Flamholtz and Randle (2000:9) state that:

'The first challenge entrepreneurs face is that of establishing a successful new venture. If they have the ability to recognize a market need and to develop (or to hire other people to develop) a product or service appropriate to satisfy that need, their fledgling enterprise is likely to experience rapid growth. It is at this point, whether the entrepreneur recognizes it or not, that the game begins to change. The firm's success creates its next set of problems and challenges to survival.'

Entrepreneurs such as Richard Branson of Virgin, Bill Gates of Microsoft, Anita Roddick of the Body Shop and Michael Dell are unusual. Rarely do the founders of start-up businesses remain in charge as their businesses become large organizations.

Catlin and Matthews (2001:4) point out that:
'The irony of entrepreneurial leaders is that the very behaviors and habit patterns that lead to success at one stage of growth can contribute to failure at the next stage. It seems that just when you get good at something, you discover it's the wrong thing to be doing!'

Flamholtz and Randle (2000) identify the following stages of successful business growth:

1. New venture
2. Expansion
3. Professionalization
4. Consolidation
5. Diversification
6. Integration
7. Decline and revitalization

Catlin and Matthews consider that entrepreneurs begin with an intuitive leadership style. In the start-up phase they can make decisions 'on the fly', improvise when required and manage everything on a day-to-day basis.

As the business expands, this approach results in more and more frenzied activity, less time to think and a gradual feeling of being overwhelmed. Flamholtz and Randle point to characteristic organizational growing pains such as:

* People feeling that there are not enough hours in the day.

* People spending too much time 'fire-fighting'.

* People not knowing what other staff are doing

* A failure to understand the organization's goals

* Not enough good managers

* An attitude of 'I have to do it myself if I want it done properly.'

* Meetings are generally felt to be a waste of time.

* Plans are rarely made and where they exist they are seldom followed, so that things are often not done

* Some people do not feel secure about their positions

* Sales may be increasing, but profits are not

These problems are symptomatic of a lack of organizational and managerial infrastructure that can support a larger and more complex operation. The original leadership style has become inappropriate and inadequate. Now there is a need for leadership to be more deliberate and for growth to be designed rather than accidental. Nevertheless, a successful owner needs to combine this approach with the best of their entrepreneurial characteristics to achieve consistent growth.

Flamholtz and Randle consider that the firm (and therefore the entrepreneur) has to go through 'a fundamental transformation or metamorphosis from the spontaneous ad hoc, free-spirited enterprise that it has been to a more formally planned, organized and disciplined entity.'

Catlin and Matthews contend that if the founder is to remain in charge of the expanding business, he or she has to:

* Develop strategies, products/services, customers and markets.

* Develop organizational processes for planning, management and work flow - and also the infrastructure to accommodate growth and expansion.

* Recruit new people and develop teams to handle growth

* Create a business culture to align people and teams so that they work together effectively.

* Monitor the evolution of the business and adapt their own leadership style as the business expands and changes.

But what if the owner-entrepreneur is unable to meet these requirements? Flamholtz and Randle contend that there are four alternatives:

1. Resign and let someone else be brought in to run the organization.
2. Move up to chairperson, allowing a new manager to run day-to-day operations.
3. Carry on as before and hope the problems will go away.
4. Sell out and start a new entrepreneurial venture.

In general, they conclude that:

'Founder-entrepreneurs typically experience great difficulty in relinquishing control of their businesses. Some try to change their skills and behavior but fail. Others merely give the illusion of turning the organization over to professional managers.'

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References

Catlin, K. and Matthews, J. (2001) Leading at the Speed of Growth: Journey from Entrepreneur to CEO, John Wiley & Sons.

Flamholtz, E.G. and Randle, Y. (2000) Growing Pains : Transitioning from an Entrepreneurship to a Professionally Managed Firm, Jossey-Bass.

Leading at the Speed of Growth: Journey from Entrepreneur to CEO