Why Some Business Owners Get Left Behind By Their Own Companies

A lot of entrepreneurs have aspirations of making it big. They dream of turning their little enterprises into industry leaders someday.

After all, with hard work, nothing is impossible, amirite?

However, reality is a harsh teacher. In a 2008 study by the Harvard Business Review called the Founder’s Dilemma, the author found that it was rare for founder-CEOs to still be running their business in the long term. In fact, less than half of the 212 startups included in the study had the same CEO after 3 years.

The study is a decade old and there have since been notable founder-CEOs who kept their positions, like Facebook’s Mark Zuckerberg and our very own Vlad Shmunis. But the norm is still this:

While the original business owner is fine for building the company from the ground up, they’re not always seen as the best person for growing it.

But why is that? Why isn’t the person responsible for the company’s existence the perfect guy to take it to the next level? Can the person who built the company from nothing be a hindrance to the company’s own growth?

The answer to the last question is a big sad yes. Entrepreneurs can get in the way of the growth of their own business, and here are some of the reasons why:

No vision, always in survival mode, and reactive, not active

One of the primary reasons why entrepreneurs are replaced as CEOs of their own companies is the mindset they bring to the organization. When you are a budding entrepreneur, you are mostly in survival mode.

Budding entrepreneurs are on survival mode
Budding entrepreneurs are usually on survival mode. photo credit: The U.S. Army

When you have zero resources and no profit, your main concern is keeping the business afloat.

Startup entrepreneurs are busy putting out fires. They don’t really have the time or the luxury to think about the future. They don’t know if their company will still be there in six months’ time.

That is acceptable for a startup. However, at some point, the founder must realize that he has to get out of survival mode.

Once the company is stabilized, the company needs a vision. The leader needs to actively set long-term goals so the whole company can work towards it.

When the person in charge stays in survival mode, it will be hard for him to see opportunities to grow the company. He’ll be too busy reacting to every perceived fire instead of finding ways for the business to improve.

Sentimental over the first team

It is not difficult to see why business owners can be too attached to their first team. After all, they’re the people who were there before the company became profitable. They’re the guys who were down in the trenches with the boss, fighting to turn the company’s profit margin around.

Now that the company is ready for the next step, it just seems wrong to move forward with other people. However, as pointed out by RingCentral CEO Vlad Shmunis in a 2012 interview with Pando Daily, your first team is not always the team that can take you to the next level.

Your original team was great when you were still starting. But at a certain point, your business will need people who have more experience and a different set of skills.

For example: if you’re gearing up for an IPO, you want a CFO who’s successfully helped companies prepare to go public. You may love your current financial officer, but he won’t be right for the job if he hasn’t done anything on that scale. You can’t leave it to someone who will be learning the ropes on-the-job. The IPO is too critical.

If you let your sentimentality rule you, you won’t find people who are better suited for specific positions in your company.

It’s a harsh reality, but the business’s success should be more important than any one person on the team.

The boss is involved in everything

In startups, founders tend to have a say in everything that goes on within the company. This is understandable, especially if there isn’t a lot of people working in the office and there are no clear departments.

But the founder needs to transition from being the only decision maker to a person who trusts other people to make decisions as the company grows.

There’s nothing wrong with knowing what’s going on in the company. But when you insist on having the final say on everything down to the smallest detail, you’re just creating a lot of unnecessary bureaucracy. You effectively bog down the efficiency of a growing company.

At this point, the founder becomes a roadblock instead of an asset to the company.

No Segmentation of tasks and duties

Entrepreneurs also tend to do things informally. In a lot of startups, employees handle many tasks and duties that aren’t always related to each other. It can’t be helped because most startups have few staff members. Everyone has to step up and do things that are not strictly part of their job description.

It’s not an ideal setup, but it can’t be avoided when the business is just starting. However, as the company grows, business operations should also adapt. Continuing with this informal setup leads to redundancy of duties and confusion over task ownership.

If the entrepreneur still prefers doing things this way months after starting the business, then maybe he deserves to be replaced as the company’s CEO.

As the owner of the business and top decision-maker, you must strive to put organization in your organization. As the business expands, you need to segregate tasks. You must form departments and assign or hire more managers. When you do this, you clearly establish duties and responsibilities and your can enforce accountability more easily.

example of office hierarchy
Above is an example of a company organization chart that has clearly defined accountability and ownership of responsibilities. photo credit: holacracy.org

 

These are some of the common reasons why some business owners are replaced and left behind by their own companies. The only thing constant in this world is change, and that includes your fragile hold on your position as CEO of your own company.

You have to recognize that running a budding startup that’s still trying to find its niche is different from running an established company whose goal is to maximize profit.

If you fail to adapt to the new situation, you may just find yourself left behind by the business you built from scratch. And that’s all because became an obstacle to your own company’s success.

 

Do you agree with the points raised in the article? Share your thoughts in the comments section.

About the author

Author

Mark Dacanay is a Digital Marketing Professional who has been working with a B2B company offering cloud-based phone systems for more than 5 years. He is obsessed with anything about the cloud – the technology, not the fluffy stuff in the sky.