When the Entrepreneur Who Built the Business Leaves

We hear a lot about the importance of hiring professional managers to replace the entrepreneurs who drive a company’s successful growth. We are repeatedly reminded that the growing companies need to ultimately replace their entrepreneurial leaders with professionals who can bring in more sophisticated management techniques.

Granted, high growth companies will eventually need good management processes. And, in many situations, the entrepreneur who successfully grew the business may not be the right leader to implement the adoption of these processes. As a result, the entrepreneur is often replaced by a new leader with experience in big company management techniques. And, as companies grow larger, they do need these kinds of management processes.

However, there is another side to this that should not be forgotten. When the entrepreneur leaves and big company managers take over, the changes that are made may not really fit with the company’s culture and vision. While trying to make the company more professional, sometimes the newly installed management may end up taking the growing business too far afield from its roots. And, such straying too far from the company’s culture and vision can have detrimental effects on its success.

If the entrepreneur remains with the company after new management arrives, the entrepreneur may object to changes that are too far removed from what the company is all about. When this occurs, however, it is often said that the entrepreneur is just refusing to let go. Sometimes, this may be the case. But, not always. Often, the entrepreneur is able to see how much of a misfit the new changes are.  In contrast, the recently brought in professional managers, with their focus upon improving processes and systems, may not see a need to deal with these kinds of lack of fit issues.

That’s why, in some cases after the professional managers take over, the entrepreneur eventually is brought back to revive the business.  We saw this happen at Apple, where founder Steve Jobs returned and transformed Apple into the world’s most valuable company. And, we saw it once before at Starbucks. Now, we see it happening again at Starbucks, where the entrepreneurial Howard Schultz has returned once more to lead Starbucks and help revive it after the tough business conditions brought on by the pandemic.

Schultz is returning at a time when it is said that Starbucks lost its cultural strength. According to the April 23-24, 2022 Wall Street Journal article “Starbucks Has a Tall Order for Howard Schultz” by Heather Haddon, Starbucks had “streamlined parts of the business and focused on increasing efficiency”…”but, some former executives said the company lost touch with its people focused culture.” The article reported that workers felt pressured by an increasing emphasis on speed metrics. In order to help with this, “Mr. Schultz hired a new senior executive specializing in employee relations, Frank Britt, to act as the company’s chief strategy officer,” according to the article.

It is beyond the scope of this blog post to predict how well Starbucks will do as its former leader returns to the helm once again. But, it must be emphasized that success requires balancing the need for efficiency based managerial processes with the need to maintain crucial elements of a company’s culture and vision. An entrepreneurial leader who previously ran the company during successful growth can sometimes return to help bring about this much needed balance.

Nonetheless, for a company to endure long term, it cannot rely on the entrepreneur forever. The Wall Street Journal article says, “Others have expressed concern that the company resorted to calling back its early leader to try to get back on track“.  As former Starbucks vice-president Christine McHugh said in the article, “It’s not sustainable.”

That’s why, as I see it, based on my 25+ years researching business success and failure patterns, companies must balance the need for managerial efficiency processes with the need for the cultural and vision elements that drove the company’s success. The return of the entrepreneurial leader can help with that. Yet, someday the company will have to be able to do well without the entrepreneur who guided the initial success. But, it must find ways to do so without destroying key elements of the business that may be crucial for the company to thrive.

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