Ben Horowitz, the co-founder and partner of Andreessen Horowitz recently wrote an excellent post about Why Founders Fail: The Product CEO Paradox.That inspired me to share my experience and perspective on why founders are being replaced by CEOs.
The early stage (up to 50 employees)
Majority of startups during their first few years are focusing on a single product. The strategy is very clear. So are the goals. The team is relatively small and so everyone is on the sale page and communication is informal. The founder and 2-3 additional members make up the sales team and so there is no need for formal training. Majority, if not all, employees are hired by the founder/CEO and so culture and values are consistent. The founder/CEO is involved in most of the details on a daily basis so there is no need for formal meetings or processes. Majority of the meetings are related to product roadmap, brainstorming etc. and usually decisions require a certain level of consensus.
In summary, majority of the activities the founder/CEO is doing at this point are related to selling (product, vision, strategy internally) and building the business.
The mature stage (above 50, usually +100)
As the company grows so does diversity. Suddenly there are different cultures and employees with different values. There are multiple personalities to work around. There might be multiple products and different employees interpret the strategy differently. As you hire more employees, you need to think about formal training to help employees get on board. Attrition rates are higher and the CEO needs to think about documenting activities in case an employee departs or a new one comes on board. Finally, probably the major difference is that the CEO has to delegate many activities he was doing previously to other employees and prioritize the ones he wants to be directly involved. Formal reporting mechanisms are required,
In summary, the CEO at this stage is mainly focused on putting procedures in place, hiring key employees (vs. all employees), building the infrastructure, defining the strategy and roadmap (high-level) and mostly communicating and managing people.
Different CEOs – Different skill-sets
As you gathered, the skills required from the founder/CEO at an early stage are less diversified in my view ( though one might argue differently as the founder need to “wear multiple hats”). They include product skills, ability to sell (to the team, to early customers and to investors), resourcefulness, given that he encounter many challenges for the first time. Formal communication is less important internally and as everyone is involved in the day-to-day activities, and finally being hands-on is key.
The skill-set required from the CEO at a mature stage, based on the activities I described, include clear communication, long term thinking, good people skills, ability to delegate and identify what’s important (80/20). The ability to think strategically and methodologically, look at the big picture and work around different personalities are all equally important.
I’ll conclude this post with a link to an article that discusses Jeff Weiner, Linkedin CEO’s management style. It will enforce many of the required CEO attributes I described earlier today.