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Founder's Disease
One of the hardest things to deal with in saving a company is almost always the founder. I call it “Founder’s Disease”, and before I get too punitive about it, I too was a sufferer at one time. This is the disorder unique to entrepreneurs whereby they think that since they are the ones who came up with the idea and started the ball rolling only they can really understand what is going on and how to run things. Never mind that this flies in the face of all evidence to the contrary i.e. that the company is underperforming or in trouble and they are the captain of a sinking ship. No, it is usually everyone involved - but them - that understand that things have to change in order to survive and prosper.
The root of understanding this disorder is to accept that it is a very different talent to start a company than to run it. Almost without exception it is not found in the same person. Let me share two examples, one of the right way and one of the wrong. First there is my friend Don. By background he is a high school drop out, former druggie and party animal who went to work a long time ago in a machine shop. He found that not only did he enjoy the work, but he was very good at it. As time went by he learned all that he could, became an exemplary employee, and when the company started to founder due to the mismanagement of the original owner, he was able to buy the company for a song.
Knowing that he could only carry so much of the load, he immediately began to hire and surround himself with talented people who both knew the industry and knew how to run a business. This meant in the early years taking a lot less out of the company for himself and making some sacrifices, but in the end was worth it. The company grew from a half dozen employees to hundreds today and is a major machining operation making parts for Fortune 500 companies. Moreover, Don became essentially a Chairman of the Board and kept adding to his talent pool so that today he is able to live the life of a very wealthy man with a wonderful family and is very active in the community doing whatever it is that interests him. It is a great success story.
Don knew what he was good at, was a risk taker and willing to sacrifice, and found the “A” talent that he needed to make things work. He had no ego about it and understood without formal education that A people hire A people but B people hire C people. He did not need to be right or have all the credit and he kept his eye on the prize.
Next there is my client Phil, whose name I have changed for reasons of confidentiality. As I write this we are trying to turn his company around. It is a manufacturing concern with an excellent product line and fair distribution channels. Phil is very well educated with a graduate degree from a top university. He conceived the company, took a partner, raised capital, and plunged ahead. However, in raising the capital he worked from no formal business plan, no budget, no analysis of the talents of the main players, no market research, and basically sold himself and others on the promise without a real foundation. Sure he made projections, but they were based on guess work.
As time went on the partner turned out to be a mistake as well as a borderline personality. (Feel free to Google that term but suffice to say it is the kind of person that mixes paranoia with narcissism and always has to be right. They are a lot of fun, as you can imagine). The company burned through millions of dollars and is unfortunately now “running on fumes.” On the bright side sales are in the seven figures but expenses are out of control, he has no real idea of his costs of production, no formal systems in place, and now that panic has set in, he is frantically trying to save the company, but he has “Founder’s Disease.”
The hard thing to deal with is that he still believes that he can figure his own way out of this mess. Only desperation finally allowed him to bring our turnaround in to help but he still instinctively resists what needs to be done every step of the way. He is letting us finally get involved after all only since he has hit rock bottom and we are in the midst of finding out if it is too late. Happily I think it is not, but it is going to be a tough sell as we persuade investors to accept a debt/equity swap, clean up the balance sheets, obtain new financing, hire a qualified COO, and work towards a brighter future. For the record, the company’s products are great so it would be a shame to let it all go to waste.
The point that I want to make here is that if you are in trouble to any degree, it is highly unlikely that you are going to be the one to figure it out. It would not be logical to think otherwise and this is precisely the reason why the really big companies run by MBA executives hire outside consultants to come in and fix things when the going gets tough. Since the leaders are executives - and not founders - they have no emotional baggage and have their eyes on the ball. Namely, making the company a success so that they can keep their jobs and prosper.
Entrepreneurs are often so wrapped up in ownership and the pride (hubris) of being the founder that they forget a major reason for starting and running a business is to make money. Who really cares where credit for success is assigned as long as the check clears, no? Like I often tell my own staff, you can make my title “Janitor” as long as I’m paid what I have coming to me.
Posted by Herb Kay on Thursday, December 20, 2007
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