Men’s Wearhouse’s termination of founder and executive chairman George Zimmer highlights one of the most important decisions a company, its board, and investors make: hiring or retaining the right CEO. When the decision involves promoting, replacing or complementing a founder who built the company—as Zimmer did—the decision is quite complex and the stakes are extremely high. There is a long-standing and active debate about what to do with a founder CEO once the company has expanded beyond the entrepreneurial stage. There are four schools of thought.
How difficult is it for a company to remain on the Fortune 500 list? Jim Collins, of Built to Last fame, wrote in 2008 that since the list’s inception, nearly 2,000 companies have appeared on it—and only 71 companies from the original 1955 list were still running strong. The Kauffman Foundation, in a recent report, noted that after seeing relatively low turnover in the 1960s and 70s, Fortune 500 turnover accelerated to new highs in the 80s and 90s. And Peter Senge of MIT’s Sloan School of Management writes that the average lifespan of a Fortune 500 company is only about 30 years. With such an uneven record, any successful CEO preparing to depart from his or her company should rightly be concerned about the legacy he or she is leaving behind—but that legacy is about far more than the CEO.