A Thoughtful Transition

With all the abrupt departures, scandals, and founders with hurt feelings, it's nice every once in a while to identify a transition that seems to be well thought out and working.  Earlier this month, XO Group, Inc. announced the completion of a multi-year transition of its two founders, the husband and wife team of David Liu and Carley Roney, while Mike Stein, who joined the company a year and a half ago will remain President & CEO.  According to the company's own press release Liu, who will remain as Chairman of the Board stated: "Two years ago, the Board and I began to execute on a thoughtful, public, and methodical plan to implement a seamless executive transition, and today marks the final step."

This runway for the new CEO with the founders in place seems to have been just the prescription for XO which has continued its growth path despite a more than 2% drop in its stock price at the announcement earlier this week.

I Guess It Wasn't THAT Bad?

In December we posted the blog article below on Sean Rad's departure from the leadership at Tinder.  Well on second thought, perhaps his egregious behavior was just not that bad.  He's baaaaaack!   Talk about a quick founder rebound.  

Today CNN reported that after just five months. Christopher Payne, the professional CEO the company hired to replace Rad, is now gone.  And Rad is back in the driver's seat.

"It's only been a few months, but there was mutual agreement here that it was not the right long-term fit, and given Tinder's rapid growth trajectory both Christopher and the Board thought prompt action was best for everyone," said Matt Cohler, of Benchmark Capital, a Tinder director.

Is there more to this?  Could a new CEO really have failed that drastically, or only been given the few months to succeed and then summarily tossed out?  Or did something happen?

Was it the twitter rant about the Vanity Fair story? Or was it the seeming overreaction to Hannibal Buress's comments at the 19th Annual Webby Awards?  Or was this just a bad hire?

No matter the cause, it is clear that the board did the company no favors in its choice of successors.  This founder transition stuff is hard!  Being forced to accomplish it quickly can lead to even more disaster.
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Tinder Founder to be Replaced with "Seasoned" Exec

There are few things that an early stage founder growing at double digit pace can do to cause his board to replace him.  This is one!  According to news reports Tinder will replace its cofounder, Sean Rad just two years after he founded the dating site.  Apparently, Rad had been the subject of a controversy this year when a female executive sued Tinder and its parent company IAC alleging harassment and discrimination.

“We’re recruiting a new CEO to lead Tinder through this time of explosive growth and expansion, adding world-class talent to the management team and allowing me to focus on Tinder’s product and brand,” Rad said in an e-mailed statement. “I look forward to working with the new CEO to realize Tinder’s massive potential.”

You don't actually believe that Rad is welcoming the new CEO with open arms, do you?  Not a chance.  And the new CEO will do herself good if she disposes with Rad altogether rather than let him lurk in the background undermining her ideas and authority.  I don't know Sean and he may be a very good and well meaning CEO/founder.  But after having his walking papers handed to him in such a public controversy, there really is no longer a place for him influencing the direction of the company in the future.  And his ability to work with a new CEO is certainly in question. We'll wait and see what plays out in this soap opera start-up drama.

The Founder Plots a Coup ... that Backfires

Earlier this year, George Zimmer, the very public founder of Men's Warehouse, didn't like the way he looked, as he was unceremoniously terminated from his executive chairman of the board role with The Men's Warehouse.  Even Saturday Night Live found this termination newsworthy enough to parody him on one of its broadcasts.

Back in 2011 Zimmer was replaced by Doug Ewert, who then took on the role as CEO. His recent firing coincided with the company's acquisition of Maryland-based Jos. A Bank, after a back and forth battle over who would acquire whom.
Mr. Zimmer stayed on as executive director post this transition.  However, apparently he had difficulty accepting that he was no longer CEO. We know little about George's behavior prior to his termination from his role as a director.  However, from the reports of this event, we guess that he was not of much help to his successor.
According to the Board's written statement at the time of his termination, Zimmer refused to support the management team.  He demanded power to veto corporate decisions, including executive compensation.  In fact, some insiders have said that Zimmer tried to negotiate a sale of the company to a private equity group.  Zimmer shot back that they used this firing to silence his concerns.
Either way, this very public controversy reminds us that the role of the founder post termination is of critical importance to on-going corporate governance.  Simply changing titles without decisive agreement on roles and responsibilities is critical to the successor's function.  Couldn't The Men's Warehouse have done a better job for its management team by insulating them earlier from his divisive behavior?

The New Culture at Apple - Circa Tim Cook

In 2011 I penned the blog posting below to Tim Cook as he took on the awesome task of following in the footsteps of Steve Jobs.  Based upon the current article in Business Week - Tim Cook Interview: The iPhone 6, the Apple Watch, and Remaking a Company's Culture - our wishes seem to have been fulfilled.  Tim is his own person.  While he respects the legacy he inherited and promotes the great traditions of Apple, he moves the company in a form that is true to his character and beliefs. Some of his actions are contrary to what Steve would have done.  Some are not.  But the performance proof is in the pudding.  My original blog post is below.

Reprinted from September 2011

An Open Letter to Tim Cook

Dear Tim,

Congratulations on your recent promotion to CEO at Apple.  Obviously, we are all concerned about what this implies about Steve's health.  However, as his hand picked successor we have all the confidence in the world in the potential of your tenure.

Last week we saw the press you generated from your initial interviews.  In those, we heard you say that "Apple would not change" under your leadership.  While that may be what your loyal Apple employees, shareholders and the press wanted to hear, it raises many concerns.

It's very difficult to be the successor of an "imperial CEO."  Just ask some of the high profile successors to Bill Gates, Phil Knight, Larry Page and a host of others.  As the returning CEO at Apple, Steve certainly generated superhuman results, commanded a cult-like following, changed the course of consumer behavior, and in doing so resurrected your company from the ashes into one of today's most valuable companies. I'm sure this is a legacy you would like to perpetuate.  But if I were going to give you any advice as you take on your new role, it is BE YOURSELF!  Don't try to live in someone else's shoes.  Be authentic.  Even if it means changing the way things are done at Apple.

Steve Jobs is a once in a century phenomenon.  Perhaps history will record him in the same league as Einstein, Ford, Ben Franklin, or Edison.  You are not Steve Jobs.  So don't try to be.  Tim, you have much to bring to Apple.  You have been the behind the scenes architect of some of the most important parts of Apple's success.  But I fear that if you try to perpetuate Jobs-ian cult-like status you will fall flat on your face.

Being yourself will require changes that Steve would not have made.  Make them.  Be sure they are thoughtful and take into account the expected reaction from the loyal Appleonians.  Start with "Why".  Make sure the employee ranks, customers, and even the press understand your deep feelings for the changes and then proceed.

Don't expect immediate gratification.  In fact expect the opposite.  Human nature abhors change.  Most of your constituents will likely oppose your changes.  Be patient.  If you are as smart as you appear, the changes you make will be for the good.  Keep the faith; don't back down.

Apple is an important American icon, especially in this fragile economy.  Finding ways to cause Apple to grow and prosper is more important than ever.  Steve hand picked you for this job.  He probably was right.  Don't let us down.

The More Things Change, The More They Stay the Same

Oracle founder Larry Ellison hands off CEO title to Hurd and Catz, takes executive chairman role

Is this good for the company?  Should investors head for cover? (Stock is down 5% as of the date of this article.) Is that good for Mark Hurd or Safra Catz, the two who are left to co-run the company?  Will anything change at Oracle?  Is change necessary at Oracle?

Many questions remain in the now heralded changing of the guard at this venerable tech company.

But Ellison's own statements leave me to believe that nothing really will change at Oracle post his departure.

Question # 1 - Has there ever been a company in the history of capitalism that was successfully run by two people?  Come on Larry!  Make the tough decision on your successor put ONE person in charge. Don't leave it up to the two of them to have to politically joust to make important decisions.

Question # 2 - Why are you leaving if things are going to remain the same?  If there is a reason for you to leave then leave and get out of the way.  Let your very capable executives take the company to the next stage.  Let them make the changes that you WOULDN'T have made.  Let them be free to determine what needs to stay the same and what needs to change.  Get out of their way.

While the article details that not much is changing in the way of Ellison's day to day responsibilities, one has to wonder WHY IS THIS HAPPENING?

Self Aware Founders are the Exception not the Rule

But Mark Suster (of Upfront Ventures) is a visionary (now VC) who understands that sometimes extricating yourself from the role is best for you and the company.  The backseat driver syndrome that he describes is the least helpful behavior for all involved.  An excerpt from his 2011 blog post still resonates today ...

He said that when talking with the board and with investors he realized that he was no longer visionary in this particular field and certainly no longer passionate about it. It happens. But since he was still the CEO people still always looked for him to set the direction of the company. He was the founder, after all. He realized he needed to leave.

For Immediate Release:

Trachtman Commits to Scribing Book about The Dirty Secrets of Succeeding Company Founders

Why this process often goes awry

September 11, 2014

Annapolis, MD – Les Trachtman, most recently CEO of Crofton, Maryland-based Force 3, Inc. is writing his long awaited book on the dirty secrets of company founder succession.  He recently launched a Kickstarter campaign in which he committed to a Fall 2015 delivery date for the book.  The book is entitled: FOUNDed.

“The topic – at least the truth – about how founders get replaced and why many of these successions fail is not often talked about.  But every company has a founder and many of the more successful ones ultimately get replaced, sometimes more than once.  How, when, and by whom they get replaced can be the difference between wealth and failure,” Trachtman said.  “I’ve now done this five separate times, sit on the board of a third generation family company, and have talked to hundreds of founders and CEOs who succeeded them. I feel compelled to share this knowledge to enable founders, boards, investors, and professional CEOs how to increase their odds of doing this well."

The recent return of Michael Bloomberg to his eponymous company and the ensuing departure of the current CEO, Daniel Doctoroff, recently has again focused international attention on the company founder-successor issue. Trachtman’s experience is dead on when it comes to these kinds of topics.

The book with chapter titles including:  The Emperor Has No Clothes, Doing the Dirty Work, Family Matters, Can’t Anybody Here Play this game, and Try Before You Buy is bound to be a fun and compelling tale of Trachtman’s advice intertwined among his real-life stories and anecdotes of the good and the bad that he has experienced.

FOUNDed. is due out in Fall 2015.  Pre-orders, as well as author-inscribed copies are available on Kickstarter until October 31, 2014.

About Les Trachtman

Les Trachtman is the majority shareholder of Purview, LLC, an entrepreneurial endeavor focused on disrupting the business of medical imaging. Prior to that Les served in a serial progression as CEO of five ventures in each replacing the founder/CEO. Force 3, Active Endpoints, e-OneHundred Group, Transcentive and Metaserver, He’s led corporate development for Progress Software (PRGS) and Hyperion Solutions. Les serves on the board of directors of The Metro Group, where he is the sole non-family board member of a 90-year-old family corporation and serves as the Entrepreneur in Residence at Union College. Les received a BS in Electrical Engineering from Union College and a JD and MBA from Emory University.

Contact

To learn more about this book go to:

https://www.kickstarter.com/projects/trachtman/founded

For more information contact Les Trachtman

trachtmanles@gmail.com

203.848.4246

Mike Bloomberg Returns

Mike Bloomberg did no favors for his friend Mr. Doctoroff who left  his role as CEO rather than succumb to political pressure from insiders imbued with power from Bloomberg. This pressure was apparently enough to thwart any changes that Doctoroff attempted. Trends like this follow most founder returns.  And this one hits pretty close to home.

Cook at Apple is much better off (and performance shows).  No one around to second guess him. No wonder he is smiling.