Gem City Playbook: From Founder to Leader?

RawPixel.com

Out of every 10 new businesses, only half of them survive more than five years. That's because many founders, who are very hands-on and involved as if by paternal instinct, do not delegate leadership responsibilities as their company grows.

I've been formally studying leadership since 2012. Informally for decades.

To provide some context, I'm getting close to proposing my dissertation on entrepreneurial leadership for my doctorate (close being a relative term for what feels like might be another decade). Entrepreneurial leadership is a newer phenomenon in the theoretical world — and I have come to find it is a particularly important framework for the founders of startups or small businesses to recognize.

And here is why: not all founders want — or are meant to be — leaders.

The United States' Small Business Profile revealed that in 2018, small businesses added 1.9 million net new jobs and at that time, there were 30.2 million small businesses in the United States, which employed 47.5 percent of the US private workforce. To reinforce that statement, nearly half of our entire workforce is now occupied by small businesses.

While these numbers suggest entrepreneurial ventures are dominating the economy, the flip side of this is that more of these businesses shut down than start up each month. Seven out of 10 new businesses survive around two years; half endure for five years; and only a quarter stay in business 15 years or more. One of the main reasons for this is the lack of effective leadership.

As anyone that has been part of a startup or new business environment can attest — they are chaotic. Everything is new, resources are lean, and there is a constant negotiation between adaptability and staying true to your product or service. When many of us start a business, we do it for a number of reasons: flexibility, to create something new, pursue your passion, and to hopefully make money.

If I were to guess, I would suggest many of us that start a business do not actively think about leading one right out of the gate. During the startup phase, founders are actively involved in all aspects of the business from value creation to delivery. And many small businesses will live in this space for a long time.

However, as the business grows, the founder needs to become the leader of the organization. By this time though, there is not sufficient time to continue to be actively involved in all the details of the business, and the time needed to set the strategic direction. It is a transition from working in the business to working on the business. This skill set also requires a shift in the founder's relationship with employees. This individual needs to now rely on others for the operational and technical capabilities — to turn away from execution and toward talent development. In other words — relinquish control. And for someone that has pretty much birthed a baby, giving up control is a very challenging notion.

Founders recognize it is important for any organization to ensure that the right people have the right skill sets. You look for it when you're hiring in areas that are not your strongest suit — programmers, technology officers, marketing experts — but leadership is often overlooked. And at times, this is to the business' detriment.

As our community continues to emerge in the entrepreneurial context and we continue to look to build and recruit businesses, we must also recognize the priority of leading them in order to remain successful. As I noted earlier, one of the reasons people often start companies is because they want the freedom to run things as they wish—and often these same wants that might drive a founder to create, are also the same ones that can also drive a founder to fail.

Rebecca Styn is VP of Ventures at Erie Innovation District and is the proprietor of Room 33 Speakeasy. She is also completing her Ph.D. in Leadership and Organizational Learning from Gannon University. Follow her on Twitter at @rstyn.