Founding a successful start-up is an incredible achievement and requires tireless energy, enthusiasm and determination. For most young businesses, though, there will always come a time when a different set of leadership skills are required.
Transitioning from founder/CEO to a new CEO can be challenging and unsettling — for employees, board members, investors and, of course, the founder themselves. How can teams work together to ease the transition and help the next CEO to pick up where the founder left off?
Navigating competing and complementary objectives
Every major player will have their own goals in mind during a C-Suite change. The board wants to maximize the growth of the business and take it to the next level. Their main consideration is ensuring that the person leading the company has what it takes to deliver.
The founder may have slightly different drivers. They want the company to succeed, sure. But they may also want to retain control over the project that’s been their life’s focus for so long. In fact, evidence suggests that founders will often make choices that prioritize control over financial reward — decisions that favor their autonomy, but risk stunting commercial growth.
This can place the leadership team in a difficult situation, stuck in the middle. Is there a way to please everyone while still doing what’s best for the business?
We’d argue ‘yes’. After all, founders often hold on to control because they want the company to succeed. They fail to recognize when their tenure as CEO has reached a natural end. Discuss the situation openly — with all groups acknowledging each others’ strengths and needs — and it’s likely you’ll find a solution that everyone’s happy with.
When and why a founder should step away
What does it take to launch a successful business? Innovation, (strategic) risk-taking, burning the candle at both ends. A founder has to be willing to move heaven and earth to solve each individual crisis as it arises. A constant state of urgency and instinct-driven problem-solving are key characteristics of most founders’ skill sets. They also inspire their teams to embody a lot of the same values.
These traits can become much less valuable as the company grows. Industry knowledge, experience guiding companies through periods of rapid growth, and confidence in building management hierarchies become essential for sustainable success.
That need-state is easy to spot from the outside in, but founder/CEOs are often the last to know when it’s time to step down.
If you’re failing as a leader, then perhaps you’d be willing to fall on your sword. But, paradoxically, it’s the high-performing founder/CEOs who are in need of more urgent replacement — they’ve succeeded thus far in growing a profitable business and now is the exact right time to let someone else take over the reins.
Working together for a successful CEO transition
One of the biggest predictors of a successful CEO transition is whether the founder is actively involved in, and supportive of, the process. Unfortunately, 4 out of 5 founders struggle to embrace the change.
A successful transition is also one where everyone’s needs are met. The board has a CEO who’s equipped to carry the company forward, the founder retains a degree of involvement that’s satisfying and rewarding, and the management team has clarity about who is in charge — they should have adequate time to build a good rapport with the incoming CEO, too.
Whoever is in charge of recruitment should also make use of the founder’s in-depth knowledge of the company, their vision for its future and their passion for its success. A founder is the ideal person to inform the process of finding a new CEO — for all these reasons and more. Given an active role, founders may accept the change more readily as well. Taking the time to become accustomed to the idea, and passing the torch to someone they trust, can make the transition feel more like sending their child off to college than feeding them to lions.
At Key Search, we have extensive experience helping founders and boards to find the right CEO to take their company to the next level. Making (or embracing) the decision to step aside as founder/CEO can be difficult. But with our help, finding exceptional talent to fill that role doesn’t have to be.