Founder / CEO Succession

Management Add comments
Dec 102007

Professor Noam Wasserman has a nice piece on founder / CEO succession in HBS’s Working Knowledge.  To summarize he talks about the heads-you-win-tails-I-lose phenomenon that founders face as they grow their business, i.e. if they fail they get replaced and if they succeed they also often get replaced.  I think what Noam is observing is actually the case, but in the "success" scenario, I don’t think that success is causal with replacement.  More likely it is some new aspect of the larger, more successful business that other board members perceive the founder as not being able to manage (e.g. more of a focus on sales management than new product development).  Either way, the lesson is clear to founders: success in a startup doesn’t guarantee you get to keep your job.

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Posted by fnazeeri at 1:50 pm
  • http://www.awhere.com Jim Pollock

    Furqan,
    This has NOTHING to do with the intent of your post, but a funny quote I heard a decade ago regarding “CEO succession” was someone talking about large well run organizations…
    The specific reference was to IBM. He stated “IBM is such a well groomed organization that if the CEO leaves, they hire a new sales guy and everybody bumps up a notch.”
    Nothing to do with your post, but it sparks a humorous image.
    Jim

  • http://www.founderresearch.blogspot.com Noam

    Great to see this 2-year-old Working Knowledge interview getting dusted off, Furqan. :->
    You doubt that “success is causal with replacement,” and at that level I definitely agree. For causal mechanisms, we have to look a level deeper. As described in much more detail in the interview, the causal mechanisms are:
    A. What the founder had to do to achieve that success. Causal mechanism: If the founder had to raise outside capital (e.g., to finance product development) –> founder doesn’t fully control decision making (especially at the board level) –> founder is susceptible to being replaced.
    B. Whether the success caused dramatic changes in the challenges faced by the CEO. Causal mechanism: Founder succeeds at leading venture to the completion of initial product development –> sales, marketing, and organization-building challenges gain importance –> founder-CEOs lacking skills to address those new challenges are much more likely to be replaced.
    When A. & B. are both true, the probability of founder-CEO succession skyrockets. (My academic paper on founder-CEO succession shows the results of my quantitative tests on a couple of hundred ventures. My research blog has a link to the paper; Typepad doesn’t seem to be letting me embed the link here.)
    In other words, it’s not a random draw or a “flip of a coin” whether a founder-CEO is going to be replaced, but the substantive changes in (A.) power structure and (B.) CEO job requirements that cause the probability of the founder’s being replaced to jump.
    If any of these causal chains are missing pieces or off the mark, would love to hear about it! :->

  • gatsfeu

    As CEO I feel the same in these kind of situations, indeed great article! xl pharmacy

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