Why startups need to have a founder succession plan in place
Not only does a startup founder who wants to stick around need to evolve, but they need to do so at the right time – and rarely do founders get this right.
There’s something that very few people in the startup scene like talking about: a floundering founder. Let’s call this moment: end-stage founder.
The first thing you need to know is that an end-stage founder doesn’t need to be an end-stage startup – in fact, if you navigate this period right, your startup will grow and grow abundantly (and, ironically, so will your founder).
I’ve worked in executive search for decades. My bread and butter is understanding people, not only where they will fit but where they will thrive. And when people thrive, organisations, no matter what the size, will too. I’m speaking out now, though, because we need our innovative startups more than ever in Australia and we need to de-risk their growth.
Startups are defined by their dynamic energy. Driven by passionate founders, they push boundaries and create groundbreaking services and products, disrupt industries, even awaken our collective vision, driving all of society forward. However, as these companies grow, the very founders who once propelled them forward can become profound risks to the future.
For the most part, at some point, every founder in a startup has two choices: 1) evolve or 2) step aside. Why?
Because the hyphenated CEO-founder needs two different skill sets and rarely do these skill sets exist in the same person. Unfortunately, vision, possessiveness and ego, which work well when you’re building something out of nothing, don’t often translate to effectively managing large, departmentally separated teams of people and complex P&Ls. The person who was once the epitome of culture fit because she or he had created the culture now risks a phenomenon I like to think of as “organ rejection.”
In my professional role and my volunteer work as a judge in the Australian Technologies Competition, I see the pain caused by this organ rejection all the time. Things that used to work so well, people and cultures that used to gel beautifully with mission and commerce gradually stop working and no one seems to understand what is going on.
One of the surest signs this is happening is the universal sense on the team that the founder is a bottleneck on the team, stopping progress instead of accelerating it. Attrition rates increase, and performance dwindles, as the team struggles under the founder’s unchanged leadership style.
Founders are often deeply embedded in the DNA of their startups. Their vision, passion, and relentless drive are crucial during the early stages. The transition from a scrappy startup to a structured organisation often necessitates a different leadership style — one that not all founders can or are willing to adopt. And that brings us to evolution.
So not only does a founder who wants to stick around need to evolve, but they need to do so at the right time – and rarely do founders get this right. Often they are the last ones to know that in their current incarnation, they are no longer the right person for the job – sure they know they should take a course or two to grow, but who has the time for that when they have to micro-manage every aspect of their now humming enterprise?
And if they get the evolution timing wrong, the founder might just find their evolved self on the other side of a once viable company. Even if they get the timing right, and decide to take action in the very earliest stages of organ rejection, founders need to grow both personally and practically for the evolution to work. The visionary who lacks the empathy or warmth to manage people or close big deals needs to develop these qualities while also learning how to delegate, manage strategy, respect governance necessities, know-how and when to seek legal advice, etc. Not an easy ask for anyone.
In my role as both a mentor and leading a technology recruitment practice, I’m constantly reminded of the importance of leadership primarily as a bridge to unlocking human capital.
While many focus on product innovation and financial metrics, the human element is far too often overlooked. Our startup founders must build cohesive teams, foster a positive culture, and strategically guide the company through different growth phases –all, ideally, while modelling the “servant leader” for their people.
But here’s the thing, there’s a surefire way to avoid “organ rejection”.
In most cases, your best bet as a startup team and as a startup founder is to have a founder succession plan in place almost from the beginning. I’m not talking about putting your founder out to pasture or making them a purely honorary figure. In fact, it’s the exact opposite, a founder succession plan will instantly mature your startup and strengthen your proposition, allowing you to sidestep unspoken friction and potential toxicity.
Essentially, you will be putting in place a strategic human development plan that will see your founder assume their next right role in the company at exactly the right time and give everyone a great running way in the search and identification of the CEO who will take on that critical role.
“Organ rejection” is a silent killer in the startup world. Take heart, it doesn’t have to be.
Sean Garvey is a senior partner with global executive search firm Odgers Berndtson and is a judge in the Australian Technologies Competition.
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