvisation. This is not a one-step journey, although it is not an “impossible mission,” as statistical data may seem to suggest.
The founder’s vision must evolve into a strategy document. The form of this document enables the “translation” of the vision into an organized business process. Unfortunately, most of the expert recommendations are made for very large companies, so the recommendations used by domestic authorities in this field are still “clunky” and unnecessarily complicated. The original knowledge from which these recommendations were derived is available and very simple to apply. They were created to support precisely the former family companies but are often mystified to the point of being unusable due to the strange inclination of book authors. This problem is compounded by the unwieldy forms of documents that break down strategy guidelines into tasks for employees. For some reason, few people care that certificates of revised organization and management methods “hang on the wall” and do not live in everyday work.
When the management of a company conveys to all employees the idea of “value for the customer” and organizes the work of everyone who creates and should improve it, the “organization” begins to come alive, and a common goal permeates the beliefs and attitudes of the employees. Teamwork becomes a natural necessity, along with the exchange of important experiences and mutual support for the development of each employee. Thus, manageability enables the creation of “value for the customer” through the collective work of all employees and initiates the process of continuous improvement at every workplace.
In the business practices of successful companies, “value for the customer” and “manageability” are connected through systems of measurement and monitoring of both company-wide and individual results, along with sales outcomes, customer loyalty, and brand strength. In this way, the aligned monitoring of the organization’s efficiency (manageability) and the effectiveness of the offering (value for the customer) drives the development of both the company and its employees.
Such a degree of manageability is easier to build in family companies and does not directly depend on the number of managers or their specific potential, as it sometimes seems when comparing smaller with larger companies. We believe it is even easier when starting with a good family company that nurtures a culture of trust and a spirit of support among all employees.
The aligned development of the organization by defining the business process and the development of managers and colleagues who will improve the process and the value for the customer is especially important for the second generation of the founding family. The guidelines of this knowledge will give real strength to their authority as well as to the love of the parents who pass on not only the company mission but also the family mission.
