Why Entrepreneurs Make Bad Managers

Like most people nowadays, I’ve worked several different jobs over the course of my career. I’ve worked for some folks who were great managers and I’ve worked for some that were their own worst enemy. My first job out of college was working for an individual who built his own investment firm from the ground up. After over 30 years in business, that investment firm doesn’t even exist any more (I’ll get into that a little bit later).

It turned out that some of the traits that served him best as he built his company also led to the downfall of it. A co-worker and I discussed this very topic on occasion and after reviewing the proof we both came to the same conclusion – entrepreneurs make bad managers. The evidence in our particular situation was compelling.

One of the main problems that he and a lot of other entrepreneurial managers had was that he couldn’t relinquish control of anything. As the company grew to over 1000 employees, he was still spending a lot of time on tasks that could have (and probably should have) been delegated down the chain – everything from interviewing entry level employees to having a hand in developing the weekly cafeteria menu.

This guy was worth over $1 billion at one point yet we couldn’t send out a single piece of marketing or advertising unless it had his written approval. That could sometimes require a couple of days wait since he was busy addressing all sorts of other minor issues just like this throughout the day.

Entrepreneurial managers also like to be surrounded by “yes men”. Some managers appreciate people who offer a different vision or take on an issue but entrepreneurs tend not to be in that group. People who challenge the boss could be very useful in the goal of growing the company but you won’t often find them around the entrepreneurial manager. They like people who agree with them and THEIR vision of how to run THEIR company.

When you are surrounded by people who tell you what you want to hear the potential for trouble is extensive and that’s exactly what happened that resulted in the collapse of this investment firm. Our manager ended up engaging in improper trading activity (trading activity that was not permitted for his customers), had it OK’d by other senior managers, got caught and then was essentially forced to resign. The company was sold several months later.

This isn’t to say that all entrepreneurs will make bad managers. Some have been very successful but the history they have with their own companies and the struggle to give up some of the control associated with it can make for a challenging environment. In the case of my old boss, his inability to delegate along with the absence of a system of checks and balances ultimately led to a company that was forced to be sold for pennies on the dollar and cost hundreds of employees their jobs.

If you find yourself working for the company of such an individual, you don’t necessarily need to update your resume today but be aware that there will likely be challenges. When it comes to entrepreneurs running their own creations, the road will never be smooth.

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Author Info

This post was written by David Dierking. David lives outside Milwaukee, Wisconsin and has been working in the financial services industry for over 13 years with a background in investments, accounting, and marketing. He earned his Chartered Financial Analyst designation from the CFA Institute in 2004 and was recently published in the Milwaukee Business Journal. You can also check him out at The Ultimate Fit Challenge

5 Responses to “Why Entrepreneurs Make Bad Managers”

  1. David Wilson |  Aug 25, 2010 at 3:26 pm

    Thanks for the post, great info as always.

  2. GBR Briana |  Aug 25, 2010 at 4:45 pm

    I’ve noticed that too! Entrepreneurs have a hard time letting things go. I think that’s why a lot of small businesses go under; there’s too many “yes men” who don’t let the person know if something’s truly a good idea or not, and when something IS a good idea, they don’t have enough time to implement it because they don’t know how to delegate. It really takes a village to not only raise a child, but a business as well

  3. Ron |  Aug 27, 2010 at 8:50 am

    Entrepreneurs aren’t the only people who want to be surrounded by “yes men” — you should meet my boss … and HIS boss.

    I once worked for a brilliant entrepreneur who’s main focus was sales. I likened it to building a dam. He was always throwing more and more material on the dam, but never paid attention to the leaks. Eventually one of those leaks caused the whole thing to burst and he lost a $40 million company (and put 140 people out of a job).

  4. Gobankingrates |  Aug 27, 2010 at 2:10 pm

    It definitely makes sense that when you build a company from the bottom up, you want to continue to oversee every facet. I guess the only solutions are to keep your company at a size where you can keep up that level of individuality, learn to delegate, or hire someone else to take care of the company’s management for you.

  5. Vytas |  Aug 28, 2010 at 4:18 pm

    I think that it is impossible for the same person to have all possible qualities necessary for business. That’s why entrepreneurs need managers. If an entrepreneur is also a good manager, I think this is an exception to the rule.
    Thanks for the post.