05 July 2006

It's all About Change

In three of the four situations that I personally engaged in as a replacement for the founder, I ran into a similar theme. In each situation I was asked to help transition the company to the next level. In each case, I carefully studied what was working, what wasn't and what was missing before acting. And then ....

I found what many new CEO's find. Change is painful for a founder. Several of the founders I succeeded even went so far as to translate change into a personal indictment. Almost any change I wanted to make was thwarted - "that's not the way we do things here," You don't know as much as we do about this market niche, so it's premature for you to make that decision," and "let's talk about that first". Each leaving me with the question of why they hired me in the first place?

What I found was that unless the founder had a good reason to agree with change, they are predisposed to oppose it. A good reason to change often takes the form of a close encounter with failure pointed out by a well meaning VC who just saw her million dollar investment turing to saw dust. Oddly enough, "successful" ventures, that need to hire a new CEO with experience and knowledge to get the venture to the next level, are often missing that "good reason." So companies that are doing ok, have a harder time integrating a new CEO than ones that are failing.

A good board and smart investors can make all the difference. Setting expectations early with the founder, the board can begin to process of transition way before a new CEO is ushered in the door. In fact, many VC's who I've talked with make it very clear to the founder that they will likely be replaced when the appropriate time arises and a new skill set is required. As the time nears, they reinforce that message - being sure the founder "gets it!" And during the transition process they back up their message by directly eliciting the "change" agenda from the new CEO.

Contrast that with the less experienced investors who convince and cajole the founder into believing that the new CEO will be their "partner" rather than their boss, just to get past this tough transition issue. Once introduced on the scene they expect the CEO and founder to work out the change relationship themselves. There are very few situations where this type of approach works.

As Tracey Goss pointed out in her book entitled: The Last Word on Power, everything that got you to the success you enjoy today will hold you back from success in the future. Founders can take a lesson from Tracey. It isn't about them and the change required is not about their inability or incompetence. Success at the next level is about using a new set of tools to tackle and new and different job. Installing a new CEO when then game has changed from start-up to later stages of commercialization requires the company (and founder) embrace these kinds of change.