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In the high-stakes world of startups, founders face countless decisions that may make or break their corporations. Perhaps none is more critical or personally demanding than determining whether to remain on as CEO.
Gymshark founder Ben Francis stepped down as CEO in 2017, bringing in veteran retail executive Steve Hewitt. During that point, Francis focused on product development and brand building.
In August 2021, after gaining useful experience and perspective, Francis returned to the CEO role as Gymshark’s valuation grew to over £1 billion. Any founder should admire his rational alternative to acknowledge its possibilities and limitations.
Founder-CEO
The startup ecosystem has long entrenched the concept that founders should naturally transition into the CEO role. High-profile success stories like those of Mark Zuckerberg at Facebook and Jeff Bezos at Amazon reinforce this concept. But this “one size fits all” approach often misses a key reality: the skills required to conceive and launch a startup are very different from those needed to scale and manage a growing company.
Starting a business requires vision, creativity, and the ability to innovate quickly. It often involves wearing multiple hats and making quick decisions with limited information. Running a maturing company, on the other hand, requires strategic considering, operational excellence, and the ability to build and manage teams effectively.
Taking Twitter as an example, though Jack Dorsey co-founded the platform, his initial tenure as CEO was temporary. It wasn’t until years later, after he gained more experience, that he returned to the role. This shows that even good founders is probably not ready for the CEO role straight away—and that’s okay.
I’ve spoken to countless good founders who feel trapped when they commit to scaling a single project. Each person has different strengths. Many founders excel at creativity and creating groundbreaking products, but the day-to-day operations of a growing company feel limiting. Recognizing this disconnect doesn’t diminish the critical role of a founder; you’d never ask a chef to administer the funds of a restaurant, right?
The Hidden Costs of Founder-CEOs
When founders insist on keeping the CEO despite lacking the crucial skills, the costs might be significant and far-reaching. One of the most damaging effects is a reduction in talent acquisition and retention.
Senior executives are drawn to corporations where they will learn from experienced leaders and see a path for themselves. If a company is run by a founder who learns on the job, it could have difficulty attracting top talent. This creates a ceiling effect where the company can never hire anyone more qualified than the founder-CEO.
What’s more, this dynamic can result in a dangerous echo chamber: Companies risk making costly strategic mistakes without experienced voices in the C-suite who are willing to challenge the founder’s ideas.
A notable case is WeWork, where Adam Neumann’s unchecked control as founder and CEO led to questionable decisions and ultimately derailed the company’s IPO plans, wiping out its estimated value in the billions.
Knowing When to Step Aside
Recognizing when to transition from the CEO role shows maturity and a true commitment to the success of the company. Here are key indicators that it could be time:
- If you consistently feel overwhelmed or unprepared for the challenges thrown at you, it could be time to hunt down a more experienced leader.
- If the company’s growth has stalled despite its strong market position, latest management could provide latest perspectives and strategies.
- If you’re more passionate about product than management, or if you long to get back into the creative or technical facets of business, it could be time to pursue a role as chief product officer or chief technology officer.
- If a company is consistently struggling in key areas similar to financial management, operational efficiency, or scalability, it could profit from a more experienced management team.
When founders resolve to depart, it doesn’t mean they’re abandoning the company. Many thrive in alternative roles that play to their strengths. A superb example is the role of Chief Innovation Officer, where the founder focuses on driving latest product development and keeping the company on the leading edge.
The founder might also grow to be an executive chairman or member of the board of directors to supply strategic advice and maintain key relationships, leaving day-to-day operations to the CEO.
When Google founders Larry Page and Sergey Brin hired Eric Schmidt as CEO in 2001, they were capable of focus on product innovation while Schmidt led the company to tremendous growth and a successful initial public offering.
I might even argue that the majority startups don’t need a traditional CEO in the early stages. They need a founder, but the two roles have grow to be interchangeable in today’s startup landscape.
Remember, stepping aside isn’t an admission of failure; it’s a strategic move to make sure the long-term success of your organization. By putting ego aside and focusing on what’s best for the company, founders can often achieve way over they might by insisting on remaining CEO. The true measure of a founder’s success isn’t their title, but the lasting impact of the company they’ve built.
Ask yourself: would you somewhat run an average startup or be the founding father of an amazing company?