When a Founder Exits as CEO
As I step back as CEO of Bonobos, I am grateful to reflect on the founder journey and its elating, arduous, overwhelming and wonderfully surprising road.
You don’t think when you start a company as the founding CEO that, if your venture actually works, you end up with three jobs: founder, CEO, and chair of the board.
Being a founder is about being so driven to distraction by the world that you want to put something new in it. It’s an act of creation, of irreverence, of defiance, of hope, and arguably one of narcissism. (If you dispute the last point, just ask yourself: of all the people on the planet, no one has both thought of this before and been capable of doing it, other than you?) Founder is, along with president of the Cubs, one of the great jobs of all time: you get to create something that matters to you, and to attract great people to join you in making that creation mean something. If it works, you make money for yourself, your team, and your investors: the people who back you and believe in you. If it really works, you change the world. The only issue with it? If your company is successful, the founder job changes so rapidly that it becomes something that barely resembles what it was when it began.
In the unlikely event that your venture takes off, you become something else that can crowd out the founder role with its demands on your time: CEO. Soon the creativity that got you into this gives way to something more regimented. You come to discover the CEO job is a lot different than founder. It’s about focus, scale, and execution. It’s mostly about not doing new things, and picking the few new things to do which are really going to matter. It takes judgment. It’s about hard decisions, sometimes lonely ones. It takes courage. You need to become a leader, overnight, often to people who are your peers or your elders. It takes courage, judgment, self-awareness, humility, empathy, and intellectual honesty. As you attract more employees, more shareholders, more customers, and more capital, you have to decide where to go with it all. It takes endurance, perseverance, and a profound sense of duty.
Chair of the Board
Then a third role then creeps up on you. As the company scales, the board becomes more important. Board meetings that were an afterthought with just a couple of people in the early days, almost like check-ins, become more significant moments of actual governance: real board meetings. The board expands and the amount of capital invested increases. Stewardship of the company, matters of strategy, whether to sell or go public, whether to raise more capital or not, whether to buy a company or not, how to align incentives, and how to take a group of disparate people who put in money and make them into a team in their own right: these becomes your new challenges. You become the leader of the shareholders, or more precisely, the leader of the people who report to the shareholders. In tandem, you may become a voice for the company vision, a shepherd for the corporate strategy, the architect of the company balance sheet, a keeper of the company’s long-term future, and an ambassador for the company to the investors and the wider world.
Soon you are juggling three balls.
For some period of time, you do all three. Some founders want to do all three in perpetuity, and not plan for any change. They do so at their peril. No founder is CEO of their company forever. At some point, you have to plan for succession. Or the universe will plan it for you. Then three questions come up:
- Who do I hire or promote as the new CEO?
- When do I do it?
- What do I do now?
The first question is a longer answer. As for the second, only you and your board will know — but it helps to do it from a position of strength, not duress. It might be a five years, it might be fifteen years. In rare cases, it’s more. Ten is a nice round number, but I’m biased, as I did eleven.
So what now?
Here is one potential job description of the founder after they leave the CEO role. This assumes it’s a positive sunset and the founder is still involved, whether as chair of the board, or board member, or someone just welcome at the office:
- #1 ambassador for the company
- Voice for the customer
- Consigliere to the CEO
- Chief cheerleader and scorekeeper
- Leader of the board
- Spirit animal
What do each of these mean?
#1 ambassador for the company
Without internal reporting responsibility, a founder who leaves the CEO seat can represent the company, and has more time to. This can free up the new CEO to find the right balance between internal and external roles. The founder only does this at the pleasure of the CEO, as the CEO will by definition become the #1 spokesperson for the company.
Voice for the customer
Every company can use someone advocating loudly for the customer. As the CEO juggles the competing demands of employees, shareholders, and customers, the founder is free to becomes a strongest voice for the customer. What great company has ever had too much of that?
Consigliere to the CEO
A founder has unique ability to have both distance and immersion in being the CEO’s chief advisor. It is important for the new CEO to clearly take on all the decision making responsibility, and so the founder must fully hand over the keys to the new CEO. This means not screwing anything up by interacting with the team and focusing solely on being a helpful consigliere. The founder serves the CEO, not the other way around.
Chief cheerleader and scorekeeper
“There are no diminishing returns to specific positive feedback.” While praise from the CEO is terrific, a respected founder can say a few words, pass a quick note, send a small gift, or write a quick email; that retains its power forever. If done the right way, a founder can keep a keen eye on the metrics and numbers. If the founder says anything about the score, it should be when the team is winning. When the team is losing, it’s up to the CEO to bring everyone from behind while you, with full support, cheer the team on.
Leader of the board
A board is an organism in itself that requires nurturing. A good board can be hugely accretive to a company, a bad board disastrous. By having the founder as the chair who is focused on it, the CEO is freed up to be that much better at running the day-to-day. This then gives the chair time to think strategy and vision for the long term. In cases where the founding CEO was ousted or coached out, this doesn’t work. With thoughtful succession, though, it can. The new CEO can report to the chair, or to the board. The latter is probably better. In some cases, this succession happens from inside a new parent company, as the founder moves into a new role and “retires” as the leader of the acquired company. The new CEO may or may not report to them as the deck chairs shift. In cases where the CEO reports to the founder, the secret is that the founder now actually serves the CEO.
And I think there may be a sixth one. I call it spirit animal. A founder plays a magical role at the company: they invented it. If and when a founder walks out the door, there is something spiritual that walks out the door too. At that point, the founder becomes a symbol. At its best, their spirit is imbued. As Lao Tzu says:
A leader is best when people barely know he exists, when his work is done, his aim fulfilled, the people will say: we did it ourselves.