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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