Many founders totally suck at being CEO of their own company.
Here’s how their fantasy and dream works:
Founders dream of the day they’ll grow to be a massive team and — from inception to a huge success — retain their throne as CEO. Then they suspect they may rule the world through their mental acuity, stealth and a little luck.
Unfortunately, that kind of thought isn’t what is best for the company, employees and customers. New research shows that, more often than not, companies run by founders are “less productive and more poorly managed” than those which bring in outside CEOs.
The Founder’s Dilemma
Research of data collected by the World Management Survey detailed a review of more than 13,000 mid-to large-sized companies in 32 countries. Firms led by the people who founded the company were 9.4% less productive, on average, and on average had consistently lower management scores—which typically rose once the founder-CEO was replaced.
Other research studies from business school professors at Duke, Vanderbilt, and Harvard Universities examined similar data with identical results.
Few founder/CEOs ever get close to seeing their companies grow to anything substantial or epic. When Noam Wasserman, a professor at the USC Marshall School of Business, looked at 212 US startups (paywall) launched in the late 1990s and early 2000s, he found that only 50% of founders still controlled their companies three years after founding it. Four years later that number was down to 40%, and only 25% of founders were in charge at the time of the company’s IPO.
It’s actually pretty rare for founders to remain on as CEO as their company grows. It turns out that investors don’t like going all in on companies that are too reliant on one person’s talents and dream. Being a good founder and a good CEO require two completely different skillsets and mindsets.
A lot of startup founders suffer from what’s called the “rich versus king” dilemma: they exhibit poor control between wanting control and wanting profit. And unfortunately, control from the King type often wins, so the company loses.
Well, that’s logical. Here is a small truth neurochemically: You’re not a King unless you have a kingdom, a castle, maybe a church and certainly an army with quite a few taxpayers paying you. Someone always has to foot the bill.
Can this be bypassed? Well, yes. There are always exceptions to the rules. You may want to know what those components are. We can give you a list to follow.