Entrepreneurs vs CEOs

You have a problem. I have a solution

There is an undeniable thrill to being an entrepreneur. Starting a business that you are passionate about and early success

With Sophia Amoruso, founder of the company, Nasty Gal, and author of the bestselling book #GIRLBOSS, recently announcing her resignation as CEO after the company was declared bankrupt, it got me wondering. Do entrepreneurs make good CEOs or not? Experience and research suggest that the answer is no. Whilst entrepreneurs are extremely skilled at creating a business, they are often the biggest obstacle to the sustainable growth of that business, and can sometimes even destroy it, as appears to have been the case with Nasty Gal. (Likewise, in many cases, successful CEOs do not make great entrepreneurs.)

The reason entrepreneurs don’t make good CEOs is quite simple. Successfully starting a company, and growing a profitable business in a competitive world are two very different – and often incompatible – roles that require very different capabilities. Entrepreneurs are inherently powerful disruption and change agents. They identify a problem, create a solution, and then convince the right people that the solution will work. An effective CEO, on the other hand, creates the infrastructure for sustainable success.

So, what is it that holds entrepreneurs back from being successful CEOs?

  • They struggle to delegate. To an entrepreneur, the business they have brought to life can be like their baby. They devote their heart and soul to nurturing it into being. Trusting someone else with its care, or worse, relinquishing its care completely, can be a heart wrenching experience that they avoid at all costs.
  • They are usually not passionate about managing. Entrepreneurs did not start their business for the sake of managing it. If they want to eventually significantly scale their business though, they will need solid strategy execution management skills – or find someone who has.
  • They can suffer from tunnel vision. Entrepreneurs require an almost fanatical devotion to their vision for it to succeed. It is this devotion though that can ultimately hold the business back. Adapting and broadening this vision as markets and conditions change can be very difficult for entrepreneurs to do, which can lead them to making poor decisions. It would seem that in order to bridge the gap between entrepreneur and effective CEO, an entrepreneur must understand when it is time to get out of their own way, or switch hats and roles.
  • They find it difficult to make tough calls. Entrepreneurs are creators by nature – they make, build and grow things. Sometimes though, certain projects or products need to be killed for the greater good. Entrepreneurs often lack the objectivity to kill their creations.

I’m not saying that all entrepreneurs can’t be CEOs. There are some rare birds who can wear both hats – look at Starbucks’ Howard Schultz, FedEx’s Fred Smith, and Southwest Airlines’ Herb Kelleher. What I am saying though is that if you are an entrepreneur running your own business, and you want to continue doing so, you need to ask yourself some tough soul searching questions. Are you truly capable of leading your business to the next level? If not, what is your exit strategy?


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