Here’s an anxiety dream: You’re driving a high-performance sports car out onto a busy super highway. You use all your skill and cunning to maneuver yourself though the pack until you’re out in front, racing ahead, a clear winner. You’re feeling great.
And then it hits you: This highway has no exit ramps. You must drive this car, at this breakneck speed, forever.
This is the nightmare of some successful Founders. After victoriously envisioning, creating, funding and launching a company, forces conspire to keep them in that same leadership position forever, even as the role of leading the company evolves and changes from creator to builder to sustainer.
Many Founders are spectacular at founding, but some are less well-suited to the next-generation roles. Unreasonable expectations that force Founders into these roles create difficulties for everyone – the company, shareholders and, perhaps most dangerously, the Founders themselves.
At Egon Zehnder, we’ve watched this negative trend of Founder Trapping proliferate in the market over the past two decades. Generally, it is rooted in three key assumptions:
- That a Founder is well-suited to not just be a builder and a creator, but also a professional manager.
- That he or she will have the learning agility to grow as a leader as quickly as their organization is growing.
- That Founders even want these type of leadership roles.
But how did these unfair assumptions take hold?
It’s our hypothesis that fundraising rounds are the main structural force that has been driving this trend over the last two decades. Cheap and available money has led to endless cycles countless VCs, and ever-mounting pressure to net the highest dollar-value rounds. Founders find themselves caught in a cycle of fundraising with the VCs honoring “the Founder magic.”
Pair that trend with another cultural reality: Society idolizes founders, often referring to their vaunted status as "cult of the founder." Would a VC be as willing to invest in a professional CEO in the same way they would a wunderkind? Perhaps more so today, but that hasn't been the norm over the last 15 years. The power of the cult of the founder was strong for a long time.
This is made all the more difficult by the visibility of notable unicorn Founders-turned-CEOs such as Larry Ellison, Jeff Bezos and Mark Zuckerberg. These unique individuals have set an unrealistic precedent. They have helped to perpetuate the myth that long-term commitment is the noble path. In short, historically, we’ve rarely celebrated the idea of Founders passing the torch. Rather than being positioned as practical or even celebratory, it’s questioned to signal a failure.
This insistence that Founders remain at the helm has two distinct negative outcomes, among countless others:
The financial problem: There is now data that supports that, while pre-IPO, on average, Founder-led companies outperform those with non-Founder-CEOs. However, that difference diminishes just three years post-IPO, after which Founder-CEOs actually start detracting from firm value.
The human problem: Being a Founder requires a lot of tenacity and courage. It is the loneliest job. It can also be very unhealthy, both physically and mentally. Have we forgotten that Founders are people, too, who are vulnerable and are mere mortals, just like the rest of us? Why have we strayed from simply honoring the Founder's creative genius to demanding they be superheroes?
It is part of our mission to help Founders achieve their vision in ways that play to their capabilities and interests – serving both their personal and professional goals. We don’t believe in the notion that there’s only one path forward. Rather, we want to help Founders pave the way for their best possible outcome.
While every situation is unique, often we’ll work with Founders in the following capacities:
- Facilitating Self-Discovery: We assist in an intensive personal diagnostic on strengths and motivations – a “Founder, know thyself” exercise. This can help achieve clarity on both natural and desired leadership styles. We partner with the Founder to deep-dive into issues of legacy and developing a view of impact beyond the company they’ve built. We support this very personal self-discovery with 3 steps: a private 1:1 discussion on the Founder’s life foundations and entrepreneurial narrative; a psychometrics mapping of his or her personality factors; and finally, a Founder Debrief and Dossier – a summary of our insights into one’s motivational drivers, tendencies and competencies, and evolving identity.
Hiring for Complementary C-Suite Roles: We leverage the Founder’s self-reflection process to design role specs and identify talent who can complement their areas of energy and strength. We dive deep into understanding how Founders build trust to ensure any “founder complement” hire is set up for success and de-risked and use psychometric tools to map similarities and differences to facilitate conversations of how they may be complementary and/or redundant in co-leading the business.
Succession Planning: We partner with the Founder to create a roadmap for a sustainable leadership model – one not dependent on them. We map scenarios of different roles they can play, aside from CEO, that brings impact to the business, joy to themselves and also empowers leaders who can further their legacy. We help Founders envision “what’s next” and think deeply about “what’s left undone.”
Board Planning: We believe in the value of Independent Directors as they can bring in fresh perspectives and bridge dynamics between Founders and Investors. We advocate for appointing Independents earlier in one’s journey. This can also help forge a pathway to transition out of day-to-day operating. We can help recruit these directors and/or reconstitute the board pre-IPO.
Ultimately, Founders should be valued – not vaulted. Rather than trapping the Founder, our goal is to find, develop, and foster leadership in authentic ways and enable Founders to serve their best impact.