Do you think most founders would benefit from handing over the reins to a professional CEO? Think about the answer… No one ever guesses right on the first try. But go ahead and take a guess anyway.
Well, if you thought “no” or “yes,” the truth is that either way you answered is correct.
Due to a series of strange events, I was both a founder and then, later, the professional CEO, so I would know.
Let me give a little background first.
I previously owned and led a company called StartCHURCH. During my time there, we helped start over 15,000 churches and nonprofits and hundreds of businesses across the country.
However, it wasn’t always fun, games, and successful statistics. Before I joined, StartCHURCH had launched successfully. It was a multi-million dollar business, consistently generating six-figure profits. The company was growing quickly. But the founder was growing tired.
Shortly after I started working for the company, he made the incredibly difficult decision to sell. He found a buyer in the industry and hoped that the two companies would prove stronger together by joining forces.
Fast forward a grueling 18 months, and the company found itself on the brink of bankruptcy. I was there the whole time, and trust me; it was grueling for everyone involved. When the original founder took back the reins, there was nothing left of the company but a few hundred angry and underserved customers, no cash, and a pile of debt.
That’s when I got the opportunity to join as a co-founder in the rebuild of the company. After a few years, I took over as CEO, which gave me the unique opportunity to know what it’s like to run my own company and someone else’s simultaneously.
It was one of the most challenging and rewarding times of my life. I want to share with you some of the principles I learned along the way.
- The founder and the CEO must have identical visions for the company.
- The founder and the CEO must trust each other.
- The CEO must be substantially better at leading the organization’s senior leadership team.
Side note: Over the last two weeks, I’ve laid a lot of the groundwork for this concept. If you missed those articles, you can find them here and here.
1. The founder and the CEO must have identical visions for the company
This is harder than it seems. At the start, everything is lovely. The founder finally has a little time on their hands to rest or pursue another passion. The CEO is grateful for the opportunity and has the advantage of a strong vision laid out by the founder.
However, these two realities start to shift. The founder’s freedom can turn to boredom, which turns into tinkering and an increased desire to return to and direct the business’s affairs.
The CEO’s position demands vision, and while the founder is away, even the most well-intentioned CEO can intuitively sense and atomically fill the vision void. No matter how close their visions were at the start, they were still two people. But as time progresses, by default, those visions will begin to deviate.
For this reason, I find it is incredibly important for the founder and CEO to meet regularly to re-sync their visions for the future of the company. In these meetings (and truthfully before the CEO is hired), you need to have a frank discussion regarding whose vision will be pre-eminent.
If, as the founder, you plan on hanging onto those keys, you should know that requires you to stay much more involved in the company. Vision doesn’t happen from a distance. Clarity does, but only when it is seated in a deep internal understanding of today’s challenges and opportunities. You have to be intimately connected to the business to remain effective as it’s Visionary.
If, as the founder, you plan on giving up all or most of that control, you should know that your decision will be tested. Your CEO will make decisions that you don’t like–decisions you certainly wouldn’t have made yourself–decisions that affect a substantial portion of your livelihood. The question is, what will you do when you are lying awake at 2:00 a.m. concerned about the future of the business that you’ve put in someone else’s hands.
There’s no way around this issue other than to start with an honest and transparent conversation about the future (specifically about what will happen when you disagree). Both individuals must continue to put in the necessary time and energy to stay on the same page.
2. The founder and the CEO must trust each other
The Cold War gave rise to the phrase “mutually assured destruction” to define the military and socio-economic policies used by nuclear world powers. It goes like this. If you shoot a nuke, I’ll shoot a nuke, and we all die. This mutually assured destruction is what keeps everyone from firing the first shot. It is easy to see that this is no recipe for trust.
The truth is a founder and a CEO can each destroy the other, but in the end, they both lose. If the relationship goes toxic, founders believe the lie that the CEO is expendable. While there is some truth to this, most founders aren’t capable of re-entering the business and filling the CEO role for any extended period.
When problems spring up in the relationship, it’s easy for the CEO to believe the founder needs them, and without them, the whole thing will fall apart. While there is some truth to this, I know very few founders who are willing to be bullied by anyone, including the CEO they hired. In starting the business, they’ve already proven they can build a great company even in the face of adversity.
The first step is to recognize both the founder and CEO are interdependent. They need each other. Their best option is to work together. This mutual dependence will help keep everybody’s heads in check.
From there, I really like the five rules laid out in the book Rocket Fuel by Gino Wickman and Mark Winters.
- Stay on the same page. We’ve talked about this. It all comes down to time, energy, honesty, and humility.
- No end runs. As the founder, you can’t work around your CEO (or let anyone else get around him/her to get to you).
- The Integrator [CEO for our purposes] is the tie-breaker. In team meetings where there is no single clear direction forward, the CEO makes the call, not the owner.
- You [as the founder] are an employee when working “in” the business. Wearing the founder hat inside the company is a sure way to undermine your CEO and cripple your leadership team. You have to be one of the team when functioning in the business.
- Maintain mutual respect. You have to recognize your own weaknesses and each other’s strengths. The CEO needs to recognize the Founder’s sacrificing and accomplishments. The Founder needs to recognize the CEO’s capacity to lead people and processes to build a more excellent enterprise. There is zero tolerance for either of you to stray.
3. The CEO must be substantially better at leading the organization’s senior leadership team
There is always a loss when the founder steps down. It doesn’t mean it isn’t worth it, but pretending it didn’t happen is unwise.
The founder and the business at this point are almost inseparable. For the founder, this can mean some personal soul searching after the honeymoon period wears off. For the company, it can feel like losing a parent.
There is a strangeness to the transition. While much of it is temporary, the truth is there won’t ever be another “founder” leading the company forward.
As much as I didn’t want this to be true when I took over as CEO, I can tell you it was. The sooner I recognized it and accepted it, the sooner we could talk about it as a team, process it, and even benefit from it.
But here’s the point I want to make now. As the founder, you need to find someone who is more skilled than you. Otherwise, there’s simply no point.
Handing the company off to someone you are hoping can swing it is setting them up for failure. They are already stepping into big shoes, and that could be one too many challenges to face.
While this seems obvious in a blog article, it’s a whole different story in the real world. Usually, there is some heir apparent in the company. It can be a literal heir or a loyal #2 who has been there since the beginning.
It can happen, but it is rare for the loyal #2 to be your exceptional #1 executive, leaving you with a tough decision. Do you promote the #2 to a role that is too big for them? Or do you look over all that loyalty and hard work and choose someone else? Either way, it isn’t easy, but I can tell you this. It is never honoring to put someone in a role in which you know they cannot succeed. Leading a company from the top is a big job, and being there from the beginning does not automatically mean you’ve got what it takes to lead from the #1 spot.
There is another way
With all of this said, you need to know there is another way. A professional CEO is not the only way forward. Almost every founder I’ve worked with has worried that they had reached the limit of their leadership abilities, but by the time we finished working together, they realized they had so much more to give.
I love helping founders stay engaged in and at the helm of their businesses. There is simply no substitute for a founder who is willing to learn how to lead effectively at this level. Here’s what it takes.
- Re-up your commitment to leading the company in this new stage
- Examine and seek input into which of your beliefs and actions are holding back the company.
- Instead of seeking out one person to right the ship, build and empower a team to do it.
- Adopt the right strategy for your current stage (which is seldom the strategy you used to get into your current stage)
I was able to do each of these and succeed as a co-founder, then a CEO, and then as an owner when I successfully transitioned the company to its next CEO. And I did it using my six-part Capacity Creation strategy.
You can access the complete strategy in my six-week Creating Capacity eCourse. Based on the timeliness principles of Predictable Success, this strategy is guaranteed to work for you, allowing you to understand where you want to take your business and how to get there. Register for free today!
[yotuwp type=”playlist” id=”PLNTSkWehajGMmyy6phatyjGwglOvyf7a8″ ]
Do You Know What Type of Founder You Are?