I have a friend, let’s call him Joe, who’s an entrepreneur. Joe’s company was acquired a couple of years ago by a larger company, and Joe was left in charge of a suite of products only he could run for this company. He was doing very well but had the usual corporate complaints: it was too rigid, it was too slow, he didn’t enjoy it. We shared some of our war stories.

Then, one day, Joe was walking by a conference room where his CEO was hosting a group of b-school students, talking about acquisitions. The CEO calls Joe in, introduces him to the class, and says: “do you know what is the first rule when acquiring a company? Fire the entrepreneur. They never fit in, and they give you bigger headaches than anyone else could”.

As Joe was telling me this, I think he agreed with his CEO. I did too. Entrepreneurs are often celebrated and applauded in the Bay area, hailed as business leaders and innovators. That’s often true. However, there’s another thing that’s true, that acquirers find out quite often: most of us are individualistic, unmanageable hotheads who can’t, or at least won’t, play well within the corporate culture. It makes sense, too: had most entrepreneurs been able to or interested in participating in the corporate power structure or dynamics, most of them wouldn’t have become entrepreneurs.

Since I first heard Joe’s story, it resonated in many stories I’ve subsequently come across. Entrepreneur meets CEO. They become business BFFs. CEO acquires entrepreneur, hoping for higher returns and synergies. The entrepreneur is exhilarated: finally, he’s able to super charge his strategy in a much bigger organization. Acquisition goals? We’ll get them in no time. I’ll just do what I always do. The time bomb starts ticking.

Fast forward 12 months and the situation is almost beyond repair. The CEO has an energy ball running around the building calling his middle managers lazy and their process folks idiots. Every second person in his company is irritated by this person sitting in meetings making everyone else feel stupid. Plus, the guy’s team has set up a barricade and is unwilling to integrate with corporate systems, come hell or high water, because theirs are better. In the meantime, the entrepreneur is plucking out hairs due to the slow pace. Everyone’s so slow! Everything requires permission! He’s being asked to provide status updates and someone can override his operational decisions! All hell is about to break loose.

Not an ideal scenario, is it? That’s the worst case, of course. The usual case is a much more tame version of the same problem, with the entrepreneur still being unhappy and looking to eject as soon as his vesting has crossed some major milestone. How do you prevent this from happening? Here’s some advice.

• Fire the entrepreneur. Joe’s CEO’s advice still holds. Hiring entrepreneurs to do what they did with their companies, only internally, seldom works. If you need a team, get the team. If you need the product, get #2 in the company to run it. Move the entrepreneur aside and let him work on something interesting and open ended, usually solving a really hard problem.
• Keep them self sustained. The best use for an acquired entrepreneur is as head of a business or functional unit, separated from others and hopefully with its own infrastructure. Let them run free. If you put an entrepreneur in a role that requires them to touch all parts of the organization – well, they will. Big time. That can prove successful in one use case only: when you put them at the top, like eBay did with David Marcus. Otherwise, be ready for some turmoil. Entrepreneurs didn’t get to where they did by setting up committees and inclusive communication, and there’s no reason to believe that they’ll start when you acquire them.
  
• Manage by KPIs/challenges. Once you have them overseeing a well defined area, give them concrete targets to hit. An unchallenged entrepreneur will get bored and either eject or try to redefine his mission, which often means stepping on other people’s toes. Set goals. If they’re met quickly, set more aggressive goals. Aggressive targets and the free hand to pursue them is what drives entrepreneurs. Give it to them and you’ll get an effective force. Let it slip and you’ll get mayhem.

Entrepreneurial people can be a positive force, if I may say so myself. Acquisitions happen because they, we, create value. However mismanaging an entrepreneur often results in both sides being less happy and successful than they could have been. Taking a few precautions can help your acquisition dollars do so much more for you.