Grist: Save the Founder

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From Inc Magazine, by Adam Hanft

If I had a dime for every time I’ve heard it, I could start another business: Entrepreneurs are passionate people, great at building companies, but only to a certain level.

As their enterprises reach maturity, these impatient, impetuous founders need to be replaced by ‘professional’ managers. It’s a stereotype that’s become a truism. In VC land they even have a name for the problem: founderitis.

The most recent public eruption of this hypothesis occurred when celebrated its 10th anniversary, and the media openly wondered whether it was time for Jeff Bezos to surrender control. Give me a break. That same logic came close to destroying Apple. You know the story: In 1985, convinced the company had outgrown its founder, the board dismissed Steve Jobs and handed the reins to John Scully – a packaged-goods guy, a branding maven, whom Jobs had wooed from Pepsi two years earlier. Scully, of course, failed either to expand the company in the computer market or to innovate elsewhere, and in 1993 was replaced by Michael Spindler, who in turn was replaced by Gil Amelio – neither of whom did much better. Jobs returned as interim CEO in 1997, dropped the interim in 2000, and the rest is white-earbud history.

The lesson is obvious. The notion that entrepreneurs outlive their usefulness is both stunningly wrong-headed and potentially dangerous — especially now. It’s universally acknowledged that today’s business environment is faster-moving and more unpredictable than ever. And those are precisely the conditions that cry out for more, not less, of the founder’s restless spirit. Indeed, the very skills and qualities that gave rise to a business at the outset are what’s needed when companies find themselves in a constant state of re-creation. No business, however “mature,” needs mere tending. But all businesses require sparking. Entrepreneurship needs to be a chronic condition.”

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The Founding CEO’s dilemma: Stay or Go?

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From HBS Working Knowledge, August 2005

Noam Wasserman is an assistant professor and MBA Class of 1961 Fellow in the entrepreneurial management unit at Harvard Business School. His paper ‘Founder-CEO Succession and the Paradox of Entrepreneurial Success,’ published in Organization Science in March-April 2003, won Harvard’s 2003 Aage Sorensen Memorial Award for sociological research. With his coauthor, Rock Center Entrepreneur-in-Residence Henry McCance of Greylock Partners, professor Wasserman recently completed a case study about founder-CEO succession at Wily Technology. New Business publisher Mike Roberts met with Professor Wasserman to learn more about his research.

New Business: Tell us about your research.

Noam Wasserman: My research focuses on founder frustrations in entrepreneurial firms, with a particular emphasis on the core issues of organization building that cause problems for founders’ abilities to achieve their goals. I’ve been especially interested in the pattern of succession in many entrepreneurial firms�specifically, that many founders are replaced by ‘professional’ CEOs early in the life of the venture. My data shows that the percentage of founder-CEOs who ‘go the distance’ is extremely low, especially in high-potential ventures. People like Bill Gates and Larry Ellison, who are able to lead their companies for quite a while, get all the attention because they are rare, not because they are typical.

NB: What do we know about why this happens?

Wasserman: In large companies, when the CEO doesn’t do well, the CEO gets replaced. When the CEO does do well, there is almost no chance that person will be replaced. If he or she has led the company to success, that person is about as solid in the position as one can get.”

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