The entrepreneurial vs. the professional CEO

This month I am going to tackle a sensitive and controversial subject: the critical traits that distinguish an entrepreneurial owner from a professional CEO. This is an issue that our TEC members wrestle with as their companies grow larger and, hence, more complicated to lead and manage.
Unfortunately, we have found that it is rare for “entrepreneurs” to be able to make the shift themselves. Typically, the entrepreneur will instead hire an outside professional manager.
The question arises, therefore, when should an entrepreneur running a successful, growing business bring on a professional manager? Comparing the respective traits and strengths of entrepreneurs and professional managers is one way to make that important determination.
I will examine seven major trait categories: personal motivation, business skills, decision-making/professionalism, problem and analytical skills, influence, intelligence and memory.
Personal motivation – Five traits describe entrepreneurs in this category. Clearly, they are risk-takers, display a high energy level, have a definite success expectation, show high self-confidence, and exude great enthusiasm. The six traits marking the professional manager include self-discipline, the ability to be a mentor, respect for authority, emotional stability, interest in personal self-development, and an introspective view of the business and its potential.
Business skills – Two traits uniquely distinguish the entrepreneur. First, they have a good instinctive handle on how to best market their products and services. Second, and this may sound strange, but they are the benefactors of good luck. There are also two skills they share jointly with the professional manager: both have relevant business experience and both have a strong customer focus. The professional manager tends to excel in three areas. They are well grounded in finance and understand the nuances associated with interpreting balance sheets and income statements. They have a penchant for tracking results on a regular basis. They have excellent people-selection skills.
Decision-making/professionalism. Entrepreneurs have great problem-solving skills, and they tend to be very quick in analyzing a situation and arriving at a good solution. As is also true with professional managers, entrepreneurs can conceptualize issues and opportunities in a highly abstract fashion. They find “links” where the average person would simply say, “You can’t have ‘B’ if it is not preceded by ‘A'”. Professional managers, on the other hand, use intuitive deduction as their major means of problem resolution. They also have a knack for balancing results achieved against people orientations. That is, they are good “people readers.”
Problem-solving and analytical skills – Both entrepreneurs and professional managers share one very important trait here in common. They both know how to ask the right questions, and they routinely do so with precision and incisiveness.
Influence skills – This skill base is a bit lopsided, favoring the professional manager. They tend to be high on leadership, feedback-focused communication, strong organizational capabilities, human sensitivity, listening orientation, goal setting, and trust building within the organization. Entrepreneurs, on the other hand, are simply marvelous at wielding influence through powerful visions. They can create enormous excitement around a vision about the future direction of the company and get others to buy into it.
Intelligence – This is always a delicate subject when comparing entrepreneurs and professional managers. But, with tongue in cheek, professional managers show a lot of common sense and entrepreneurs have outstanding “street smarts.” Professional managers consistently display good judgment, and entrepreneurs consistently show a strong conceptual grasp of difficult problems. Interestingly, and contrary to popular opinion, both entrepreneurs and professional managers have demonstrated academic rigor.
Memory – Here there is a fairly clear distinction. Professional managers have great long-term memory skills, and entrepreneurs can concentrate diligently on critical detail. They see things that the average individual would miss.
Are there any rules of thumb that would govern when an entrepreneur should consider hiring a professional manager? Well, they are not imbedded in concrete, but there are a few.
First, it is possible that the entrepreneur can make the transition needed to bring professional skills to the firm – possible but not very likely. An industrial psychologist can help sort this out, and there are many good ones in the Milwaukee area.
Second, an entrepreneur should ask the following questions: Is the business still fun for me? And am I still leading the charge as enthusiastically as I was when I founded it?
Am I getting bogged down in problems that are too internally focused? Am I spending too much time with my financial advisors worrying about cash flow and profitability? Am I losing good people? Has my temper changed? Am I becoming impatient with the need to document too many things that were unnecessary to document in the past? Has my personal health situation changed (i.e., gained weight, high blood pressure, etc.)?
Let’s face it. Entrepreneurs made America what it is today. They are absolutely indispensable to our future as a nation. But that doesn’t excuse them from reaching the point where, after a great deal of thought, they conclude “It might be time to let go.”
Such a difficult, gut-wrenching decision often paves the way for refueled growth initiatives within the entrepreneur’s organization.
If you are an entrepreneur, what’s your choice going to be? Will it be the right one for your company? I hope so and, believe me, so do your stakeholders.
Until next month, “good entrepreneuring” – for you and for the future of your company.”
Harry S. Dennis III is the president of The Executive Committee in Wisconsin and Michigan. TEC is a professional development group for CEOs, presidents and business owners. He can be reached at 262-821-3340.
April 13, 2001 Small Business Times