Transitioning From an Entrepreunership to a Professionally Managed Firm Part IV

November 2, 2022
# min read
Doug Brown

Editor's note: This is the fourth of four installments of the series surrounding what it takes to move from a relatively small micro-business to a more robust, larger organization. Each article explores a different aspect of that journey.


In previous issues, we discussed the initial phases of transitioning a business from its infancy to becoming a sustainable business. We discussed the challenges and the growing pains experienced by many companies in that part of the growth curve and an understanding of the six key organizational development tasks they have to navigate. Also, we have covered how to understand the four major stages that an organization must pass through on its way to greatness, the typical characteristics of those stages, and the nine discreet result areas that are different between the entrepreneurial management style and a professional management style.


This installment discusses the tactical transitions that a business must successfully execute. Having a road map before we begin this relatively long journey is helpful. It is even better if we have a map that gives us indicators when we are successfully going in the right direction and indicators when we have started to stray off the plan.


As you read through the series of areas below and the problems that commonly occur and fester, I hope you will be able to get a sense of what new behaviors you need to begin implementing immediately.


What follows are a series of descriptors that indicate a less than desirable way of operating in today's business environment. Both individually and collectively, they create problems that rear their ugly head and then must be managed and solved.


Culture. The company thinks and acts like a "family, "with many leaders and managers "looking the other way" to avoid conflict. Productivity is defined and measured so loosely that it almost seems normal to tolerate poor performers.


Planning. No formal business plan, goals, or objectives exist, and so little consistent direction is provided for people regardless of their position or level of responsibility.


Control of the organization. Often control is ineffective or sporadically handled in fits and starts. When exerting authority, the primary style is top-down or command-and-control type management.


Decision making. People at the top are making decisions slowly and changing them quickly, leading to false starts and a lack of commitment to follow through.


Roles and responsibilities. Functions and duties are not defined clearly, and no measurements or standards of performance typically exist. This gap results in overlapping responsibilities, role confusion, and multiple areas where nobody is responsible for an outcome.


Communication. The overall level of poor written and verbal communication contributes to confusion among the staff and management.


Performance reviews and appraisals. If appraisals occur, only a surface-level discussion happens between a manager and the subordinates. Leaders and managers only provide positive feedback to avoid conflict. Little thought and effort are made toward muscle-building the organization or developing the individual staff members for the long term.


Recruiting. No formal recruiting, workforce planning, and succession plan exists.


Training and development. Little leadership, sales, or soft skills training exists outside of product or service-oriented training.


Budgets and accounting systems. No formal budget exists, or if it does, it is viewed as purely an "exercise." More often than not, data or numbers are inaccurate or incomplete. Financial information is typically gathered for the business and not broken down into functional areas.


Let's compare these to the characteristics of a high-performance organization. I'll also speak about what it can take to get there.


Culture. The company thinks and acts to generate profits consistently. Managers learn to deal with and manage conflict due to training and development. Productivity is measured using simple-to-administer tools and tied to the desired profitability targets. Leaders don't tolerate poor performance or poor performers for long. Managers provide the tools and guidance to help others make different choices and improve at a quick pace. Whenever someone doesn't show adequate progress, they will be removed from the position and, when possible, reassigned to a better match for their skills and abilities. If not possible, the organization will push them out to find a new career path in another firm.


Planning. A formal business plan exists, along with the supporting goals and objectives. The top team and other appropriate partie sengage in a strategic thinking and business planning process and review annual goals. The initial process involved determining elements such as the vision and values, determining market needs, assessing the competitive situation, and objectively assessing internal strengths. A shorter-term mission also was defined, and action steps began to be flushed out. People closest to the issue build appropriately detailed plans and communicate them to people at every level of the organization.


Control of the organization. Performance monitoring occurs in regularly scheduled meetings. After training in both the basics and advanced levels of communications and meetings management, a participative management style helps encourage an appropriate level of buy-in by all staff.


Decision making. Every level is making appropriate decisions for the organization. When subordinates should have made different decisions, the leaders recognize that it was not likely a willful insubordinate act but instead indicates a lack of understanding about an issue, value, goal, or priority.


Roles and responsibilities. Roles and responsibilities are clearly defined. Agreed upon performance standards (measurements) result from one-on-one and work groupor department meetings. This step minimizes overlapping duties, role confusion, or areas where nobody is responsible for an outcome.


Communication. The overall written and verbal communication level contributes to a motivated, can-do attitude among the staff and management. To understand what is happening inside the organization, leaders consciously keep their eyes open and ears to the ground to listen for what is said and not said. Also, leaders seek opportunities to listen to and get unsanitized feedback from real customers.


Performance reviews and appraisals. Managers proactively conduct appraisals in an appropriate environment and time of day, providing positive and negative constructive feedback. The subordinate and the manager use it as an opportunity to revisit career path decisions, discuss exhibited strengths and weaknesses and look for and select opportunities for personal and professional development. The organization operates with the understanding that people are an asset that can and should appreciate in value over time.


Recruiting. Formal recruitment is a planned activity. Managers are provided training in recruitment and interview techniques. Cultural differences among changing demographics are researched and explained. Detailed recruitment strategies and tactics make them executable and actionable. Once in place, managers are expected to hit recruiting goals and targets.


Training and development. Budget dollars and senior leadership support a full range of soft skills training and development activities that genuinely encourage others to help them excel. The promotion structure rewards proper behavior.


Budgets and accounting systems. The formal budget exists. More often than not, the financial information system and internal providers provides data or numbers that are accurate and complete. People (at every level) become accustomed to receiving accurate data available to support their ongoing decision-making.


As you can conclude, we see significantly different behaviors in the two scenarios. That attention to detail among the well-run firms allows them to leapfrog their other competition.

Read the next article in the series:
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