Anyone who has experience with a successful and growing early stage company has seen it. Venture capitalists often struggle with it. Boards end up agonizing about it. Other employees complain about it.
Sooner or later it becomes obvious. Founders try to avoid taking action on it. It festers. Organizations suffer.
Early stage leadership teams can become a constraint on future growth. Not that they weren’t valuable along the way. It’s just that their skill sets and capabilities may not scale at the same rate as the company’s growth.
It is the savvy founder who plans for this in advance.
Shedding members of a founding team is as natural as a snake shedding its skin. Snakes shed their skins multiple times during their lives, more frequently during their early years. So too is the fate of most leadership teams - at least if the company intends to grow.
“The old skin has to be shed before the new one can come,” said Joseph Campbell, American mythologist, writer and lecturer. The snake shedding its skin has been seen as an ancient metaphor for inner growth.
Coincidentally, a snake about to shed its skin begins to experience physical changes. Its skin becomes dull, its eyes cloud, and increasingly it exhibits nervous behavior – perhaps because its vision is blurry. Companies in need of transitioning their leadership might exhibit similar symptoms.
Rather than ignore this issue and hope it goes away, savvy CEOs should plan for it. There always will be some early team members who have the farsightedness and ability to grow their skill sets in step with the company’s changing needs. But most will naturally be left behind. As organizations mature, the leadership required is quite different. The skills and experience necessary to lead the next phase of growth changes. There is nothing unique or tragic about this process. It is a natural part of organizational maturity. Shed your skin so you can grow.
Just like ripping off a band-aid, shedding leaders can be momentarily painful.
Early leaders provide critical value during their tenure and should be compensated for their impact. But compensation for past contribution does not mean they are assured a continuing role on the team.
Is demotion appropriate?
Often we hear that founders, in an effort to assuage the pain, re-assign the former executive to report to the new upgraded leader. The exec brought in to contribute new skills and capabilities becomes the former leader’s boss. What effectively occurs is a demotion in place.
The process often plays out like this:
- Founder realizes (often from outside influence) that a team member requires upgrading.
- A search ensues and a new executive is recruited.
- To avoid having to sever what has become more than a mere working relationship between the founder and his early team member, the founder tries to appease his friend by keeping her around. She now reports to the newly hired exec.
- Early team member is offended but outwardly agrees to the demotion.
- Early team member complains to anyone who will listen, sews cancerous seeds, and if you are lucky leaves as soon as they have a better opportunity.
No one ever succeeds after being demoted. That’s is a psychological certainty. Rip that band-aid off!
Just like a growing snake, the founder (or successor) should expect to shed leadership team members multiples times as the company matures.