Research: How Long Should a Founder Remain CEO?
Exploring the optimal tenure for a startup founder in the CEO role, we delve into research findings and industry insights. The balance between entrepreneurial spirit and seasoned leadership is scrutinized, offering a fresh perspective on this critical business decision.
Do founder-CEOs have an expiration date?
Jack Dorsey’s sudden resignation from Twitter caused a stir in Silicon Valley and around the world
- Dorsey’s decision to hand the reigns over to CTO Parag Agrawal bucked the recent trend of “founder-friendly” venture capitalists encouraging founders to stick around for as long as possible
- Founder-friendly strategy can be beneficial for firms
- There is some evidence to suggest that founder-friendly leadership is associated with an almost 10% higher company valuation at IPO, but the value of having a founder in the top seat rapidly deteriorates after that
- Value added by a founder dwindles to zero approximately three years after IPO
Involve founders in succession planning
Ideally, the founder should be involved from the outset in crafting and implementing the plan.
- However, if the founder isn’t as excited about spearheading the effort, it’s up to the board to take the lead
- It’s vital for them to proactively involve the founder as much as possible.
Funnel founders towards non-CEO positions
Encourage founders to transition to another role within the organization to benefit from new management
- This approach works best with founders who are able to acknowledge that they are no longer the best fit for the CEO role, but who are still committed enough to their companies to stick around
Funnel founders towards personal passions
Both founders and their organizations will benefit from clarity around what will work best for the individual leader
- Board members and executives in roles supporting founder-CEOs should strive to discover their founders’ passions and direct them towards paths that will help them fulfill those goals
- Founders themselves should focus on developing their capacities for introspection and self-awareness
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