Firing Founders for Future Success
As a business grows, leadership will need different skills. If they won’t keep pace with changes to the business model, it’s time for a change in leadership.
As a startup grows, its leadership needs to keep pace.
Founders of companies tend to be the idea generators who discovered the product or service their clients need. They are adept in technical skills, which are valuable to the venture.
“However, very often, they might be too narrowly focused in their capabilities,” said Ari Ginsberg, professor of entrepreneurship and management at the NYU Leonard N. Stern School of Business. “For the company to meet its high-growth potential, that requires a different kind of talent.”
Leaders of high-growth companies need a variety of skills, including management. This could be a huge transition from the working style of the founders when they started the fledgling business in their garage.
Ginsberg listed five signs and lacking skills that show a founder is struggling.
- Difficulty in recruiting necessary talent or having high turnover. “The company is only going to thrive if you get the best talent possible,” Ginsberg said.
- The founder could be growing the company too slowly or too quickly.
- Communication skills are key. “If you don’t know how to communicate in a way that motivates people, if you don’t know how to reward people in a way that motivates, then that’s a real problem or a potential, major obstacle in the way of growth,” he said.
- Focusing too much on engineering extra items on a product without considering customers could lead the investments to fail.
- Leaders must also represent the company both internally and externally while building a culture.
Gaining the necessary skills to solve these struggles comes down to if a founder can’t or won’t do something, said Noam Wasserman, professor of clinical entrepreneurship at the University of Southern California Marshall School of Business and founding director of Founder Central initiative, an education and research center for entrepreneurs. He also wrote “The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.” If the leader can’t do something, such as managing a large team or improving sales and marketing, there are workshops and mentoring opportunities they can use.
The business risk of them not training to improve is that the role won’t be done well. However, if the founder refuses to change or perform new tasks, it’s much harder to overcome, and the risks are more dire. The business could risk gridlock or destructive friction between stakeholders, Wasserman said.
Key employees can have discussions with the founder to suggest coaching, but the founder might not listen, said Jonathan Pellegrin, former chairman and CEO of Johnson Hill Press Inc. and retired professor of entrepreneurship and strategy at University of Wisconsin-Madison School of Business.
“There has to be somebody that monitors the behavior and practices of the CEO,” Pellegrin said.
Venture capital firms and boards of directors can then require the founder to get training, or the board will fire them and bring in new leadership from the outside.
Pellegrin said that in the end, the founders need to understand that “as the company becomes more and more valuable, they have to make a choice: Are you doing this just for your ego, just to be independent, or are you doing this to build an enterprise of value that can survive long after you’re part of it?”
Lauren Dixon is an associate editor at Talent Economy. To comment, email firstname.lastname@example.org.