“How to turn entrepreneurship into enterprise: The case of an African entrepreneur”.

This report, presented by the NGCL Leadership Class of June 2017, outlines and analyses the challenges founding entrepreneurs face in turning their enterprises into corporations and how handing over power to management teams. Turning a business into a corporate enterprise requires the entrepreneur to take his hands off operations and create an environment where the organization can grow beyond him. The transition requires emotional intelligence on the part of the entrepreneur and empowerment of employees. This case-study proposes how this can be done.

CONTEXT OF THE STUDY:

The organization is a sole proprietorship in his late fifties and has been in operation for the last 20 years. He has won favour with many County Governments and won contracts running to billions of shillings over the last 3 years. He is fairly successful and because of leadership challenge, over the last 2 years, he has contracted 4 consultants to drawn up a strategy for the organisation but he has been very reluctant to implement. He has infused good management practice by bringing on board management team (Head of Finance, Technical, Sales) who have not lasted 6 months and end up resigning. He is not receptive to change and feel threated by professional manages. He operates a highly closed enterprise which relies entire on his decisions and feels out of control when new effective measures are executive without him sanctioning the strategy. 

DEFINE THE CHALLENGE:

The leadership challenge faced by the proprietor is the fact that he has acknowledged the business has grown and requires to be management professionally for the next phase of growth. However, he finds it absolutely difficult to relinquish control of the enterprise to third parties since he will not be in-charge. He feels he still need to make decisions even as he hands over the organisation to professionals. The dilemma is the realisation that he needs management that can grow the organisation into a market leader without him ceding control in decision making.

REVIEW OF LITERATURE/INFORMATION ABOUT THE CHALLENGE

Leadership Competencies and Traits

Leadership is commonly seen as an important variable affecting organizational performance. Leadership is a process by which an individual influences a group of individuals to achieve common goals. Yukl (2006) found several traits that were related to leadership effectiveness which include a high energy level and tolerance for stress, self-confidence, including self-esteem and self-efficacy, an internal locus of control orientation, emotional stability and maturity, and personal integrity. The skills approach suggests that while leadership abilities can be developed, whereas traits are more inherent in an individual.

Leadership competencies have been defined as “the combination of knowledge, skills, traits, and attributes that collectively enable someone to perform a given job”.  Yuki (2006) offered some general suggestions for applications on leadership styles. These styles include maintaining self-awareness, developing relevant skills through continuous learning and leadership development, noting that strength can become a weakness in a different situation, and compensating for weaknesses by using delegation or staff with complementary skills.

Attitudes are a complex combination of things we tend to call personality, beliefs, values, behaviors, and motivations.  An attitude includes three components: an affection (a feeling), cognition (a thought or belief), and behavior (an action). Attitudes help us define how we see situations, as well as define how we behave toward the situation or object.

According to Yuki (2006), leaders who want to be great must think about the future most of the time by thinking about where they are going rather than where they have been, maintain a positive attitude and think about the opportunities which tomorrow may avail rather than focusing on the problems of the past and finally maintain a positive attitude in addition to being long-term thinkers. At all things and in any situation, one of the most important leadership qualities is the acceptance of personal responsibility. Leaders never complain, never explain and instead of making excuses, they make progress and accept responsibility for either success or failure of any action taken.

Leadership Succession Planning

Winn (2005) noted that a business owes its success to the drive, vision and creative energy of its owner and identified four main components to leadership succession planning.  These are: identifying the potential successor; changing management style; successor training and development and selecting the successor. The sole- proprietor must be able to identify what the firm need from the future leader, what the future leader needs from sole - proprietor owner, the extent of would - be leader strategic thinking and consistent drive for results, ability to lead and build talent, entrepreneurial edge and commitment to the firm’s mission and values. In the same vein, the future leader needs the support of the owner to ensure consistent drive for results, commitment to the firm’s mission and values, identify opportunities for firm growth, and ensure competitive compensation and give rewards and recognition by acknowledging value of contribution of the future leader.

The role of leaders, according to George (2003), in today’s turbulent environment is crucial. Leaders can be identified and chosen through their skills and talents. According to Mumford et al., (2007) there are cognitive, interpersonal, business and strategic skills. A future leader must be able to communicate clearly in writing or by discussion, be an active listener and be able to weather turbulent periods with less stress. It must be borne in mind that leaders, depending on their intentions, Visions, experience, strategies, objectives, hidden drives and motives, education and expertise have the power to cause either significant improvement or degradation of the world around them. In the words of Hollenbeck et al., (2008), a high potential leader must always seek opportunities to learn, act with integrity, adapt to cultural differences, be committed to make a difference, seek broader business knowledge, bring out the best in people, sees things from a new angle, has the courage to take risks, seek and use feedback, learn from mistakes and be open to criticism. It is through all these that a potential leader can be identified and chosen

Leadership and Change Management

Intensifying competition for resources and demand for profit maximization is pressing firms to become more flexible, more results-focused, and more fast-acting. Organizations are finding that such competition requires competent leadership and the challenge for organizations and business schools alike is to help build effective leadership both in the next generation of managers and throughout organizations. Change management involves a sense of critical reflection.

  

According to Brookfield (1995), there are three major cultural barriers to critical reflection that inhibits change management: the culture of secrecy, the culture of individualism, and the culture of silence. The culture of secrecy is one born of insecurity, fear, and unawareness (Brookfield, 1995). The leadership of organizations tends to encourage a certain level of secrecy; for example, managers may fail to take their employees into certain areas of change because of feelings of fear and insecurity that they may not be able to expertly describe what is happening in that particular arena (Dimmock, 1995). Brookfield (1995) believes the second cultural barrier is “individualism.” Although individualism may have its place in the corporate world where it fits, but it can sometimes lead to personality clashes, undeserved promotions, and inefficiency. Moreover, the “transformational leadership” style places a premium on teamwork (Bass, 1997). The third barrier is silence. Brookfield believes individuals are reluctant to voice their opinion, and as a result, they remain silent (Brookfield, 1995). Individuals may see inequity and instability within the organization and feel the necessary response should be silence. Employees have sometimes noticed, for example, that they have erred in what he or she said, but fail to say anything because they fear the manager may respond negatively. Sometimes employees have alternative explanations for events. Employees may fail to acknowledge them for fear they may clash with the manager, and the manager will hold it against him or her during evaluations (Leithwood, Begley, & Cousins, 1994).

When viewed in terms of leadership styles, the flexible leader adapts to new situations, whereas the rigid leader maintains consistent patterns of behavior in almost all situations. A flexible style does not mean changing personality. It does, however, involve the use of different tactics, depending on the situation. Flexibility is one of the core tenets of the “transformational leadership” style (Cohen, 1998).

KEY QUESTION TO BE ANSWERED

Discussion

For leaders to gain acceptance of organizational change, there are a series of factors that need to be understood. The first and foremost is to understand the “human side” of transformational change. Inevitably issues are destined to arise. There will be new leaders, new jobs, and new skills that will be needed. This creates uncertainty and resistance follows. The method that the organization deals with this may determine morale and acceptance. This method demands data collection, analytic planning, and implementation processes as possible. This method should be based on a timely assessment of the readiness for change.

Another consideration is to start with strategic management. Everyone is the organization will look to the top for leadership during the process of change. The leaders must articulate the vision and the challenge faced to motivate others. The vision must be consistent and speak with one voice as to the changes and they must model the desired behavior necessary for change. They are aligned and committed to the direction of change, understand the culture and behaviors the changes intend to introduce, and can model those changes themselves.

A further consideration is for the leadership to insure there is a sense of ownership and communicating the message. This ownership requires more than mere buy-in or passive agreement that the direction of change is acceptable. Ownership is often best created by involving people in identifying problems and crafting solutions. It is reinforced by incentives and rewards such as financial compensation or psychological. Too often, change leaders make the mistake of believing that others understand the issues, feel the need to change, and see the new direction as clearly as they do. The best change programs reinforce core messages through regular, timely advice that is both inspirational and practicable.

COLLATION OF FACTS AND DATA

The organization is a sole proprietorship in his late fifties and has been in operation for the last 20 years. He has won favour with many County Governments and won contracts running to billions of shillings over the last 3 years. He is fairly successful and because of leadership challenge, over the last 2 years, he has contracted 4 consultants to drawn up a strategy for the organisation but he has been very reluctant to implement. He has infused good management practice by bringing on board management team (Head of Finance, Technical, Sales) who have not lasted 6 months and end up resigning. He is not receptive to change and feel threated by professional manages. He operates a highly closed enterprise which relies entire on his decisions and feels out of control when new effective measures are executive without him sanctioning the strategy. 

ANALYSIS OF INTERPRETATION

The above shows that the sole proprietor is not able to let go of his own organization, though it has outgrown him. He is unable to retain professional staff as there is high staff turnover. He threatened by staff who are qualified and know their jobs. In fact he thrives when everyone depends on his input so as to execute their work. He has 4 very good strategies for the business developed by consultants but he is very poor at execution. This can be attributed to:

• a)     Poor leadership
• b)     Lack of vision and mission of the organization
• c)      Lack of Emotional intelligence
• d)     Inward flaw
• e)     Failure on strategy implementation
• f)       Competing priorities- Business Development & organisational Development
• g)     Dysfunctional structure
• h)     Lack  of prioritization of resources

CONCLUSIONS

“Leadership is the energetic process of getting other people fully and willingly committed to a new and sustainable course of action, to meet commonly agreed objectives whilst having commonly held values” Mick Yates

Leadership is about understanding people, and about getting people pointing and acting in the same direction. The unique role of a leader is then to provide the energy and commitment to see this job through, and ensuring execution is perfect. Leadership is about listening, and making a real "connect" with others. It is a process.

Without a need for change, the concept of Leadership is meaningless. Leadership is not an abstract, Platonic concept - it is a practical activity, with a specific goal in mind. We believe everyone can train, develop and enhance their Leadership skills. This is true regardless of the size or complexity of the Enterprise. And, because everyone can train, the results can be measured. You cannot have Leader’s without followers, and you cannot have followers without Leaders. Paradoxically, therefore, the Leader is also a follower, in the sense of reflecting the wishes of others. Leaders and followers are thus fully interdependent.

RECOMMENDATIONS

Adopting the 4E’s Leadership Framework is critical in running a sole proprietorship. It is built around four sequential activities – Envision, Enable, Empower and Energize. It integrates strategic planning with Leadership development, and is both a personal improvement process and a tool to use to build high performing organizations.

Envision
A robust view of the external world, contextual and competitive possibilities drive the formation of the enterprise mission. Increasingly, focus on the customer and creating innovation networks are key. On the “Organizational” axis, Leader and Follower must share coherent values to provide a solid foundation for all activities. Strategic choices must be defined, as must clear goals and a practical time sequence (for “Operational’ clarity).

Enable
The best enabling mechanisms are built on innovation. The first type (on the “Operational” axis) includes the right information, tools, technologies, and business methodologies. The second set of enablers (on the “Organizational” axis) includes processes and structure. It requires ensuring that the right people and the right skill sets are in place to get the job done, building towards interdependence across the functions and geographies of the enterprise.

A useful deployment tool is the OGSM, which connects Envision with Enable. We distinguish between verbal objectives (O – the mission), and numerical objectives (G – the goals) and between strategies (S – choices of what to do and what not to do) and measurement (M).

Empower
The Leader has a contract with his or her Followers, for mutual success and failure, reward and sanction – so the two are interdependent. Both sides are given freedom, yet held jointly accountable. On the “Organizational” axis, the team needs the training to get the job done.  Empowerment must bring rewards, and also sanctions or challenges for improvement. On the “Operational” axis, Leaders and Followers must both measure progress, which encourages dialog and continuous improvement.

Energize
On the “Organizational” axis, maximum energy will result from the combination of winning (in the marketplace) and achieving a sense of personal success and satisfaction. The more energy the team generates, the more energy the Leader has – in a virtuous circle of reinforcement. On the “Operational” axis, continuous communication and course corrections are key. This includes “walking the talk” and having a clear, truthful and persuasive “Leadership story”.  The Leader (and the Leadership team) is the motor for change, providing energy to the entire organization.

REFERENCES

Yukl, G., Leadership In Organizations (6th ed.). Upper Saddle River, NJ: Prentice Hall, 2006

George, B., Authentic leadership: Rediscovering the Secrets to Creating Lasting Value. San Francisco: Jossey-Bass, 2003.

Mumford, T.V., Campion, M.A. and Morgeson, F.P,The Leadership Skills Strataplex: Leadership Skills Requirements Across Organizational Levels.The Leadership Quarterly, 18(2): 154-166, 2007.

Hollenbeck, J. R., Ilgen, D. R., Sego, D., Hedlund, J.A., Major, D. A., & Phillips, J. (1995). The multi-level theory of team decision-making: Decision performance in teams incorporating distributed expertise. Journal of Applied Psychology, 80,292–316.

Authors

• ü  Paul Ooga
• ü  Liz Kimwene
• ü  JeremiahMunji
• ü  Fridah Ombogah
• ü  Dr. George Mbugua

See also

Employment and enterprise are the same thing

The five laws of successful employment

Employment is a business

The entrepreneurial employee

How to start a business without capital

The age of the employee has come to an end

The Economic Empowerment Mindset

The 33 Laws of Self Employment