Founders are responsible for much of an organisation’s early success, often taking a hands-on role in navigating operational challenges, securing funding, establishing vision and culture, building a team, setting and delivering on a growth strategy.
Some of the world’s most recognisable companies are founder-led and there are plenty of irreplaceable founders who are intrinsically linked to their brand. Examples include Meta CEO Mark Zuckerberg; Dell Tech CEO, Michael Dell; and Tesla/SpaceX CEO, Elon Musk – to name just a few.
“While founders bring undeniable passion and entrepreneurial spirit to their endeavours, not all founders have the desire, ability or backing to lead their organisation beyond the initial vision or ultimately get to a retirement stage,” says Chris Tan, Associate Partner for Gerard Daniels. “In fact, most founder-led organisations eventually reach the point where a change of leadership is needed – whether by design or requirement.”
When should you hand over the reins?
The timing for transitioning from founder led to professionally led, depends on the nature of the organisation, where it is in its life cycle and the personal and professional aspirations of the founder. It is also one of the biggest risks to the ongoing success of any organisation.
“The search for an external CEO or Managing Director typically begins when an organisation grows beyond the founder’s core skillset; more structure is needed around governance and/or risk; or when a different type of leader is needed to deliver on the next phase of growth,” says Chris. “A change of leadership is also planned when the founder wants to retire, move into a Board role or explore opportunities outside of the organisation.”
With self-awareness, founders recognise when it’s time to transition out of their leadership role. This change may also come as a recommendation from the Board, shareholders or other stakeholders.
Stepping aside
The appointment of a new external leader can be the catalyst for significant personal, professional and organisational growth. However, for founders, the sentiment that drives this change doesn’t always align with the reality of stepping aside.
“Choosing an individual to lead the organisation that you built from the ground up is one of the most emotionally charged and challenging decisions that a founder will make,” says Chris. “Even when this process begins with good intentions, it’s not uncommon for the founder to fear the change and loss of control that it brings.”
When founders struggle to step away, this dynamic can lead to:
- A lack of clarity or misalignment that erodes the incoming leadership role
- A perceived lack of empowerment that limits talent attraction and executive search
- Poorly defined success metrics for the transition and performance of incoming leaders
- Emotional attachment to legacy ways of working that slow the transformation required for growth
- Failure to define and uphold new governance and corporate structure
- Loyalty to founders that prevents new leaders from onboarding and gaining traction.
How to manage the appointment and transition to external leadership
When a leadership change is approached in a structured way, with clarity of intention and a good understanding of the human dynamics, it becomes a major turning point in the growth and evolution of an organisation.
“While the perfect transition does not exist, there are some factors that you can be mindful of to improve the outcome of this major change for your organisation,” says Chris.
Governance
Clearly defined and supported governance and organisational structure is key to a successful leadership transition. “This requires clarity of ownership versus management; restructured leadership roles and decision making; and clear communication to guide the perception of the new leadership authority,” says Chris. “The founder must also engage in the process and be willing to evolve their relationship with the business.”
To achieve the required governance, appoint a leader with the skills and experience to build consensus at all levels (including the newly revamped executive and Board) and to bring the organisation along on the journey.
Clearly defined success
To continue to grow through new leadership, founder-led organisations must know what the successful leader and transition will look like. This means considering:
- The type of leader and skillset that will drive future growth
- Defining a role that allows the founder to stay connected to the organisation (where appropriate and recognising the difficulties of such a move)
- Setting clear KPIs for the transition and ongoing performance expectations for the new leadership team.
When the founder steps aside or moves into a different role, it’s important to retain the intangible value from their previous leadership role. “Whether this includes intellectual property, market relationships or their established reputation, the founder is an important asset to the organisation and must continue to be nurtured, valued and engaged.”
Engaging specialist support
Partnering with an executive search firm provides hiring organisations with specialist support to ensure a successful appointment and smooth transition to external leadership.
“Gerard Daniels offers vital guidance to clients in managing the executive search process and sourcing the right skills, personality and values for the incoming CEO,” says Chris. “More importantly, we stand by founders as they make this important decision, navigate this future-defining transition and manage the many relationships that are in flux during this time.”
To appoint a senior leader or discuss your changing leadership needs, connect with Chris or reach out to your local Gerard Daniels team.
