The tricky step from Founder to CEO

Customisable business insurance
01 June 2016
3 minute read

Entrepreneurs are a unique breed. Creative, determined and single-minded, you thrive on excitement, risk, and doing things your own way. Not everybody can be, nor wants to be, an entrepreneur. But if you do, you usually don't want to do anything else. It's part of your DNA.

As a founder, you experience the joy and satisfaction of seeing your business grow, eventually taking on a life of its own. But, while this transition from start-up to established business is what you've been working towards, it can leave you in uncharted territory, suddenly faced with the role and responsibilities of a fully-fledged CEO.

If you're faced with this challenge, you're not alone! Entrepreneurs and investors have been struggling with the issue for years, with mixed views on the best way forward.

There are founders who seem to make the transition to CEO effortlessly. Bill Gates started Microsoft and then ran the business for years, while Brian Cheskey has remained at the helm of Airbnb as it has undergone extraordinary growth.

But for every story like this, there are plenty where it has gone the other way, with founders struggling to step into the CEO shoes and eventually giving up control.

Take Andrew Mason, founder of Groupon, who was unceremoniously fired in 2013 after a string of disastrous results for the company. Or Zynga's founder Mark Pincus, who actually fired himself, admitting "I learned a lot of hard lessons on the CEO front … and do not give myself very high marks as a CEO of a large-scale company."

Why the struggle?

On the surface, as the founder you might seem like the ideal person to take the company to the next level, given your success with the business so far. But in reality, the skillset of a CEO is a world apart from that of founder, and something that doesn't come naturally to many entrepreneurs.

At the start-up stage, you have total control over what happens to your business. Personally and emotionally invested, you do almost everything yourself, making important decisions on the fly and battling with the challenges of the day-to-day. Risk-taking is no problem, and mistakes are frequent – but that's all part of the journey!

As a CEO, you have to take a step back. It's impossible for you to do everything, so people management and delegation take over, working within the structure, process and politics of a big business. Long-term thinking and strategising are the new normal and, with pressure from investors, mistakes don't go down so well!

This is not something that many founders want, or know how to handle.

Professional CEO vs founder-led

When faced with this challenge, one option is to hire a professional CEO to take over, bringing in the necessary executive experience and expertise to scale the business. In fact, many founders find they aren't given much choice in the matter, with some investors insisting on a new CEO to protect and maximise their investment.

Professional CEOs were particularly popular a number of years ago, with early Silicon Valley success stories such as Google, ebay and Yahoo! choosing to replace their founders with 'grey hair' once they reached a certain size.

Research has also supported the outside CEO approach, with Noam Wasserman, an expert on entrepreneurship at Harvard Business School, arguing that founders who stay in charge ultimately sacrifice greater success by accepting less outside control and investment.

But the tide has turned in recent years, with businesses and investors now more keen to keep founders on and research suggesting founder-led companies are actually more successful.

A recent study by Purdue's Krannert School of Management found that companies where the founder is still CEO are more innovative, generate more patents, and are more likely to make bold investments, with experts suggesting this is down to the founder's unique purpose, deep knowledge and commitment, that is simply difficult to replicate elsewhere.

So what's the answer?

Unfortunately, as with any complex question, there isn't a simple answer! While trends and fashions may change, it ultimately comes down to you and your particular situation.

But if your passion simply isn't in the CEO role, then that's absolutely your decision. Finding the right CEO to take over can allow you to focus on the areas of the business you most enjoy, while maximising the long-term success of the business.

If you do decide you're up to the challenge, then make sure you and those around you are prepared for the shift, bringing in the team and support you need to make it as seamless as possible. Working with a coach or mentor can help guide you through the challenges, while hiring a strong and experienced COO can also plug any gaps in your skillset.

But remember, whatever happens, you'll always be the founder - it's just time to move on the the next chapter!

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