Opinions expressed by Entrepreneur contributors are their own.
In the high-stakes world of startups, founders face countless decisions that can make or break their companies. Perhaps none is more critical or more personally challenging than determining whether they should remain at the helm as CEO.
Ben Francis, Gymshark’s founder, stepped aside as CEO in 2017, bringing in experienced retail executive Steve Hewitt. During this time, Francis focused on product development and brand building.
In August 2021, having gained valuable experience and perspective, Francis resumed the CEO role when Gymshark’s valuation had already soared to over £1 billion. Every founder should admire his rational choice to recognize his capabilities and limitations.
Related: 4 Launch Strategies for Startup Success and Longevity
The Founder-CEO
The startup ecosystem has long perpetuated the idea that founders should naturally transition into the role of CEO. High-profile success stories like those of Mark Zuckerberg on Facebook and Jeff Bezos on Amazon reinforce this notion. However, this one-size-fits-all approach often overlooks a crucial reality: the skills required to conceive and launch a startup vastly differ from those needed to scale and manage a growing company.
Founding a company requires vision, creativity and the ability to innovate rapidly. It often involves wearing multiple hats and making quick decisions with limited information. In contrast, leading a maturing company demands strategic thinking, operational excellence and the ability to build and manage teams effectively.
Taking Twitter as an example, while Jack Dorsey co-founded the platform, his initial tenure as CEO was short-lived. It wasn’t until years later, after gaining more experience, that he returned to the role. This shows that even brilliant founders may not immediately be ready for the CEO role — and that’s okay.
I have had countless conversations with brilliant founders who feel trapped when committing to scaling a singular project. Every person has different strengths. Many founders excel at creativity and creating groundbreaking products but find the day-to-day operations of a growing company constraining. Recognizing this disconnect doesn’t diminish the founder’s crucial role; you would never ask a master chef to manage the restaurant’s finances, would you?
Related: If You Want People to Follow You, Stop Being a Boss — 8 Steps to Truly Effective Leadership
The hidden costs of Founder-CEOs
When founders insist on remaining CEO despite lacking the necessary skills, the costs can be significant and far-reaching. One of the most detrimental effects is its limitation on talent acquisition and retention.
High-caliber executives are attracted to companies where they can learn from experienced leaders and see a path for their own growth. If a company is led by a founder learning on the job, it may struggle to attract top-tier talent. This creates a ceiling effect, where the company can never hire anyone more qualified than the founder-CEO.
Moreover, this dynamic can lead to a dangerous echo chamber. Companies risk making costly strategic mistakes without experienced voices in the C-suite willing to challenge the founder’s ideas.
A relevant case is WeWork, where Adam Neumann’s unchecked control as founder-CEO led to questionable decisions and eventually derailed the company’s IPO plans, destroying billions in value.
Related: Stepping Aside: When To Walk Away As A Leader
Knowing when to step aside
Recognizing when to transition out of the CEO role shows maturity and true commitment to the company’s success. Here are key indicators that it might be time:
- If you constantly feel overwhelmed or unprepared for the challenges you face, it might be time to seek more experienced leadership.
- If the company’s growth has stalled despite its strong market position, fresh leadership could provide new perspectives and strategies.
- If you’re more passionate about a product than management, or if you find yourself longing to return to the creative or technical aspects of the business, it might be time to transition to a role like Chief Product Officer or Chief Technology Officer.
- If the company consistently struggles in key areas like financial management, operational efficiency or scaling, it may benefit from more experienced executive leadership.
When founders decide to step aside, it doesn’t mean abandoning the company. Many find success in alternative roles that leverage their strengths. A good example is the Chief Innovation Officer role, where the founder focuses on driving new product development and keeping the company at the cutting edge.
Alternatively, the founder could become the Executive Chairman or a Board Member to provide strategic guidance and maintain key relationships while leaving day-to-day operations to the CEO.
When Google’s founders Larry Page and Sergey Brin hired Eric Schmidt as CEO in 2001, they could focus on product innovation while Schmidt guided the company through tremendous growth and a successful IPO.
I would even argue that most startups don’t need a traditional CEO in the early stages. What they need is a founder, but these two roles have become interchangeable in today’s startup landscape.
Remember, stepping aside isn’t an admission of failure; it’s a strategic move to ensure your company’s long-term success. By putting ego aside and focusing on what’s best for the business, founders can often achieve far more than they could by insisting on remaining CEO. The true measure of a founder’s success isn’t their title but the enduring impact of the company they’ve created.
Ask yourselves, would you rather lead a mediocre startup or be the founder of an incredible company?
