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.
05 July 2006
09 June 2006
The challenge facing any new CEO is to get the existing team, which may have a long history of working together and who were no doubt more comfortable before the CEO got there, to engage in a team building process to embrace change, accept diversity onto the team, and leverage the team’s existing talents. This always proves to be much harder that it appears.
If you ever joined an organization where the founders give up the CEO role but stay on with the company in functioning roles, you already know this is a difficult challenge. If you haven’t experienced it first hand, or perhaps read about some notable failures, if should suffice to say that it is very hard for a founder to give up control of his or her “baby.” This is a company that they have birthed, named, nurtured and financed. Giving up “control,” just because some investors say it will be for the greater good, may be acceptable in theory, but it is not easy to do. Even those founders who actually believe it may be good for the organization, historically have had a very a hard time actually giving up this control.
Many new CEOs make a precondition for their joining an organization the removal of the founders. While you lose the talents and the institutional knowledge by doing so, it often is the only way to get a clear change in direction, loyalty and leadership accomplished. Keeping founders around almost always leads to fragmented loyalty, back channel conversations, distrust of the CEO, and second guessing of the new CEO’s decisions. In fact there probably has never been a founder-CEO succession in which the founder has not believed that many of the new CEO’s decisions were flawed, misinformed or misdirected.
If you ever joined an organization where the founders give up the CEO role but stay on with the company in functioning roles, you already know this is a difficult challenge. If you haven’t experienced it first hand, or perhaps read about some notable failures, if should suffice to say that it is very hard for a founder to give up control of his or her “baby.” This is a company that they have birthed, named, nurtured and financed. Giving up “control,” just because some investors say it will be for the greater good, may be acceptable in theory, but it is not easy to do. Even those founders who actually believe it may be good for the organization, historically have had a very a hard time actually giving up this control.
Many new CEOs make a precondition for their joining an organization the removal of the founders. While you lose the talents and the institutional knowledge by doing so, it often is the only way to get a clear change in direction, loyalty and leadership accomplished. Keeping founders around almost always leads to fragmented loyalty, back channel conversations, distrust of the CEO, and second guessing of the new CEO’s decisions. In fact there probably has never been a founder-CEO succession in which the founder has not believed that many of the new CEO’s decisions were flawed, misinformed or misdirected.
06 June 2006
Since this is graduation time, I thought it might be appropriate to highlight one of the highest profile founders, Steve Jobs. He gave what may have been one of the the most meaningful and relevant commencement addresses at Stanford University several years ago. If you haven't heard or read it or had your soon to be high school or college graduates read it, I recommend it. Steve is one founder that gets it (albeit he may not have earlier in his career and certainly hit some bumps along the transition he did at Apple). His address is also available from iTunes in both audio and video free of charge here.
28 May 2006
Organizations (both for profit and not-for-profit) are started by a unique breed of individuals who often are driven by passion to solve a need or promote a cause. The characteristics of successful entrepreneurs are often antagonistic to the needs of a scalable organization.
Founders are passionate, driven, smart, opinionated, and capable. They often hold unique knowledge of the particular solution they are developing. Often founders find it more expeditious to “do” rather than “teach.” As such this centralized knowledge source can become a strangle-hold on a growing organization. Founders often seek out people to join the organization who believe in them or their cause and often maintain “blind faith” in the decisions of the founder. Early hires are usually people who can execute on the direction of the founder rather than managers who are empowered to make their own decisions.
The growth of a founder-based organization may plateau when the centralized control structure expands beyond its founder-capable sphere of control. While some founders are able to grow a company with several hundred staff without relinquishing control, more often the organization begins to suffer from his or her micromanagement.
There are several documented high-profile success stories of founder entrepreneurs who have shot past this phase of business expansion, typically by understanding their own limitations and taking action to expand the central authority through good hiring or through a personal metamorphosis. However these are the unique cases. More often it is an outside influence (from investors or stake holders) that forces this confrontation.
Bridging this phase of the business is not easy. If not handled correctly it can be the downfall of a potentially great organization. The effective process of changing leadership – what I call founder transition – is not well documented. While it is critical for an organization, most transitions are handled with gut reactions by financial people who are not necessarily skilled or experienced with this process and often do not set appropriate expectations or develop an effective structure. This blog is intended to create a conversation that will enable organizations to gain from the experiences of founders, investors, and hired-in CEOs who have succeeded and failed in this critical transition.
Founders are passionate, driven, smart, opinionated, and capable. They often hold unique knowledge of the particular solution they are developing. Often founders find it more expeditious to “do” rather than “teach.” As such this centralized knowledge source can become a strangle-hold on a growing organization. Founders often seek out people to join the organization who believe in them or their cause and often maintain “blind faith” in the decisions of the founder. Early hires are usually people who can execute on the direction of the founder rather than managers who are empowered to make their own decisions.
The growth of a founder-based organization may plateau when the centralized control structure expands beyond its founder-capable sphere of control. While some founders are able to grow a company with several hundred staff without relinquishing control, more often the organization begins to suffer from his or her micromanagement.
There are several documented high-profile success stories of founder entrepreneurs who have shot past this phase of business expansion, typically by understanding their own limitations and taking action to expand the central authority through good hiring or through a personal metamorphosis. However these are the unique cases. More often it is an outside influence (from investors or stake holders) that forces this confrontation.
Bridging this phase of the business is not easy. If not handled correctly it can be the downfall of a potentially great organization. The effective process of changing leadership – what I call founder transition – is not well documented. While it is critical for an organization, most transitions are handled with gut reactions by financial people who are not necessarily skilled or experienced with this process and often do not set appropriate expectations or develop an effective structure. This blog is intended to create a conversation that will enable organizations to gain from the experiences of founders, investors, and hired-in CEOs who have succeeded and failed in this critical transition.
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