Founding CEOs: Do You Know When (& How) to Move On?
January 7, 2013
When a company transitions from the startup to the expansion-stage its senior management has to evolve, as well. Sometimes that means founders need to know when to shift into different roles and bring on an experienced CEO.
When on-demand project management software company AtTask chose to undergo a CEO transition in 2011, it wasn’t because the business was underperforming. In fact, the Utah-based SaaS company was doing just fine.
After securing its first round of financing from OpenView Venture Partners in 2007, AtTask had driven 40 percent annual growth through 2011 and boasted a who’s who customer roster of Fortune 2000 companies that included Nike, Cisco, ABC, 3M, REI, Trek, and Kellogg’s.
But founding CEO Scott Johnson also understood his own limits, and he recognized the need to bring in a leader who had the experience – and objectivity – to take the company to even greater heights. So, in the summer of 2011, Johnson hired an executive recruiting agency to help him find his successor.
That firm – along with AtTask’s board of directors – chose veteran CEO Eric Morgan, who Johnson says was uniquely qualified to operationalize AtTask’s growth strategy. Since joining AtTask, Morgan has led the company to a $17 million round of growth financing and an even stronger stranglehold on its market. Johnson and Morgan sat down with OpenView to discuss the secrets behind the company’s smooth CEO transition, and share some tips for ensuring that a founding CEO’s departure isn’t disruptive.
OpenView: Scott, could you tell us a little bit more about what prompted your transition, and why you thought stepping down was good for the company?
Scott Johnson: Basically, the company was sick of me and I wanted to do more snowboarding.
All joking aside, we had experienced incredible growth since our founding and I thought the business was on the precipice of even greater success. We were adding hundreds of new accounts every year and our team was growing to meet the demand.
While I felt like I could capably manage that growth as the founding CEO, I also knew that AtTask could really flourish if it had someone in charge who had been through the expansion stage before and could infuse the business with some fresh, objective strategic decisions.
OV: Did you make your company aware of the CEO succession plan while you were executing it?
SJ: I didn’t, and the reason for that was simple — I didn’t want there to be any unrest within the company, or any concern that something negative prompted the move.
I ended up making the announcement in two phases after Eric had accepted our offer. First, I held a company meeting and simply said, “Hey guys, we’re going to have this transition, this is why we did it, this is my goodbye, and thank you all for your hard work over the years.” Then we waited a week and had a second meet-and-greet type of meeting where we introduced Eric.
I think doing it in two phases allowed the idea of the transition to sink in so that Eric could have a proper introduction with a team that was ready to look forward.
OV: How was the first week or month on the job for you, Eric? Did you have any concerns about the AtTask team rejecting the change?
Eric Morgan: We obviously spent a lot of time in the interview process making sure that I was a good fit, and we wouldn’t have gone forward if we didn’t think that I was.
I had run a similarly sized SaaS company that was at a comparable stage to AtTask, and the board and the AtTask team appreciated that I had that experience. I understood the culture and challenges fairly well, and I was also able to convey that I wasn’t being brought in because there was a problem. By listening to employees and clients, people understood that while I planned to make changes, I wasn’t going to come in and blow the company up.
SJ: I think one of the best things we did was make sure that it was a clean break, though. I didn’t want there to be any confusion about who the company’s CEO was, so I made sure to open the door to Eric and let the team know that I had all the confidence in the world he was the right man for the job.
OV: Scott, you stayed with the company as its Chairman. Was it important to you to stay involved, despite stepping down as CEO?
SJ: Not in a day-to-day capacity. It was important for me to make sure Eric was not just a capable leader, but also someone who was truly passionate about what we are trying to accomplish at AtTask. I became confident of that as he and I discussed the business.
So with that in mind and those things checked off my list, it really wasn’t important to me to be there doing much of anything. If I was going to err, I was going to err on the side being hands-off and giving Eric breathing room. I really just wanted to be there for him if he needed to bounce something off of me, or had a question about the business that I could answer.
Click here for Part II of our interview with Scott Johnson and Eric Morgan on managing a successful CEO transition and the secrets for incoming CEOs to step in with their best foot forward.