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160
The darkside ofentrepreneurship
Manfred
ER.
Kets de ViiesSometimes the sam.ecreative energy that drivesan entrepreneur has itssource in destructive intemalneeds that can ruin acareer or
a
company
Most entrepreneurs, likemany other people, havethe normal amount of diffi-culty dealing with others,with the ups and downs
of
a
career,
and with the suc-cesses
or
failures of
a
com-pany. Most entrepreneurshave their internal visionsin tune with reality so thatthey act in the real worldin a way that other peoplecan
understand.
For
someentrepreneurs, however,things
are
not soeasy.
For
these people, the high de-gree of energy necessary toachieve a dream has de-sires and needs behind itthat if let loose can wreakhavoc in an organization.
For
instance, an entrepre-neur's attention to detailthat is a virtue in the start-up phase can be truly crip-pling if he or she continuesto exert such control whenthe organization grows.Theperson who can't let gothe reins even when faced
vi/ith
the company's demisemust have
a
need that isgreater than the desire tosee the company
succeed.
In this article, the author,who has studied andtalked to many entrepre-neurs who found them-selves out of control at the
helm,
describes the behav-ior patterns that these peo-ple often have in commonand how they affect theircompanies.
For
venturecapitalists and corporateCEOs looking to acquirean entrepreneurial com-pany, he describes somepitfalls in working withthese entrepreneurs and
of-
fers a strategy that works.
Mr.
Kets de Vries is profes-sor of management atINSEAD. Fontainebleau.France.A psychoanalyst,he has spent many yearsstudying the inner
work-
ings of managers and theirorganizations. He haswritten numerous booksthat examine companiesthrough
a
psychoanalyticlens,the most recent
of
which is
The NeuroticOrganization
(v/ritten withDanny Miller; publishedby lossey-Bass.
1984).
Thisis his second article for
HBR.
the first being "Man-agers Can Drive Their Sub-ordinates Mad," which ap-peared in our July-August1979issue.Illustration bySally Wern Comport.
John White, president and CEO of awell-known company in the office equipment indus-try,was wondering if he should acquire a small elec-tronics component business. Since the company'sproducts would be a valuable addition to his officeequipment line, White had been quite eager to pursuethe matter. In considering this possibility, White keptgoing over in his mind the kind of arrangements heshould make with the electronics company's founderand owner, Lee Thompson. During their discussions ofthe buyout, Thompson had indicated that he was pre-pared to stay on after selling his company. AlthoughWhite recognized Thompson's contrihution to makingthe company a big success, he wondered how a contin-uing association would work out. Would Thompson fitin with the parent company? How would Thompsondeal with being a subordinate? Would Thompson, usedto having things his
way,
follow directions and acceptWhite as a boss?John White's concems are not outland-ish. Some entrepreneurs find it hard to accept anothercompany's way of doing things and can create a work-ing atmosphere that makes adaptation very difficult.One should not, however, see such hehavior as thenorm. Many entrepreneurs are well equipped to dealwith different company environments.What are entrepreneurs like? What dis-tinguishes them from other businesspeople? Althoughas a group they are not easy to get a handle on, somecharacteristics seem to be common to all of them.Entrepreneurs seem to be achievementoriented, like to take responsibility for decisions, anddislike repetitive, routine work. Creative entrepre-neurs possess high levels of energy and great degrees ofperseverance and imagination, which, combined withwillingness to take moderate, calculated risks enable
Editor's
note:
All references arc listed atthe end of the article
 
Entrepreneurship161
them to transform what often hegan as a very simple,ill-defined idea into something concrete. Entrepre-neurs also can instill highly contagious enthusiasm inan organization. They convey a sense of purpose and,hy doing
so,
convince others that they are where theaction
is.
Whatever it is-seductiveness, gamesman-ship, or charisma-entrepreneurs somehow know howto lead an organization and give it momentum.Along with their mystique, however,entrepreneurs can have personality quirks that makethem hard people to work with. For example, their biastoward action, which makes them act rather thought-lessly, sometimes can have dire consequences for theorganization. Moreover, some entrepreneurs
I
haveknown have had great difficulty taking direction.As Derek du Toit, an entrepreneur, ad-mits, "The entrepreneur who starts his own businessgenerally does so because he is a difficult employee. Hedoes not take kindly to suggestions or orders from oth-er people and aspires most of all to run his own shop....His idiosyncrasies do not hurt anybody so long as thehusiness is small, hut once the business gets larger,requiring the support and active cooperation of morepeople, he is at risk if he does not change his approach.It has been correctly stated that the higgest burden agrowing company faces is having a full-blooded entre-preneur as its owner."'Du Toit raises questions about what youshould look out for if you are considering taking anentrepreneur on board, working for one, or encouragingnew ventures. What can cause problems? Are there pit-falls to avoid? If
so,
what are the options in such situa-tions? What provisions can you make to accommodatethe typical entrepreneur? Do entrepreneurs have morepersonal problems than other people? In short, what isthe dark side of entrepreneurship?
Entrepreneur's theater
In answering these questions, let's keepin mind that entrepreneurs are not a homogeneousgroup. They come in all sizes, each with his or her owncharacteristics.'
I
am discussing here owner-managers
I
have worked with whose personalities were responsi-ble for their own or their companies' failures. [See theinsert entitled "The Research Base.")
Need for control
A significant theme in the life and per-sonality of many entrepreneurs
I
have known is theneed for control. Occasionally, their preoccupationwith control affects their ability to take direction orgive it appropriately and has serious implications forhow they get along with others. Some entrepreneursare strikingly ambivalent when an issue of controlsurfaces - they are filled with fantasies of grandiosity,influence, power, and authority, yet also feel helpless.They seem to fear that their grandiose desires will getout of control and place them ultimately at the mercyof others.Consequently, some entrepreneurs
I
have studied bave serious difficulty addressing issuesof dominance and submission and are suspicious aboutauthority This attitude contrasts greatly with that ofmanagers. While managers seem able to identify in apositive and constructive way with authority figures,using tbem as role models, many of the entrepreneursI have observed lack the manager's fluidity in changingfrom a superior to a subordinate role. Instead, theyoften experience structure as stifling. They find it verydifficult to work with others in structured situationsunless, of course,
they
created the structure and thework is done on
their
terms.Larry Malcolm, a successful entrepre-neur in the sporting goods industry, is a typical exam-ple.In my discussions with him, he talked about hisinability to work for others. After he dropped out ofcollege, Malcolm started work as a sporting goodssalesperson for a department store. He liked the experi-ence (sports had always been his great enthusiasm), buta fight with tbe department head over the "right" wayof displaying merchandise prematurely ended his stay.He then found a clerical position in an apparel com-pany that manufactured active wear. Although hemanaged to stay on longer at thisiob,he disliked tbeworking environment, felt stifled, and, finally, quit.In his third job, he didn't fare muchbetter. But by this time, Malcolm began to realize thatworking for others was not his forte. Not knowingwhat to do and wanting time to think about the future,he took his savings and made an extensive trip toEurope. At a sporting goods fair in Germany, he met adesigner whose work he liked, and on the basis of tbeman's designs, managed to get a few orders from adepartment store and a number of small retail opera-tions when he retumed to the States. All of a sudden,Malcolm found himself running his own business.Larry Malcolm's story is not unusual.Many entrepreneurs seem to be driven hy a magnifi-cent obsession, some idea, concept, or theme thathaunts them and that eventually determines whatkind of business tbey choose to be in. Malcolm's greatpassion was sports, and everything related to it. It par-tially explains his talent for finding more functional aswell as attractive designs. Tbis focused interest is notthe only factor, bowever. Listening to entrepreneurs'case histories,
I
have found many situations where it
 
162Harvard Business ReviewNovember-December 1985
The research base
My research is based on extensive observations ofand interviews with 38 entrepreneurs operating in awide range of industries. Most of these entrepre-neurs were based in the United States or Canada.My usual entry into their companies was as anexpert in strategic human resource managementwith a special interest in entrepreneurship and fam-ily business. Sometimes management asked for myhelp because it saw my clinicai background as use-fui in untangling complex family and business situa-tions.In a few cases. I had a purely therapeutic"contract" with the entrepreneur. To the extent thatI dealt with dramatic" cases, my sample is biased.
was also-like Malcolm's-people's inability to submitto authority and accept organizational rules that drovethem to become entrepreneurs.Many entrepreneurs are misfits whoneed to create their own environment.' Offering thedeference a subordinate usually owes a superior oftensuffocates this type of person. They tell themselvesthat they don't want to be at the mercy of others. Evenif they move away from old controlling influences,these concerns linger on. Many of the entrepreneurs
I
have been studying are preoccupied with the threatof subjection to some extemal control or infringementon their will. When such people are suddenly placed ina subordinate position, power conflicts are inevitable.People who are overly concemed aboutbeing in control also have little tolerance for subordi-nates who think for themselves. In organizations, thisdesire for control can lead to extreme behavior, forinstance, an owner-manager needing to be informedabout even the most minute operation of the company.To illustrate, every moming one entrepreneur responsi-ble for a $20 million consum^er product operationhabitually opened not only his own personal mail butalso all mail directed to the company. In addition, hehad to approve all requisitions, no matter how small.He said it gave him a "feel" for the overall functioningof the organization.Once that may have been the case. Butexcessive concem with detail that may be appropriatein the start-up phase of
a
company will increasinglyhecome a burden to the organization as it stifles the in-formation flow, hampers decision making, and inhibitsthe attraction and retainment of capable managers. Inthis entrepreneur's situation, although his subordinatesadmired many of his qualities, they deeply resentedbeing infantilized. Good performers did not stay.Moreover, because true accountabilitywas lacking, information needed for decision makingdid not circulate. As a result, sales and profits pla-teaued and the future growth of the enterprise was en-dangered. Buyers of entrepreneurial companies startedby such people should be prepared to inherit a medio-cre management group.
Sense of distrust
Closely related to the need for control isa proclivity toward suspicion of others. What makessome of the entrepreneurs
I
have known stand out asextreme examples has heen their strong distrust for theworld around them. They live in fear of being victim-ized. They want to be ready should disaster strike.Paradoxically, quite a few
I
have worked with feel bestwhen their fortunes are at their lowest. When at thetop of the success wave, they imagine themselves in-curring the envy of others.So not to tempt the wrath of the gods,when people ask them how things are, they respond bysaying that business is only "so-so" or "not too bad."But if their fortunes tum and they are close to bank-ruptcy, it is as if they have paid the price, done theirpenance for having been successful. Because it producesa sense of
relief,
their predicament can have a positiveeffect. With the alleviation of anxiety, they have theenergy to start anew, which they do with enthusiasmand a sense of purpose.People who are "sick" in this way arecontinually scanning the environment for somethingto confirm their suspicions. This behavior pattemdoes, of course, have its constructive side: it makes theentrepreneur alert to competitors', suppliers', custom-
ers',
or govemment moves that affect the industry.Anticipating the actions of others protects them frombeing taken unaware. But such vigilance can also leadthem to lose any sense of proportion. Focusing on cer-tain trouble spots and ignoring others, entrepreneurslike this may blow up trivial things and lose sight ofthe reality of the situation.When a strong sense of distrust assistedby
a
need for control takes over, the consequences forthe organization are serious: sycophants set the tone,people stop acting independently, and political games-manship is rampant. Such entrepreneurs can interpretharmless acts as threats to their control and see themas warranting destructive counteractions. Understand-ably, such thinking doesn't lead to sound head office-subsidiary relationships.In one case, headquarters sent a consul-tant to help the chief executive of a newly acquiredcompany to assess profitability by product line and de-velop and implement a strategic plan. When the con-sultant arrived, the ex-owner didn't even let him lookat the financial statements on the ground |as he ex-plained to headquarters) that the consultant might usethe information to help the competition. At another
of 00

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