A common phenomenon in the entrepreneurial world and business world, in general, is an entrepreneur who has conceived an idea that is great, and when the venture reaches its next stage, there is a natural movement in which he is appointed CEO.
However, many inherent difficulties emerge, ones that can threaten the very survival of the enterprise and its future.
In this article, I am going to talk about the difference between an entrepreneur and a manager, and what is important to remember for those who want to make this leap.
Elon Musk and Jeff Bezos or Larry Page and Michael Dell?
There are countless differences between entrepreneurs and managers, some of which are sure to be intuitive for you:
Different personality: An entrepreneur is a dreamer in his being, a person with a great appetite for risks, goes against the odds and acts out of passion. I am almost tempted to write that an entrepreneur must be charismatic.
Consider, for example, the current situation in the economy.
Very young companies that want to recruit programmers and have to struggle with giants who can offer conditions that are immeasurably more tempting than what their company can offer.
Entrepreneurial charisma and the ability to harness people will definitely be important in such a situation.
A manager is perhaps almost the opposite: two feet well planted on the ground are required, a person who knows how to manage risks and deal with them wisely, and an ability to make excellent decisions.
Allow me for a moment to take you back to high school classes, and talk about the genesis of research on authority (although after that many more trends and schools have impacted the understanding of leadership and charisma, and I would love to touch on that in one of the following articles).
Max Weber, a 19th-century political economist and sociologist, is one of the forefathers of modern sociology and public administration theory.
Weber spoke of leadership through two key concepts: charisma and authority.
Charisma is often an innate trait and is a person’s ability to seduce people by virtue of his personal charm.
Authority, on the other hand, has three sources through which a person can gain the support and legitimacy of his actions:
- Traditional authority – an authority given by virtue of religion or monarchy.
- Rational authority – authority that is anchored by a set of laws or regulations, suitable for formal organizations such as companies.
- Charismatic authority – an authority created by the belief of the people that the leader is a man with exceptional skills and a vision to produce new ideas in any field.
While an entrepreneur must often possess charismatic authority, a manager will often possess rational authority, because it is clear to all of us that when a senior manager in the company we work for guides us to a particular project or task, that is what we will do.
Different conditions for creating success: An entrepreneur is initially faced with limited resources or even a lack of resources, and with this shortfall, he has to move an idea from the theory stage to the practical stage, and surmount all the hardships along the way (finding Product-Market Fit, formulating MVP, etc.). In the absence of the financial ability to recruit a team he has to wear a lot of hats (finance, marketing, sales, operations, service, etc.) and do them all in a great way to allow the venture to take shape.
Note that all of these functions are not even directly related to producing the product or realizing the product idea, but they also demand from the entrepreneur’s time, energies and inputs.
A manager heads a company with resources (even if it is a relatively young company, resources are still limited), and they are the ones who support the achievement of his goals and objectives.
Hence most of his time will be devoted to decision making and management.
A CEO is an organization manager, a performance manager, a resource manager and a people manager.
An entrepreneur brings an idea into the world, gives birth to it, creates something out of nothing, while a manager has to grow that idea and continue what has already been created. Naturally, when creating an idea or cultivating the idea, the way to measure the success of the idea is not the same way.
Long-term commitment: An entrepreneur is committed to the success of the company he has established throughout his life, or if you will, a “Catholic marriage.”
A CEO is often rewarded for short- and medium-term achievements, through performance metrics that are almost impossible to build in the long run.
We hear from time to time in the media about CEOs of companies who have retired with the so-called “golden parachute”, and more than once, there is criticism that there is really no connection between the CEO’s performance and the attractive package of conditions with which he retired. It also happens when the CEO has left behind a company with not-so-excellent infrastructure for the years to come.
Having reviewed the significant differences between them, I want to touch on the similarities. There are also quite a few.
I often encounter an entrepreneur who can naturally become a manager, and I think the fact that there are quite a few similarities between them, leads to the fact that for many entrepreneurs the natural continuation of entrepreneurship is to head the company they founded.
An initiative that sometimes does not go well, as in the case of Michael Dell, the founder of the well-known computer company, during his time as CEO, the company lost a market share of about 5% (in the years 2006-2012).
Both the entrepreneur and the manager are constantly exposed to audits and valuation processes, but the nature of the scrutiny changes, since the entrepreneur is exposed to investor audit and the manager is exposed to the audit of the board of directors.
Both can suffer from loneliness, know how to withstand pressures and know how to surround themselves with the right people, and to a large extent, the success of the entrepreneur or manager depends on the right respective profile.
What do I recommend to an entrepreneur who opts for the management track?
Choose a mentor or organizational consultant to accompany you (the difference, in my opinion, is that a mentor works one-on-one, while an organizational consultant can give a horizontal answer: we should always remember that almost every challenge has two sides, and as an entrepreneur must know to choose the right people).
People selected by him/her can find it difficult to work with him/her due to a lack of established management skills, and in such a case there is absolutely room to bring in an organizational consultant.
In this case, I also recommend working on delegating authority – a very challenging issue among entrepreneurs who have decided to become managers of their companies.
Working on ego issues and leaving emotions aside: Easy to say, hard to do. I know.
After all, emotions are part of entrepreneurial passion and mental fuel. Still, the inability to give up the ego can manifest itself in the oppression of the organization.