In this post, I am specifically addressing founding CEOs who are in the midst of their first expansion stage experience (i.e. growing a company from $2-5 million in revenue to $40-50 million). I’m also addressing the evolution of a founding CEO (tactical, hands-on, getting stuff done) to a professional manager CEO (focusing on board, vision/strategy, building a senior team, and guiding the senior team to execution).
Most founders embark on a start-up journey with aspirations to see the company through to greatness while maintaining the role of the CEO. Most founding CEOs aspire to be the Bill Gates, the Steve Jobs, and the Mark Zuckerbergs of the world.
Reality is quite different. The majority of start-up CEOs recruit their replacements as the company grows beyond $10-20M in revenue.
So, what are the drivers for these transitions?
First, the role of the startup CEO is completely different than that of the growth-stage CEO. The startup CEO role is one of the renaissance entrepreneur. Starting up a company requires the vision to come up with a new idea or technology. It requires the audacity to do something about it in the face of seemingly insurmountable obstacles and risks. It requires the passion to inspire others to take similar risks. It requires tenacity and agility in creating a new market or disrupting an existing one. Invariably, the last thing that a start-up CEO needs is long years of market or operational experience. The only experience a start-up CEO needs is to have gone through previous start-ups and failed. One learns the most from failures, and often much less from successes.
The role of the expansion-stage CEO is completely different. Once the start-up figures out the right formula — who is the customer, what is his or her pain, how does the solution address the pain, how should the solution be marketed, priced, and sold — it is ready to scale. Scaling a company requires a completely different set of CEO skills. It requires the operational expertise to recruit highly experienced senior managers who have specific functional expertise. It requires the skills to establish an operating rhythm that gets the growing number of employees and managers all focused on the right set of priorities. And it requires managing through others and getting out of people’s ways.
The possibility of the founding CEO having both start-up and growth stage skills is extremely rare. And founding CEOs should not feel ashamed in any way if they are not able to carry a company through the two stages. In fact, it is a brave and shrewd founder who recognizes the issue, and raises his/her hand first to point out the need for a transition. I have seen that happen in a few of our portfolio companies.
The second driver (or in this case impediment) to the transition is the founding CEO’s ego. Transitioning a founding CEO can become a major issue for the company, its board, and its investors when the founding CEO resists facing the reality of the need. Denial is the first reaction: things are going fine, things are not as bad as the board/investor thinks, etc. Blame is the second: it’s not my fault, I don’t have the right team, I don’t have enough support, I don’t have enough funding, etc. Anger is third: everyone is against me, the investors are trying to take over my company, the board is trying to screw me, etc. Shame is the fourth: I have failed myself and others.
These emotions are natural, but very unfortunate and unnecessary. They are also driven by ego.
The problem is that founding CEOs tend to put their own personal aspirations above those of the company. If a founding CEO starts by dispassionately assessing his/her skills against what the company really needs, he/she will likely come to the same conclusion as the board.
So, Would You Hire Yourself?
As you look to put together the 2013 themes for your company and your senior team, you must also put together the CEO themes for the year. And the first CEO theme should be: the “development of my CEO skills.”
With that theme, start by asking the question, “How does my CEO skills set align with what my company requires from a CEO going forward; what are the gaps and how do I close them?”
To answer these questions, start by compiling the profile and experience of the ideal CEO candidate to take your company from where it is today to amassing 3x-4x more in revenue. The best way to do this is to pretend you made the decision to relinquish the CEO seat and start a process for recruiting a new CEO. Write the role description and profile you would hand an executive recruiter and walk the recruiter through it. Imagine you’re receiving a stream of candidates and you are interviewing/evaluating each of them.
Envision you’ve found the ideal candidate — a candidate to which you would be willing/confident to hand over your baby. What would that persona be, and how would he/she operate in your seat? Now imagine it’s you walking through the door applying for that role. Would you hire you?
If your objective and honest answer is no, you have some development to do.
Here is another angle: ask your board of directors to conduct a formal annual review of your performance. Ultimately, the CEO is accountable to the board of directors. As you reflect on this year, did the company hit its top goals for the year, financially and operationally? Could you have steered the company better? Could you have better managed the company rhythm so that all goals you set were nailed? What was missing? Where did you fail and why?
Ultimately, are you holding yourself accountable the way you are holding your senior team accountable?
Without accountability, you will not enjoy a truly cohesive senior team, and you will not possess the ability to provide them with the environment and confidence for them to develop into a high performance team.
So, would you hire yourself? If not, it is time to figure out why — and then do something about it.
For more on CEO skills, read: