Running a startup and running a scaleup requires two very different skill sets. Very few founder-CEOs possess them both, and those who don’t will either stall the growth (and eventually sink the venture) or be replaced by the Board. Neither is very much fun, so let’s look at how you can avoid the Founder’s Syndrome or treat its symptoms that are epidemic in the entrepreneurial world. For a more rounded insight, please check out my blog on the Founder’s Dilemma.
I was the guy you read about in any Founder’s Syndrome article: the founder-CEO who thought he knew how to run the scaleup as successfully and as efficiently as he did the startup.
The proposition of a founder-CEO in the context of a scaleup is pretty silly. It’s like an actor-surgeon. There aren’t many successful actor-surgeons around. And that’s for the reason — it requires two very different skill sets. One must be daring, outspoken, charismatic, habitual risk-taker, even flamboyant. The other must be a methodical and careful planner, patient and focused, and must possess a lot of knowledge.
The same goes for founder-CEOs of high-growth scale-ups. Of course, once you’re below 50 employees, you’ll be able to juggle both jobs more or less successfully. Maybe you don’t have a choice, maybe you can still pull it off. But once you get above that number and close to 100 employees, your venture will suffer.
I should know, I’ve made those mistakes myself.
Mistakes Were Made
My first startup was a video game development studio. I worked in the video games industry for a while before deciding I knew enough about the business to launch the venture.
Having VC funding, a very demanding Supervisory Board, many projects to manage, and a relatively sizable team, there was little time to actually be involved in making games. I thought would just going to be the first couple of months before we’d settle in and then I’ll go from running the show and putting out constant fires to actually do what I wanted to do and why I founded the startup: make video games.
Of course, that never happened. We grew quickly, got bigger projects that required more people and more management, had to move to a bigger office, hire senior talent, set up outsourcing in China, deal with publishers going Chapter 11, mortgage the house to pay salaries, visit ERs during acute burnouts, and so on — the usual smorgasbord of startup fun.
But in ten years I never really focused on making games. And that’s because I’ve never let go.
So, what’s the Founder’s Syndrome?
Often these difficult smorgasbord situations require a strong passionate personality – someone who can make fast decisions and motivate people to action. I was good at that and we built a great team of coders, artists, testers, designers.
But, as we grew I kept running the studio the same way as when we were 10.
When the studio grew to over 70 core team and about 150 external staff I should have understood the decision-making and management needs of the organization had changed and required mechanisms and processes for responsibility, accountability and authority, human resource management, management of growth, strategies for technology development, content, marketing, innovation, and much more.
It is when those decision-making mechanisms don’t change, regardless of the growth and changes of the company, that Founder’s Syndrome becomes an issue.
The entrepreneurial enthusiasm, relentless ambition, bigger-than-life charisma, and the love of wearing many hats invariably get in the way of growing and scaling a business. The very characteristics that were so essential for the initial success often prove to be stalling growth or, in worst-case scenarios (given enough time), fatal.
Of course, it makes sense you wear the CEO and the founder hats, and usually a bunch of others when starting off with your venture. You don’t have the funds to get professional management and you don’t really have enough employees to require one.
But when your company grows to between 50 and 100 employees you should think about getting professional management, including a CEO. Don’t be afraid to let go. It’s a good thing — I would have loved to have a good CEO so that I could do what I dreamt of doing, but I never got to that realization. Also, having enough introspection to let someone else run the show beats being fired and replaced by the Board. This didn’t happen to me, but I sometimes wonder if we’d be better off had they replaced me with a seasoned full-time CEO with several notches on her or his belt.
Don’t be a Chokepoint
If most decisions are made by you, the founder(s), you’ll be a bottleneck and you will stall the growth — chances are, you already are the bottleneck, you just don’t see it.
There is generally strong resistance to any change in that decision-making, where founders might lose their total control of the organization — please see Control Or Wealth: The Founder’s Dilemma for more info on the dilemma between control and money.
Boards of these ventures usually don’t govern, but instead, approve what founders suggest. Planning isn’t done collectively, but by the founders, and plans or ideas that don’t come from the founder usually don’t go very far.
When Founder’s Syndrome sets in, regardless of the size of the organization, everyone who is not the founder is relegated to the role of support staff to the founder. This may be very direct or very subtle and indirect. Many founders have ways of exerting their control through other people, including staff or other, less strong founders.
In his seminal work on the Founder’s Syndrome, Carter McNamara found that businesses must evolve through a particular lifecycle change to continue to grow and meet the needs of their customers.
This change is must go from typically entrepreneurial and intuitive decision-making and growth to well-planned and managed development. Obviously, this development can’t occur without first establishing a stable managerial and administrative infrastructure which is many times incompatible with the founder’s mentality.
Consequently, developing this infrastructure often requires a change in the nature of the founder’s leadership from that of a highly reactive, individualistic style to a more proactive, consensus-oriented, and methodical style. Unfortunately, many founders can’t make this transition. As a result, the business remains managed according to the personality of the founder, not in a manner that would allow expansion and growth.
It’s very common for businesses to experience the same problems over and over again and the business struggles from one crisis to another. Plans are not implemented. Money keeps running out. Board and staff members quickly come and go, often on the whim of the founder. No one really seems to know what’s going on and who’s calling the shots. People become afraid of the founder and the business starts to revolve around them and their appeasement, not the customer.
It’s important to understand the Founders Syndrome is really one’s fault — founders don’t set out to damage their scaleups. Besides, the syndrome rarely takes hold without numerous members of the Board and staff enabling the founders or even exhibiting symptoms of the syndrome themselves.
McNamara found that eventually stakeholders confront the founders about the scaleup’s recurring problems and the founders very often become increasingly anxious and defensive. They soon resort to blaming Board members and staff.
Without ongoing coaching and support, it’s likely that the founder will be replaced, or even worse, the business will fold.
How to fix the Founder’s Syndrome?
First of all, start planning the management hires long before the symptoms of the Founder’s Syndrome appear. No professional manager wants to take over a venture in distress. If they do, they’re called turnaround managers, and that’s a different ballgame altogether.
If the symptoms are already there, there’s still a lot you can do.
The best way to start is to accept a business management consultant or mentor outside the organization and an advocate within. Founder’s syndrome comes from doing what’s natural for you. Changing your leadership approach may be rather unnatural. If you don’t want to change, that’s fine — in this case, hire a professional CEO.
Next, ensure a customer-driven organization and don’t make decisions based on your feelings or hunches. Regularly ask customers what they need and how the organization can meet their needs and develop the business around the feedback.
Set direction through planning. Support the Board to carry out strategic planning and ensure and accept staff input as well. Conduct regular staff meetings to hear staff input. Cultivate strong finance and help them to fully understand the organization’s finances and fundraising plans.
Organize resources to meet goals. Develop job descriptions with staff input to ensure mutual understanding of responsibilities. Develop staff-driven procedures for routine, but critical tasks.
Motivate the leadership and staff to meet goals — check out OKRs if you haven’t already. Delegate to staff members by helping them understand the purpose of tasks. Get their input as to how the tasks can be completed. Give them the authority to complete the tasks.
In regular staff meetings, celebrate successes! Bring in customers to tell staff how the organization helped meet their needs. Conduct regular performance reviews with staff to ensure organizational and staff needs are being met. In stand-up meetings, share status information and conduct day-to-day planning.
Guide resources to meet goals. Share management challenges with the Board and ask for policies to guide management. Work from the strategic plan and develop an associated budget to earmark funds.
Think transition! Help the Board to regularly undertake contingency planning, including thinking about what the organization will do when you step down as CEO.
However, the most important step is to accept that nearly all startups have Founder’s Syndrome when they are transitioning to a scaleup. There’s nothing wrong with you or your business. What is important is to understand the symptoms and act quickly to allow your venture to follow the proverbial hockey stick.