Management requires policies, procedures, and bureaucracy if entrepreneurs want to grow their companies

A Rocket Mortgage/Quicken Loans Super Bowl commercial featured actor and comedian Keegan-Michael Key translating jargon and slang for people. In one snippet, he tells a woman perusing a dating web site what the word “entrepreneur” really means: Unemployed.

This strikes a chord because it holds a grain of truth. It’s a mark of progress in our society that virtually anyone can create a business and call themselves an entrepreneur. Yet when it’s easy to start a company, it’s easy to think you can also run it. Even the smartest entrepreneurs often devalue the knowledge and discipline that founders and CEOs need to build companies.

This is because they are frequently escapees from corporate America with all its systems and processes. Their newfound freedom can lead to an odd management philosophy: a complete rejection of structure and bureaucracy.

This “bizarro world management” doesn’t work. Here’s why.

Entering Bizarro World

Entrepreneurs who subscribe to a “bizarro world” management approach have one tenet: Do everything the opposite of what their former employers have done. This may be referred to as the Seinfeld philosophy: If everything their former employer did was wrong, then the opposite must be right! 

There are several reasons for this approach. Entrepreneurs often feel stifled by what they perceive as too much bureaucracy in traditional companies. With an idea germinating, they create a business, convinced they can run it better than their former employer.

Then, without the expertise and skills needed to be an effective CEO, these founders simply do the opposite. For instance, they may champion flat organizational structures, no titles, and minimal processes and systems.

Also, to avoid the mistakes of past bosses and management teams, many entrepreneurs tend to micro-manage every decision, no matter how big or small. These are often in areas where they have no experience or expertise. Undaunted, they think they will eventually figure it out and take time to do so.

The Problem with Bizarro World Management

These tactics may work fine for a while, since employees will feel empowered to do their jobs. In a startup’s early days, talented people can overcome the lack of bureaucracy. However, this doesn’t scale, and with everyone doing things differently, it becomes difficult to set any performance standards or make any progress.

In addition, micro-managing slows the company down. Employees are in stasis mode waiting for their leader to make decisions. Analyzing interviews with more than 17,000 CEOs and executives, the CEO Genome project found that those with the highest IQs often struggle the most with lags in decision-making. They get bogged down in too many details and variables.

These issues often lead to founding CEOs being replaced, because they struggle to deliver growth. The problem is that knowing what NOT to do is not the same as knowing WHAT to do.

Accepting Some Bureaucracy

How should entrepreneurs approach their role as CEOs and leaders instead? Here are five suggestions.

1. Have respect for the CEO role.

PandoDaily contributor Bryan Goldberg once wrote that, “Building and running a business is very hard, and doing it well is an act of craftsmanship no less sophisticated than engineering.” He was speaking to engineers who think the CEO position will be a piece of cake compared to their profession, which requires the hard skills. Yet everyone contemplating founding a company should understand that the CEO role is its own profession that requires a unique set of skills and knowledge.

2. Know the five CEO responsibilities.

There are five core responsibilities of the CEO role: Own the vision, build the culture, provide the proper resources, make good decisions, and deliver performance. While entrepreneurs often have to do everything at first — from taking out the garbage to hiring to paying the bills — eventually they must transition into a full-time CEO role. Knowing these five responsibilities sets the parameters for the position and how entrepreneurs should spend their time.

3. Be decisive.

Decisiveness — deciding with conviction and speed — is one of the four behaviors that the highest performing CEOs exhibit, according to the CEO Genome project. The CEO responsibility to make good decisions is related to this, but not exactly the same. Determining whether a decision is good, bad or simply adequate requires first making one. The sooner entrepreneurs make a decision, the sooner they can reverse or correct it if it’s wrong.

4. Don’t go it alone.

Entrepreneurs should select a partner who complements them. This requires some self-awareness about strengths and weaknesses. For example, more technical founders should look for someone with business skills and vice versa.

5. Implement systems and processes.

There’s no getting around it: Growth requires some bureaucracy. Establishing formal processes and systems builds efficiencies and better prepares an organization to deliver on its value proposition. Acquirers look for maturity at all levels in a company, and this is a good first step. 

Granted, many entrepreneurs prefer to start companies rather than run them long term. There are different skills sets required at each level. But building a company requires a touch or more of bureaucracy and a strategic management approach, no matter how badly entrepreneurs want to invert the work environments from past jobs.

This post is based on an article I published on Entrepreneur.com on March 6, 2018.