As the entrepreneur grows and matures his goals change and necessarily the organisational goals may need to change to reflect this. Consequently this often leads to a change of strategy as well. If this is not managed well there will be conflict between the entrepreneurial founder and professional managers or other shareholders. Conflicts also arise when an entrepreneurial venture has co- founders whose goals may diverge with the growth of the enterprise. This may lead to either significant internal corporate fights or disposal of the enterprise to outside investors. When Century Bank was growing, the founding directors’ vision diverged resulting in the ouster of CEO Jefta Mugweni by his deputy and co- founder Gary Shoko. Thus entrepreneurs should plan for this and establish a process for the orderly dissolution of the partnership if differences between the owners can not be resolved.
Sometimes as the entrepreneurial venture grows the original shareholders acquire significant wealth, which opens up new opportunities for their investments. These new opportunities may be at variance with the best interests of the entrepreneurial venture. For example Dr Mthuli Ncube of Barbican Bank developed an interest in mining and for a great while explored the possibility of the bank underwriting the takeover of a 15% stake in a huge mining conglomerate. At the time of this writing it is not clear whether the beneficiary was Barbican Holdings or another vehicle in which Ncube had an interest.
However the bank did not have the capacity since it was too small to fund thistransaction.
Similarly the entrepreneurial executive directors of Interfin Merchant Bank are reported to have used the bank’s influence and resources to fund personal investments into different sectors of the economy including furniture, hospitality, real estate, construction etc. The challenge posed by these diverging personal interests is not only financial but also a loss of concentration on the management of the primary entrepreneurial venture. Issues of conflict of interest may also arise.
This post confirms that the entrepreneur should keep his eyes on his personal interest and manage them so that as they change they do not adversely affect the investment. Similarly when the promoters are a partnership it is important to manage the personal interests of the partners and monitor them as they change. Strategic flexibility should be built into the shareholders agreement to cover the eventuality of changing personal interests over time.
Extracts from Entrepreneurship On Trial by Dr T. A. Makoni