You’re an entrepreneur. You identify a problem, devise a solution, and then launch a business to deliver that solution to the marketplace. And as the company grows, you continue to exercise control over every aspect of it because it is your idea and your solution, so there is no one better to ensure the company’s vision than you, its creator.
Until you’re not.
Many startup founders desire to maintain control as the primary means to achieving their goals with their business. One of those goals, of course, is solving the problem on which the company is built. However, many of the other goals are much more personal. Things like personal pride and wealth, for example, come to mind. Thanks to people like Jobs, Gates, and Zuckerberg, almost every first-time entrepreneur aspires to build something big by controlling everything and gaining fame and a fortune when the company goes public.
It rarely happens.
Pride and personal recognition have fanned the flames of more crashing businesses than the successful companies those goals have fueled. Control is the problem for founders who, like Yertle in Dr. Seuss’s Yertle the Turtle, desire “to be king of all they can see” (Geisel, 1958). A king might see the wealth in the distance, but eventually, somebody sneezes, the king loses control, and everything comes tumbling down.
Being a king and building wealth are not mutually inclusive. Some research suggests that if you focus on maintaining control of your business, you may become king, but it is unlikely you will ever create significant wealth. And if you focus on building wealth, you will inevitably give up control (Wasserman, 2012). It is rare for an entrepreneur to maintain control and achieve wealth.
Here’s why: Like it or not, your business will inevitably outpace your skills, abilities, and expertise. If you believe controlling all aspects of the company will ensure your success, you’ll unlikely recognize when your company has outgrown you. You might be the king, but you’ll likely have little else. Plus, investors don’t like kings all that much, particularly once you’re out of the startup phase.
Whereas if you give up control, delegate to those individuals with expertise in their designated areas of your business. At the same time, if you focus on building the company’s financial value, you will be more likely to create wealth. Investors like delegation. It allows you, and everyone else in the company, to focus on those individual strengths that build wealth. Even Jobs, Gates, and Zuckerberg eventually learned the only way to create real wealth was to give up control.
Which is more important to you, wealth or control? Now that you know, how will you structure your business to achieve your goals?
_________
References
Geisel, T. (. (1958). Yertle The Turtle. New York: Random House.
Wasserman, N. (2012). The Founder’s Dilemma. Princeton: Princeton University Press.
8 thoughts on “Choosing between wealth and control”
Great perspective, David! At some point, one must choose between maximizing wealth or maintaining control. I see it particularly hard for those who are “controlling” in nature. However, delegation is key. Delegating tasks to the appropriate people will render the best results. Therefore, I feel more emphasis should be put on hiring or partnering with “A-players” versus trying to control everything and everyone. If you hire the people your confident in doing the job right, there is no need to control every aspect of the business.
Thanks, Kari.
Too often I see entrepreneurs think they can do everything. I think that’s a good strategy for a little while, especially if you’re bootstrapping. But, at some point, you have to decide if some of those things you’re doing are being done well, the best use of your time, and in the best interest of the company. That’s when you delegate.
Hiring and partnering with “A-players” is a good strategy, as you point out. You still have to be willing to let those individuals bring their best skills to the tasks assigned and refrain from micro-managing them so that they do the job “your way.” 😉
David,
Killer article! Harnessing the beast of a startup, gives a founder quite the dilemma!
As a new entrepreneur, I would have to say the goal of my business is growth. The reason for entering the business in the first place is not to hinder the startup by being unable to “swallow your pride” while sitting on the throne, it was to bring a product to the market and let it grow!
In order to structure a business successfully, the founder must get with his partners and develop an understanding of the possible routes the business may take if it really takes off. This will give the closure needed when a transfer of power occurs and there will be no surprises. Even Yertle the Turtle would approve.
David,
I enjoyed reading your assessment on a business outpacing the founder or entrepreneur. I think the idea of a business outgrowing one’s capabilities can be difficult to imagine for a new entrepreneur in the early stages of a business. Many entrepreneurs might overestimate their abilities and point to past success as evidence of their skills and need to retain control of their organization. However, if the entrepreneur is able to step back recognize the need to integrate more skilled participants, this would be the true proof of success on the entrepreneur’s part as well as the business itself.
Thanks, Paul.
I think sometimes first-time founders think control is the answer to success. I can relate. In almost every startup I have kept control for a while. But, the key to growth is recognizing that point where it’s time to give it up or pack it up. It’s a lot harder to do than you might think. 🙂
Thanks, Jose.
I agree that it’s in the early stages that it is difficult to imagine anyone will do as well as the founder. Certainly, skills and abilities are often overestimated. Being self-aware is the key, I think. And sometimes the ego can get in the way. 😉
David,
I loved the Dr. Seuss reference!
I have to agree, a great leader should know when a company has “outpaced their skills, abilities, and expertise.” On paper this is undoubtedly true. However, when you are the founder it might hurt coming to that conclusion. Nevertheless, it is like you stated, pride and ego need to be checked at the door because when your team is winning with or without you, ultimately you are still winning.
Additionally, I liken delegation to a star basketball player. There is no way one player can play every position the whole game. Every great player had to have help. It doesn’t matter how amazing or talented one is (just ask Lebron…lol) even if one desires control they need a great team!
Hi Tosh,
Thanks!
I like your connection of delegation to basketball. It does take a team to make things work; however, that team needs a coach to play to the strengths of the team members. In that way, I see the founder as more of a coach rather than a star player. The founder’s job is to make sure the right people are in the right positions so the individual’s skills and abilities are maximized as the team works toward a common goal.