Why Entrepreneurs Don’t Scale

My friend Clark Waterfall pointed out an HBR article by John Hamm the gist of which is that the traits that help an entrepreneur succeed in the early days actually work against them as the business grows.  And worse yet, by the time the entrepreneur figures it out, they’ve either run their company into the ground or gotten themselves ejected by the board.  The article gives some examples that will seem familiar to most of us.  Frustratedman

The four traits are:

  • Loyalty to team mates.  A great trait while recruiting the early team, but as Hamm points out, "a potential liability when managing a large, complex organization."  Someone told me a few years ago that first time CEOs are quick to hire and slow to fire while seasoned CEOs are the opposite.  There’s some truth to that.
  • Task orientation.  Getting things done is important in the early days, particularly when you are CEO and janitor at the same time.  But as the company grows, it can lose its way without a focus on strategy and vision.
  • Single mindedness.  Think about how much stick-to-it-iveness is required in the early days but how that can turn into tunnel vision as the company grows.
  • Working in isolation.  Building a large organization is a team sport, however in the early days there may not be much of a team.

Toward the end of the article, Hamm lays out questions to assess ability/willingness to scale and has some suggestions on how to transition.  Overall, it’s an article worth reading.