2013-04-11, Nerijus Celkonas

Nescafe style or why founders got fired

Nescafe style or why founders got fired

Those, who had the joy of sitting on three chairs at one time (owner, businessman and CEO), have faced the dilemma when on identical situation different decisions are made, depending on which deciding position the person is. It‘s a paradox, but it‘s true. The smaller the business, the more often these three positions blend into one person, and vice versa – the larger the company, the greater the hierarchy. So, what are the main differences among these positions and what are the threats and the advantages working Nescafe style (3 in 1)?

Let‘s start with some definitions:

Owner - Individual or entity who owns a business entity in an attempt to profit from the successful operations of the company.

Businessman – an individual engaged in business activities and acting individually, at own risk, under own name and expense.

A Chief Executive Officer (CEO) is the highest-ranking corporate officer (executive) or administrator in charge of total management of an organization.

In short, the owner’s role is to get profit, the businessman’s – to find or create profitable niches and the manager’s – to manage operations with the help of resources. It sound very clear and responsibilities and goals are quite different. So, how to avoid fundamental errors when sitting in one chair? A bigger question is – are personal qualities the same for all three positions?

Owner’s personal qualities have to be very pragmatic and based on personal interest. Businessman’s qualities are energy, knowledge, venture skills, creativity and risk-taking capabilities. CEO’s – management knowledge, practice, mathematics, leadership and team work.

In short, the owner is concerned with profit at the end of the year, the businessman – how to create something new and profitable and the CEO – how to stick with the budget. So, what dilemmas or decision difficulties does a person, working in all three positions face?

In this respect, a good comparison could be with child rearing. If you’re the “owner”, you wish for him/her to grow up a honest and successful person (profit), as a businessman you teach your child creativity, smartness, communication, when the child starts school, he/she is taught the standard society truths. How would this model work if everything had to be done on your own – without specialization?

Owner+businessman+CEO – it’s a mix that works in small companies and not only because of lack of finance. Gut feeling is what replaces the budget. He/she doesn’t need numbers, analysis or a business plan – he/she intuitively feels when and what has to be done to reach best results. In larger organizations such mix can become a serious disadvantage. The sense of possessiveness doesn’t allow to make pragmatic decisions, that is, act on calculation only and if the owner constituent dominates, you’ve got a problem brewing. It’s the same as the understanding that your child is inclined to art, but you want him/her to become a businessperson.

Businessman+CEO – is a common blend in middle-sized companies when it’s necessary to balance in competitive markets. These qualities are necessary in one person when interest conflict dilemmas occur in the decision-making process. It’s the financial scissors when you have to increase profits and diminish costs. When there’re two specialists, as a rule, during the time of crisis, because of failures or absence of team work, the sledge is pulled into two different directions. When business and management is in one head, usually the decisions are better, as the rational and pragmatic brain hemispheres manage to somehow agree without blaming each other for failures.

CEO – is a model for large companies when a strict and pragmatic administrator is needed to keep to the set budget and rules 100%. He/she doesn’t have any sentiments of the owner which make small companies spend money according to feeling and not calculations, he/she doesn’t care if the child has to be a businessperson – he/she will make logical decisions. He/she won’t search for new niches, won’t invest and make mistakes; he/she has other people responsible for this area.

Thus, natural transformation in the company’s management is a normal process and you have to accept it if you wish to grow your business. Recently (in the startup era), young businessmen fear investors’ interference in their business and even own dismissal from the baby they’ve created. Groupon, Etsy, Apple, Yahoo, Cisco Systems are the examples when company founders were discharged from leading positions. Venture capitalists make a huge mistake as they don’t actively communicate this to start-uppers. If you’re a good businessman and found a niche or even spun your company to 5 million turnover, it doesn’t mean that you’re the one that can scale it to 100 million. This has to be understood and prepared for upfront, or you have to learn, learn and learn – and show results or you’ll be fired. A business doesn’t have its achievement limit when you can relax, once reached. It’s a process without end and if you want to lie under the palm tree, you have to understand when your presence doesn’t help anymore, but damage the company.

Why is there personnel exchange in companies? Because they develop at different speeds. If the company overtakes a person, it needs a better specialist, if a person overtakes the company – he/she searches for greater challenges. It’s a one-way, two lane highway that never ends.

Of course, there are rare cases when the founder is still at the company’s wheel – Microsoft or Facebook (for now) are able to manage their billion-dollar worth companies. And there are examples like Google, where the founders chose Eric Schmidt to become the CEO. 

So, if you want Nescafe – create a family business.

 

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