Getting Out of the Founder’s Trap

A company founder often reaches a point in life when they no longer have the energy to continue leading as before, and they are ready to transfer the leadership baton to someone else. This can also occur when an entrepreneurial founder realizes that while they know how to build a company, they may not possess the skills necessary for managing it. Effective management involves overseeing people, structuring responsibilities, and implementing reward systems—all critical elements of a company’s “machinery.” Founders may excel in sales, client engagement, or technological innovation, but areas like finance, accounting, quality control, and investor relations may be foreign to them. If they attempt to manage the company nevertheless, there’s a good chance problems or crises may arise. As a result, they often seek a COO or president to handle daily operations.

Transitioning from a founder to a new leader is not an easy process, especially when it involves family, such as a transition from parent to child. A clash can develop due to differing styles and interests. The successor typically wants to lead the company their way, pursuing their vision, which often diverges from the founder’s; they do not want to be seen as merely a clone of the founder. This desire to leave their mark can create destructive friction and the successor, if the founder lost control of the company eases the founder out of the company  (as happened in Apple) or the founder fires the successor and tries to manage by himself only later to conclude that a successor is needed. A turnover of leadership ensues (like Starbucks) sometimes putting the company in a difficult situation that can lead to a serious crisis and endanger the survival of the company.  
 
This scenario is not limited to companies; similar dynamics can occur on a national level. An example is the conflict between Kazakhstan's new president and the country's founder, Nursultan Nazarbayev. (I consulted for Nazarbayev.)
 
So, how can we ensure a smooth, effective transition, ideally free from destructive conflict?

Before appointing a successor, it is strongly recommended that the entire executive team, along with the founder, engage external professional help to develop a cohesive vision for the company. External assistance is vital because defining a vision and restructuring can lead to significant conflicts, and an objective facilitator can help prevent these issues from becoming destructive.

Discussing the vision is essential. The founder’s original vision may need to be adapted or redefined. The top team has to support the vision so that the successor has allies rather than people who object to his moves.  

Once there is agreement on the company’s future, a search for a successor should begin, preferably from within the company, focusing on candidates who share the vision with both the founder and the executive team.

Once alignment on the vision is achieved, and the successor has been appointed, the company needs restructuring. Up to that point, the organization is usually structured according to the founder’s preferences, centered around the people the company has, and the founder’s personality what he wants to deal with and what he ignores. The successor will have a different personality and should ideally be less entrepreneurial and more organized, reflecting the current needs of the company.  Add to it that there is also a new vision that might call for a new structure. Bottom line: A different structure might be needed.
 
Organizational structure is not merely the organizational chart; it encompasses the structure of responsibilities., not the structure of authority—who decides and how. This often-overlooked component is critical to effective organizational structure. The third component involves the reward structure.

When individuals understand their responsibilities, the authority they possess to make decisions, and how they will be rewarded, the organizational structure is complete. This alignment and how the changes are handled in the right sequence is crucial for a successful succession.

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