Leadership Changes in Getting Out of the “Founder's Trap”
by Dr. Ichak Adizes
Every era in human history has specific diseases which organizations suffer from. When I say “organizations” I have in mind empires, movements, schools of thought, for-profit-organizations. Many organizations were born, grew to some point, got into a trap where there was no way out, and disappeared. The cause for this is a disease called “Founder’s Trap”. Thousands of companies worldwide are currently struggling with this disease and the organizational therapy. Unfortunately there still are no clear prescriptions for how to get out of this trap. Frequently you can find the following item on the treatment list: “hire a professional from outside.” If this is good medicine, should it not be taken by organizations?
Bringing in someone from outside should happen during the transition between Go-Go and Adolescence, not before and not after that. This is the most difficult transition in the corporate lifecycle. It is difficult because the changes are so fundamental and so necessary, and the Founder often appears to be an obstacle to them.
The solution is to turn inward, get the place organized, increase productivity and profitability, and the founder doesn’t know how to do that. He probably finds it boring, maybe even threatening. He knows the company has to change, but he worries about losing the entrepreneurial spirit that got the company to where it is. Now, the Founder brings in a professional manager who is by definition a “number cruncher”, an administrative type. When the old-timers start resisting him, the Founder may side with them, for the reason that the number crunchers sometimes worry more about cutting costs than increasing revenues. They might cut “muscle“ together with the fat. The old-timers know the Founder best and have learned how to accommodate his style. The new one has a totally different style and is clashing with the Founder and the old-timers. The place is ridden with conflicts. Add to this that up to this point the organization has been structured around people, which isn’t working anymore. At this point, the company needs clear responsibilities, authorities and a reward system that makes sense. That means the company needs accountability. This means structuring people around the organization.
So, in order to get out of the Founder’s trap, the Founder should first re-structure the company with outside help, preferably with the person who will take his place and acts at this point as a consultant and then is assigned to run the company. This should happen slowly, carefully and in the right sequence.
Another point: The company for the Founder is like his or her child who took lots of energy to grow. As a result, the Founders are very careful whom they give their “child “ to. There must be mutual trust and respect between the Founder and the person who takes his place, which does not happen overnight. Thus, slow transition from the inside is the most preferable transition.
Hiring a consultant to replace the Founder is a smart decision, but the Founders have to do this properly. First of all, the Founder has to precisely define the task of the consultant: to assist the company including the Founder to define the mission of the organization. Since its establishment, the company has taken many roads in many directions, and by now it is probably not clear what the company is about. The Founder needs to articulate for the management team what the company’s mission is, the latest business model. Then, in light of this redefined mission, the consultant has to structure the company to deliver this mission. Everybody feels he’s just a consultant, since he’s coming and going anyway, so the existing management doesn’t feel threatened. Even the consultant shouldn’t know the Founder’s final intentions. The consultant learns the company in doing the mission and structure right, and if the Founder really likes him, he hires him to run the company. The Founder appoints him as the COO, Chief Operating Officer and the Founder remains the Chief Executive Officer.
So, that is the sequence: hire an external consultant, let him re-structure the company, see how well he works with others, let him learn about the company and then, when the company is structured right, the Founder hires him as a COO.
Hiring an external consultant to be the COO is good, but the Founder is still going to be too involved. The Founder still wants to be involved because he was always involved and it is like an addiction. Such involvement, however, is taking too much of his time; so the solution is to establish an Executive Committee (EC), which is composed of all the top managers of the company, with the COO as the chairman of that committee. The key word for success of this body is: Rules of Conduct. The Founder is invited to all meetings if he or she wants to come. If these rules are followed, he or she will rarely come.
What are those rules? The agenda of the meeting should be submitted to the Founder at least 48 hours prior to the meeting and no new items can be discussed. The Founder has the right to veto any subject he does not want to be discussed during these forty eight hours. Next, the minutes of the meeting must be submitted to the CEO/Founder not later than 48 hours after the meeting and he or she has 48 hours to veto any decision. If there is no veto of the agenda or of the decisions, they are accepted by default. All decisions have to be agreed by consensus of the EC. If there is a disagreement even of one person, the decision must go to the Founder/CEO.
I found from experience with companies all over the world that this process works. The Founder feels he or she is in control and once this feeling is established, he rarely goes to meetings and invariably since the EC has to decide by consensus and they do not want the Founder back deciding, they argue between themselves and usually make very good decisions.
The benefits of having the EC are obvious: The Founder has a complementary team; they have to decide together. And if they decide together, the chances are they are going to make even better decisions than the Founder could have made alone. If they can’t agree, it comes to the Founder again; he still remains in charge. He can veto the decisions made by the EC. What happens in reality is the Founder realizes that the team is working very well together after first several meetings. The Founder reads the agenda the first time, maybe he reads the minutes the first time. From then on, he doesn’t even pay attention any more. And now what do you have? No single individual could take the company, hijack the company. They work together, they make decisions together.
Now, how much time does it take? Well, it depends on (a) the Founder’s readiness to let go, and (b) the company’s readiness to emancipate itself from the Founder. It shouldn’t take too long if all steps are done properly. I would say months, not years.
This leads us to the nature of the Founder’s Trap. Let me explain the trap: Up to the Go-Go stage of the lifecycle, companies need a strong, opinionated leadership. At this point, the Founder may realize that he/she can’t run the company as a one-man show anymore. It is too big. This is the beginning of the next stage in the lifecycle called Adolescence. The transition between Go-Go and Adolescence is the most difficult transition. Some companies successfully pass this transition, but many of them can catch a disease called “Founder’s Trap” which can be fatal. If a Founder is going to lose his/her company, it usually happens because of this disease.
The Founder (by the way, it doesn’t have to be the initial Founder – it could be the third or the fourth person thereafter) builds a company and it grows to the point where it becomes too big for him and he wants to separate himself from the company. Bringing someone fast to replace the Founder usually does not work. That is my experience. It is too disruptive. The Founder even feels as if someone has hijacked his company, someone has stolen his “baby”. It is terribly painful and does not need to be so if it is done right, as presented above.
Hiring a professional manager and giving him, or her the full authority to run the company cannot work because the company is custom-made around the Founder: The power structure, the tasks, the procedures. The chances of the professional manager fitting into that custom-made structure are therefore slight.
The first thing the Founder should do before he brings in an outsider is to re-structure the company right, to systematize the company, so that anyone can run it. And, as I said earlier, the best way to do this is to hire a consultant, ask him to restructure the company, and if he or she gains the trust and respect of the Founder and of the organization appoint him as a COO after that.