When Founders Flounder—Either Lead, Learn or Leave

The New York Times recently featured a critical piece on the “bro culture” of tech startups titled “Jerks and the Start-ups They Ruin.” Trade media speculation abounds over the futures of founders like Snap’s Evan Spiegel, Twitter’s Jack Dorsey and Uber’s Travis Kalanick. Snap suffered huge, unexplained earnings misses, and Spiegel shows an unwillingness to apologize for past privacy breaches. Dorsey has struggled to run multiple firms simultaneously as CEO. Videos of Kalanick’s explosive outbursts have gone viral, and his tenure was marred and then derailed by multiple charges of sexual harassment in Uber’s culture, management turnover and legal charges over tax deceit, among other matters.

In 2012, CNBC labeled ousted Groupon founder Andrew Mason the worst CEO of the year, citing goofball antics more appropriate for an overgrown kid than a company leader—especially of a company with a market value of more than $3 billion. At both American Apparel and Lululemon, power-obsessed, autocratic founders intoxicated by their greatness have crossed the line with abusive, and even indecent, conduct.

Clearly the very fiery temperament of a flamboyant founder that drives bold  entrepreneurial ambitions during a company’s inception can backfire later. Yet there are profound strategic and cultural risks to replacing founders, as edgy entrepreneurial vision is stifled by formulaic planning documents and the spark of spontaneity suffocated by rigid processes.

Sociologist Max Weber refers to this growth of bureaucracy as a needed “institutionalization of charisma.” The founder’s words and actions become canonized in dogma that ironically undermine the founder’s vision. After retaking the reins of the enterprise he founded, Michael Dell complained to me: “People were afraid to make changes to the business model I left them, but I [had] changed that business model six times. A business must stay fresh and change with the context. It is not a religion to be worshipped.”

“People were afraid to make changes to the business model I left them, but I [had] changed that business model six times. A business must stay fresh and change with the context.”

How have successful founders like Michael Dell, Bill Gates, Larry Ellison, Jeff Bezos and Mark Zuckerberg overcome this growth challenge? Here are four ways.

1. Leading New Life Phases. Founders must shift power from themselves as a hub via spokes to delegated authority figures. Examples of this include the Bill Gates/Steve Ballmer relationship at Microsoft and the Mark Zuckerberg/Sheryl Sandberg relationship at Facebook. Similarly, Larry Ellison yielded authority at Oracle to Mark Hurd and Safra Catz as CEOs.

2. Top-Level Mentoring. Early on with the company he founded in his college dorm room, Michael Dell wisely pulled into board service such wise advisors as Teledyne co-founder George Kozmetsky and former AMR CEO Don Carty, who served as vice chairman. Zuckerberg similarly tapped the wisdom of elder statesmen like Don Graham of the Washington Post Co., Netflix CEO Reed Hastings, Netscape co-founder Marc Andreesen and PayPal co-founder Peter Thiel, as board advisors.

3. Self-Critical Culture. At Netflix, a culture of “freedom and responsibility” gives employees the flexibility to pursue “sustained A-level performance” in areas such as revenue, viewings and earnings targets rather bogging them down with clunky controls, processes and policies. Similarly, Amazon’s Jeff Bezos allows his opinions, once voiced, to be overruled. As he noted in a 2017 letter to shareholders in reference to his response when his team proposed original show productions that he personally didn’t like, “I wrote back right away, ‘I disagree and commit and hope it becomes the most watched thing we’ve ever made.’… it’s a chance for the team to weigh my view, and a quick sincere commitment to go their way.”

4. Mission Alignment. Too often the venture capitalists on the board have a shorter exit time frame than the impassioned CEO who is building for greatness rather than building to flip. Ensuring alignment with the board and key stakeholders is critical.

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Jeffrey Sonnenfeld
Jeffrey Sonnenfeld is senior associate dean, leadership studies, Lester Crown professor of leadership practice, Yale School of Management, as well as president of the Yale Chief Executive Leadership Institute and author of The Hero’s Farewell and Firing Back.

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