Evolving From Business To Enterprise
Those firms that want to evolve from businesses into enterprises have to balance their near-term goals and the prerogatives of the founders and other leaders with the future aspirations and needs of other stakeholders.
To that end, an enterprise should show certain qualities:
1. A Willingness To Transition
A business does not become a truly sustainable enterprise until there are structures and processes in place for shifting the leadership and other key responsibilities to the next generation. In turn, the organization must ensure that next-generation talent possesses the increasingly diverse and focused skills and experience necessary to propel the organization forward.
Such transitions require founders and other leaders to pivot—focus less on themselves while identifying and mentoring future replacements. Thinking and acting for the greater good of the entire firm may not be the natural inclination of entrepreneurs (or anyone else for that matter). They likely spent their entire careers narrowly focused on managing their legacy books of business. If they want to shift the focus away from their own roles in their firms, it requires them to overcome existential worry.
At the same time, a firm’s next generation must possess not only enough talent and willingness to assume greater responsibility for the firm’s success but also a healthy respect for the work and contributions of those who preceded them. These “up and comers,” like their predecessors, must also learn how to make decisions that contribute to the greater good of others in the organization. In other words, as individuals, they must change from independent superstars into interdependent and collaborative team players. Our industry has historically tended to focus on individual accomplishments, which means some promising next-gen talent might opt to leave rather than learn to play with the team more. That means firms must continuously cultivate many high-potential employees, even those at earlier stages of their careers, to ensure the talent pool is large enough to supply the future needs of a successful and fast-growing enterprise.
2. Leaders Must Know When To Leave
The willingness and ability of leaders to face their own replaceability is just one requirement of enterprise status. Even when all leaders recognize and buy into the concept of eventually handing over control, disagreements about timing or process can stall or prevent that transition. There may be age differences among the current owners, differences of opinion on valuation, or divergent thinking about what it will take to remain competitive in the industry. Equally risky is the prospect that disagreements arise in the middle of the transition process and derail it altogether.
3. Successful Firms Must Know How To Allocate Capital For Transitions