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Leadership challenges in entrepreneurial companies

by PKF Finconta December 20, 2017

Author: Florentina Șușnea, Managing Partner, PKF Finconta

Driving an entrepreneurial organization is challenging. Far from benefiting from / requiring the number of procedures active in a corporation, an entrepreneurial firm reaching 50-80 employees can test the leadership skills of any top executive. When, however, the founder/entrepreneur brings in some additional perturbator elements, this exercise becomes even more difficult. That is why, in the following, I will point out the biggest challenges an entrepreneur can encounter on the road of growing the company.

1. Values of the entrepreneur and company values

In the beginning, when the team consisted of 2-3 people, the transfer of entrepreneur’s values and their transformation into company values was easy. The desire for success, the close-knit activity, the fluidity of roles and the focus on results were naturally accomplished. Not necessarily without different points of view or without tense moments, but all were solved by communicating with and involving everyone.

Once the company reaches a team of 20-30 people, the communication mechanisms become more complex, but the key people who have been alongside the entrepreneur from the beginning are the ones that ensure consistency between the two sets of values.

Things change radically when the team passes 50-80 people. Proximity communication mechanisms no longer ensure the alignment of values, and the interposition of an increasingly consistent level of middle management can introduce disruptive factors.

2. Control versus delegation

The level of control the entrepreneur has on his company is immense, compared to that of many corporate managers. The much lower need for control is supported, in both contexts, by the same management arguments: generating business results in a recurring and predictable manner. The discrepancy between the two (the ability to control and the need to control everything) is an opportunity cost for the organization.

This may be a difficult lesson for some entrepreneurs to learn and, when it happens the wrong way, can translate into lower managers' involvement. The worst is that it may result into upward delegation (to the entrepreneur) of many of the managers’ responsibilities.

When the company has fewer employees, these issues, though active, often remain under the radar. As soon as the organization grows to 50-80 employees, the disruptive effect of micro-management, the exercise of direct, unstructured control, and poor understanding of the entrepreneur’s leading role, produces major frictions in the mechanism of the company.

3. Procedures and autonomy

Introducing an appropriate level of procedures from the outset, depending on the level of development of the entrepreneurial business, is a good thing. Even if you can live / do business without any specific procedures in place, it's much easier to grow a company that has a good organization inside.

Introducing procedures into a business only when it reaches 50-80 employees brings with it a set of change management challenges that can be difficult to navigate. Even with the best of intentions, people will find they are attached to the old way of working and will more difficultly integrate the new procedures into daily work. Moreover, they will make a connection (often false) between the procedure and the limitation of the autonomy of their roles, which will increase the degree of resistance to change.

It should be noted here that procedures and autonomy are not mutually exclusive when the former gives the structure on which the second is based, without autonomy being the subject of procedures.

4. Leadership and management

The entrepreneur needs a very good ability to mix these two modes of operation to grow the company. Depending on each situation, and not just on the development stage of the company, in its everyday life, the dosage given between leadership and management may vary significantly. It is essential that the entrepreneur can self-observe consciously how to manage these two roles.

However, as the business grows, the leading role and the ability of the entrepreneur to influence a growing organization at a distance become essential. Founder’s behavioral model, value structure, entrepreneurial decision-making will reach the vast mass of employees via indirect channels of communication. That's why it is very important for the entrepreneur to internalize the functioning as a leader, anchor it in the core personal values and become a very good communicator.

Understanding and superior mastery of communication (verbal/non-verbal, direct/indirect, etc.) will make the actual transposition of leadership role relevant to the entrepreneur, the organization and its team.

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About us:
For more than 22 years, PKF Finconta is one of the 10 leading professional services companies in Romania. Since 2006, we are a member of PKF International Limited. PKF International is a leading international business advisory organization. The company grew consistently over the years, forming a Group of four companies: PKF Finconta, PKF Finconta Consultanta, PKF Finconta HR and Finconta Consulting SPRL, members of national professional organizations CECCAR, CAFR, CCFR and UNPIR. We provide a wide range of business advisory and related specialist services. We have seven core areas of expertise and within these areas, we tailor our services to your business and your needs: audit, corporate finance, tax, bookkeeping and accounting advisory services, transfer pricing, payroll and personnel administration and insolvency.

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