Congratulations! You’re about to head your company! Now, how do you deal with that ex-CEO who’s so used to “running the show”?
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When a company’s leadership transitions from its existing founder to a new CEO, the period that follows is often a defining moment in the company’s culture, valuation and future. Consider the shift Apple experienced, from founder Steve Jobs to CEO Tim Cook, or Uber’s move from founder Travis Kalanick to its current CEO, Dara Khosrowshahi.
Related: What to Expect From Leadership Changes at the Top
Those transitions ushered in an era of change for both companies. And though those particular instances were highly publicized, leadership transition is something that many companies undergo.
Microsoft, Walmart, Ford, Walt Disney and countless others have all experienced founder-to-CEO transitions. And, as today’s start-up landscape continues to evolve, businesses are undergoing these transitions earlier in their life cycles. In fact, a study of 212 American startups reported in the Harvard Business Review showed that by the time those ventures were three years old, 50 percent of founders were no longer the CEO; in year four, only 40 percent were still in the corner office; and fewer than 25 percent led their companies’ initial public offerings.
Companies of all sizes are no stranger to transitions in leadership, but founder-transitions are a unique milestone in a company’s leadership history because these moves come with a very distinct set of challenges. While founder-to-CEO transitions are more of an art than a science, here are four best practices to make your own change a seamless process.
Set expectations with your predecessor.
Founder-transitions come in many shapes and sizes. Some founders stay involved in the company in another role, something Larry Ellison did when he resigned as CEO of Oracle to become the company’s chief technology officer. Other founders transition out of the company entirely, just as Instagram’s co-founder Kevin Systrom did when he departed in late 2018.
Regardless of your scenario, it is critical to define what your role as founder will be in the organization, moving forward. If the founder will remain within the organization, successor-CEOs should set expectations on what the founder’s new role will entail both internally and externally. Any ambiguity might lead to challenges down the road and could be very disruptive. Setting expectations also provides a framework for dealing with deviations (sometimes harshly) should they occur.
And this is very possible, given that you’ll be dealing with someone used to running the show.
Take Kalanick as an example. While he’s remained on Uber’s board of directors since his departure as CEO, we’ve seen little of him in the public eye as a representative of Uber’s brand. Even when Uber was invited to the New York Stock Exchange, Kalanick was absent for the ringing of the opening bell. We don’t know what was going on internally at Uber but we do know that Kalanick’s continued presence illustrates the need to set, and more important, maintain, expectations, to ensure that agreed-on changes in the company are preserved.
Related: What It’s Like to Transition From Founder to CEO
Don’t underestimate the importance of communication.
Communication is the cornerstone of any successful founder-transition. When a new CEO takes the reins after a founder’s exit, uncertainty is inevitable — from employees, customers and stakeholders alike. The best way to navigate this uncertainty is to communicate right from the start and continue to do so consistently.
Being a strong communicator is one of the most important skills for leaders, and in a founder transition, its importance is amplified. Transparent and frequent communication helps create buy-in with employees, customers and stakeholders, and ultimately helps to create a more seamless founder-to-CEO transition.
However, the work doesn’t stop there: As the new leader of an organization, you as successor-CEO should be open and accessible. Implement a strong culture of communication by leading by example. Khosrowshahi’s email to employees following Uber’s disappointing IPO is a great example of maintaining open and honest communication, even after the transition is complete.
Take decisive action.
In every founder-transition, there is an impetus for the change. Maybe the company needed to transform its business model, or rebuild its reputation or operationalize the business to scale and grow. Regardless, some need for change drove the handoff from founder to CEO. In several of the founder-to-CEO transitions I’ve personally been a part of, the founder said to me, “I got the company to $10 million in revenue, but I can’t get it to $20 million, let alone $50 million.”
Successor-CEOs are put in place precisely because they’re expected to tackle that kind of challenge.
In addition, from day one, the successor must step into the role and take action. Within 90 to 120 days, he or she should assess the team, business model and culture, and act. It is essential for successor-CEOs to show they are taking decisive, measurable action to solve the organization’s challenges.
Chipotle founder Steve Ells stepped down as CEO after the company faced a series of food safety incidents. The company needed a way to win back its customers and change the cultural narrative around the brand. Successor-CEO Brian Niccol stepped in to modernize the chain’s processes, renew its focus on fresh ingredients and innovate to attract new customers — all in less than a year. Decisive action like what Niccol initiated for Chipotle signalled to employees, customers and stakeholders that transformation was happening.
Cultivate the culture.
Culture can be the “make-or-break” point for a founder-to-CEO transition. Having a good culture in place helps you, the new CEO, foster better collaboration, communication and ultimately, get better results for the company. However, a founder’s departure often means change, change and more change. And this can create a culture of anxiety and negativity among your new team members, especially those loyal to the former leader and averse to the “new” that a successor-CEO brings. It’s no surprise that successor CEOs like Khosrowshahi say they wish they’d executed on a cultural transformation sooner.
Successor-CEOs must find ways to refresh, reset or rebuild the culture. At the core of this transition are the needs for communication, honesty and transparency, but also the need to give employees something to measure, monitor and stay focused on. As a new CEO during a period of change, you should focus on giving employees a rally cry. For example, “zero customer disruption” is a rally cry I myself have used with companies undergoing product transformations.
Alternately, for a company like Apple, “simplicity” has been the rally cry for employees and one that’s remained consistent for the culture, despite the leadership shift from Steve Jobs to Tim Cook. This core theme of distilling complex ideas into simple solutions has helped Apple maintain its identity and ensured that the transition of its culture from founder to CEO was seamless for employees, customers and the market.
Related: 5 Steps for a Smooth and Successful (CEO) Exit
In today’s fast-paced, everchanging markets, founder-to-CEO transitions are less of an “if” than a “when,” yet executing these business transformations successfully is easier said than done. There is no perfect formula for founder transitions. It is up to the company’s new leader to set expectations, communicate, take action and build a culture that leads the organization successfully through a critical, transformative moment in its history.