Why Founders Suck as CEOs

Still running your growth company as a scrappy startup? You may be what's holding your firm back

Written by Darrell Kopke

Organizations led by founders can really suck.

Like it or not, every company has a culture. The extent to which this corporate culture is one of effective execution and personal empowerment (good things) or one of tolerated abuse, blaming, politics and deflection (€¦not-so-good things) is, in my opinion, simply a manifestation of the unresolved issues of a founder who’s still calling the shots. If the founder is unable to effectively communicate, the company follows suit. If the entrepreneur hoards information and undermines the leadership team, the team reacts accordingly.

The same attitude and ego that drove the entrepreneur to start their business and disrupt an industry in the first place can cause them to stagnate in righteousness as the company grows

If founders are honest with themselves, they realize it is increasingly difficult to sustain their relevance in the company they founded as that company grows. It’s not impossible, but you can’t do it doing things the way you always have done them.

We see this all the time in our work leading founder-led organizations through cultural change at institute B. More often than not, we find organizations bottleneck around their founders.

It all comes back to the “Peter Principle“—the theory that employees get promoted to their “level of incompetence.” In most organizations, the Peter Principle plays out something like this: an effective customer service agent gets promoted to shift supervisor. He excels again, and in time gets promoted to call centre manager. With some great results he gets promoted again to director. Unfortunately, he really sucks as a director, and stays put. No more promotions. When every employee has been promoted to his or her own level of incompetence, the company stagnates.

The same scenario happens time and again with entrepreneurs making the transition to the role of CEO—something that tends to happen when a firm has reached a certain critical mass, be it related to sales, clients or employees. Whereas founders are entrepreneurs that start companies and love to be “in the trenches,” as it were, CEOs are managers of the company’s community of stakeholders. CEOs align the interests of suppliers, employees, customers and shareholders. Effective CEOs stand for a world touched, moved and inspired by the organization’s products and services.

Transitioning to the CEO role is neither easy nor natural for a lot of entrepreneurs. Often, these founders get stick in the startup mentality and fail to develop into leaders of the human beings that work for them. The same attitude and ego that drove the entrepreneur to start their business and disrupt an industry in the first place can cause them to stagnate in righteousness as the company grows.

Read: The 7 Deadly Sins of Control-Freak CEOs

Founders that suck as CEOs live by entrenched orthodoxies that may no longer be valid for the size of their company or the changing nature of their industry.

It’s important to reflect on the typical growth patterns of founder-led organizations. In the early days, the founder touches everything in the business: product or service development, marketing, pricing, customer service and so on. As the company grows, the founders who transition well into the stewarding role become effective CEOs. These leaders think two to five years into the future and become the organization’s chief “why” officer. They remind their community of stakeholders why the company was founded to begin with, what the company stands for, and what the legacy of the company will be.

Podcast: How to Avoid Growing Pains

The founders who stagnate are those that don’t let go. They delegate ineffectively and, in an effort to maintain control, reverse underlings’ decisions, take over meetings and steer projects off-course. These employee-undermining behaviours very quickly turn the corporate culture toxic.

Corporate culture is a tool that great CEOs leverage to deliver extreme results. These leaders shape conversations and behaviours of not only the employees but all corporate stakeholders. You can’t do that if you’re micromanaging or rigid in your approach to change.

If you are a founder, you have the choice to be great or to suck. I suggest you choose greatness €“ unless you want to be the founder that sucks. To which I can only say this: Good luck. You’ll need it.

Read: How to Clone Yourself

Darrell Kopke is the founder of institute B, a Vancouver-based accelerator for entrepreneurial businesses that put profit and societal value on equal footing. Formerly general manager (and the sixth employee) ۬at lululemon athletica, Kopke is currently a part owner of several growth companies and a board member with The Gratitude Aeffect Foundation, a Vancouver-based charity devoted to ending homelessness. He founded iB in 2010.

Do you agree that founders tend to make bad CEOs? What do you think has to change for a startup entrepreneur to become a growth leader? Share your thoughts by commenting below.

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