A great deal of attention has been paid to the role of entrepreneurial companies as engines of economic growth. Studies have shown that most of the job growth in the US is from entrepreneurial companies. Studies have also shown that most small entrepreneurial companies fail to grow beyond the original owner and a handful of employees. In order for entrepreneurs to grow their company, they must be willing to change how they operate their businesses. Change creates a challenge for most entrepreneurs because they tend to cling to the strategy that helped them launch their company. Many of these entrepreneurs are happy to create a job for themselves or just maintain their lifestyle. The following case illustrates how coaching can help a small, lifestyle business transform itself into a growth company. The case will include the obstacles, frustrations, and breakthroughs leading to change.
Growth and Change in an Entrepreneurial Company
Sean has been in a service business for 20 years. After some early success, his sales have remained flat for the last several years. During this time, he experienced a great deal of turnover in staff. Morale was poor, with most employees believing that Sean was only interested in making money to support his affluent lifestyle. Although the company has a good reputation with customers for its expertise and service, most of its success is due to the owner’s wearing multiple hats and filling in many roles. Sean’s major asset in addition to being an expert in his field is his ability to network with potential customers. He is an extrovert and very likeable. He shows a strong interest in others, which opens up many client relationships. He has one key executive who handles a portfolio of customers. The remainder of employees are assigned to customers for projects that the owner or key executive sold.
Sean has had a six-year coaching experience that initially helped him double his revenues. Two issues still concerned him: he was afraid of losing his key executive who was responsible for about half of the company’s sales, and he was also frustrated with the turnover of staff that quit and went to work for customers or competitors, or opened their own business in competition with his company. While his company was profitable, he realized his business was not sustainable beyond him and his key executive. Without them, the company had limited financial value.
The first challenge was to make sure his key executive was committed to staying with the company. Coaching sessions identified several options, and a deal for stock ownership and a strong bonus program were worked out. It was hoped that the key executive would also become the COO and run the day-to-day company affairs. This was not to be. While very good at sales and client relationships, his key executive had little interest in assuming a company leadership role.
Poor morale and turnover continued. Coaching the owner to change his management style or bringing in a COO did not materialize as options. This was one of those times when a coach needed to confront the coachee with the “brutal facts.” Either Sean makes major changes in his business or he would not be able to build any equity or sustainable growth. With Sean choosing to grow his company, his coach encouraged Sean to consider a consultant who would perform an organizational audit and help Sean restructure his company for growth. After weeks of hesitation, Sean invited the consultant to conduct the audit and make recommendations for change. His coach followed the consulting relationship closely, interacting with the consultant and Sean. After several months, a plan was proposed, and Sean committed to it. The plan called for reorganizing the company into three divisions, changing roles and responsibilities for employees, stronger communication and cooperation between employees, and greater accountability for everyone in the company. The consultant was retained to help implement these changes.
It is too early to tell whether Sean will stay committed to the recommended changes. He will need to take a leadership role in implementing the changes. He is highly motivated to change, and his coaching sessions help him to stay focused with the company transition.
Entrepreneurs are very good at starting a business but not always good at growing the business. Beyond the creativity and spurt of energy to launch a company, there is a barrier to growth. As Marshall Goldsmith, a leader in executive coaching, has stated in the title of his recently published book, What Got You Here Won’t Get You There, a different set of skills is required to grow a company. These skills include leadership, an accountability culture, continual monitoring of the organizational culture, systems and procedures, and, in many cases, a change in strategy and organizational design. These are skills that entrepreneurs often lack, and outside help may be needed to create these changes. Realizing this, a coach can facilitate growth and change by challenging the entrepreneur to decide on whether he or she is willing to change or be at risk of failing to survive beyond the entrepreneur’s ownership. Understanding this dilemma is paramount to how the coach can approach the entrepreneur and help with the changes needed for growth and sustainability of the company. This case also illustrates how the role of the coach differs from the role of a consultant.