Transitioning from Executive to Entrepreneur

Charles Henagan loved his new job as a vice-president of marketing at a major beverage company. His challenge was to reinvigorate a legendar
Executive Producer, The Applegate Group Inc., The Applegate Group Inc.
April 22, 2010

Charles Henagan loved his new job as a vice-president of marketing at a major beverage company. His challenge was to reinvigorate a legendary brand of vodka and he embraced the adrenaline rush of travel, meetings and strategy sessions. Approaching 50, he was the oldest employee in his division, but made an effort to bond with younger colleagues over cocktails after work. Top management embraced his initiatives and he was feeling great about his work. 

 

Six months into what appeared to be a dream job, global spirit sales dropped due to the  recession. Henagan was abruptly let go, joining the estimated 15 million unemployed Americans.

 

Rather than looking for another corporate job, Henagan started Market Edge International, a Manhattan-based consulting company that helps clients create marketing strategies and build sales teams. He relished being back on the road when a recent training assignment took him to Mexico City.

 

“A lot of former executives will never be able to go back to the jobs like the ones they had,” said Henagan, who has no regrets about starting his own business. “The U.S. economy is changing so dramatically that in most industries, even when things pick up, the management structure will be fairly flat.”

 

Being flexible and open to new opportunities saved Henagan from becoming one of America’s unemployed former executives. Although Henagan embraced the challenge, many former executives dread the thought of  starting a business or working for a smaller, less prestigious company, according to Dennis J. Ceru, Ph.D., a psychologist and adjunct professor of entrepreneurship at Babson College in Wellesley, Mass.

 

“It’s tough to deal with the loss of status,” said Ceru. “They (these executives) often go through the stages of bereavement—anger, denial, depression, but some do come out the other side with renewed vigor and see an opportunity to try something different.”

 

Ceru, is an entrepreneur as well as an academic. Before becoming a professor, he founded several small tech companies in the Northeast. He said former executives who don’t want to pursue their own entrepreneurial ventures have a tough time adjusting to life at a smaller company.

 

“The more senior the executive was in the corporate structure, the less likely they were a direct contributor,” said Ceru. Their corporate rank “sheltered them from getting their hands dirty.”

 

Corporate executives are trained to collaborate and reach consensus on major decisions. But, most business owners, especially the founders, rarely seek anyone else’s input. Entrepreneurs also expect their employees to be self-directed and able to juggle multiple tasks.

 

Kathy Taggares, founder and CEO of K.T.’s Kitchens, a Carson, Calif.-based frozen pizza and fresh salad dressing company, said she has hired a few senior level food industry executives with poor results.

 

“The former executives tend to need more guidance and hand-holding than I’m use to giving,” said Taggares. “They are more process-driven and need the comfort of guidelines to follow and meetings to attend. They just need more structure than I was in the habit of providing.”

 

Taggares is clear about who is in charge at the company—she is. A former Idaho potato salesperson, she raised the down payment on  defunct food processing factory in 1989 by selling her condominium, her jewelry and cashing in her life insurance policy. She now employs about 500 workers. K.T.’s Kitchens which is privately held, does not reveal financial information. The company produces private-label pizzas for warehouse clubs, the military and schools as well as grocery chains.

 

She believes the toughest challenge for entrepreneurs trying to integrate former corporate executives is this: small business owners are responsible for every dollar raised, earned and spent. Corporate executives don’t spend their own money.

 

“They seemed to think money grows on trees,” said Taggares. “They don’t grasp how financially conservative an entrepreneurial company can be—typically the owner thinks of it as their money, which it is. An entrepreneur doesn’t throw money around as freely as a corporation 

that can always print more.”

 

Her advice to any former executive trying to adapt to working for a smaller company: create a personal game plan and start executing it from day one. “Don’t sit back and wait for tons of direction,” she said.

 

Many high level former executives are lucky enough to work with an outplacement or career transition firm. Barb Bridendolph, president and CEO of Crenshaw Associates, a New York City-based firm, helps executives decide whether or not the entrepreneurial life is for them. Most clients undergo a battery of psychological, behavioral and other tests to help them figure out what to do after losing their jobs. Because most are “C-level” executives, the former employer usually pays Crenshaw’s fees.

 

“You cannot underestimate the difference in behavior between a mega-corporation and a small business,” said Bridendolph. “The skills it takes to manage a corporate career, the matrix and strategic thinking in a global organization are very different from the operational skills needed to run a small business.”

 

Older executives often have an easier time making the transition to business ownership because they have the financial resources to invest in a new venture. Many executives in their 40’s prefer to transition back into a corporate job. She helps clients who may be willing to try something more entrepreneurial meet with a variety of business owners to get a sense of what it would be like “to walk in their shoes.”

 

Bridendolph said she appreciates the anxiety felt by a a former corporate executive thinking about working for or starting a small business. A few years ago, she inherited a 50-employee family business. She left her position as a brand manager at Procter & Gamble to manage the company before selling it.

 

Overall, she said about 25 percent of Crenshaw’s clients who explore entrepreneurial opportunities, start their own companies. The other 75 percent eventually land another job with a big or small company.

 

Meanwhile, Charles Henagan, the former beverage industry executive turned consultant, is busy growing his consulting firm. He said he feels lucky to have made a smooth transition to running his own business rather than seeking another corporate job.

 

“Small companies desperately need the skills, discipline and structure, but some corporate guys are just not meant to work in an entrepreneurial company,” observed Henagan.

 

Jane Applegate is founder and president of The Applegate Group Inc., which provides strategic marketing and video production services to big and small companies. She’s the author of four books on entrepreneurship, including “201 Great Ideas for Your Small Business,” published by John Wiley & Sons. For more information, visit: www.theapplegategroup.com. To contact Jane: jane @ theapplegategroup.com or @janewapplegate.