Helping Builder CEO’s Pick up the ReinsThu, 07/15/2010 - 17:15 | by Jim Vollett
The need for a transition
In the first article of this series, Helping Founder CEO’s Hand Over The Reins, I reported that in order to be successful, most early-stage tech companies need two very different types of innovation, and therefore two very different types of CEO’s:
- Technical innovation, supplied by the founder CEO
- Managerial and sales / marketing innovation, supplied by the builder CEO
The transition from the founder to the builder is critical. If the transition fails, the company can go down as fast as it went up. If the transition works well, the company can move to far greater heights; but it can still be an agonizing experience for the founder, the builder, and their relationship.
The potential pitfalls of transition
- Lack of buy-in on the part of the founder, often because the transition is initiated by the board/investors
- Even if the founder does buy in, it requires a major shift in identity, which is always hard to go through (but very rewarding if done correctly)
- Hiring the wrong builder and having the whole exercise be a worse experience for the company than sticking with the original founder CEO
Throughout my own experience, as well as through the interviews I conducted for this article, I have heard stories that illustrate all of the above pitfalls. The purpose of the rest of this article is to outline a map that will lead you through the complexity of hiring a builder.
Selecting the right builder
Many clients want to hire a leader from a large company that has a well-known brand and proven track record (and is the sort of company that the client aspires to be). However, there are two significant challenges:
- Being able to attract the builder you want
- Ensuring the builder can work as effectively in a small environment as a large one
Small vs. large environment
Many CEO’s have a problem when they shift from a large company to a small company because they think that the results they produced in the large company were due to their own personal efforts. However, a huge portion of their results was likely due to the brand they had behind them and the resources they had available.
When they move to a small company, the CEO’s no longer have that brand and must therefore replace it with a much stronger personal presence. They also do not have the same level of resources and need to replace them with a player-coach mentality, where the CEO’s make the shift from strategy to tactics and back again, often several times a day.
This is why the best builder candidate is one who has had both big and small experience. The "big" lets them know the structures the company is evolving to; the "small" means they know what it will take to get there.
This big and small exposure may be even more important than actual CEO experience. You may be better off to hire a COO or VP of sales with this background and let them grow into the CEO position, rather than hire a CEO from a big firm. This option has the added advantage of testing out potential CEO’s before putting them into the big chair.
Attracting who you want
Client companies may start off with unrealistic expectations of who they can attract. Yes, they all want the person who led a start-up (just like their company) to a resounding exit. But if a person has already done that, why would they be attracted to your company?
If they are attracted to significantly more equity, are you actually willing to give that up?
Therefore, your first step is to become very clear on the deal killers – those minimum attributes you must have in a candidate. Everything else is up for negotiation.
A good search firm is invaluable in helping you sort out what is a deal killer, and what is practical to expect in today’s markets.
Guidelines for hiring
First, do all the things that you usually do when hiring:
- Lay out the accountabilities/requirements of the job and get sign off on them from all people who are conducting the interviews
- Lay out a scoring system to for each interviewer to fill out about potential candidates – this will help bring much-needed objectivity and consistency to the process
- Set up several interviews, in different locations. Meet at the office, meet over lunch, and meet over supper with their spouse. Have the candidate meet key members of the board and, If possible, everyone who will be reporting to the candidate. See if you can design a task or simulation for the candidate to see what they reveal about themselves.
- Check their references and probe with your questions.
But then, take your due diligence further:
- Dynamically steer as much as you can—in other words, break this down into small steps. For instance, if you initially bring the person in as a VP of sales or COO (as explained above), you can reduce the risk of the downside and increase the possibility of an upside (although this may be impossible if the candidate has already been a CEO).
- Uncover the builder’s compelling personal reason to innovate. The builder is going to go through their own identity shift, be blindsided, look bad at times, be emotionally triggered, and feel like they were lied to. What inner drive is going to keep them going during those times? Will it be a drive for success in the eyes of others, freedom to prove something to themselves, or a deep desire to give something back to society?
- Finally, trust your founder’s intuition i.e. trust your gut.
Selection from the builder’s point of view
It is very important for the builders to do their own due diligence. They must check out:
- The market cap
- The commitment of the board and the investors
- The commitment of the team
- The product possibility
- The customer possibility
But most importantly, they need to take their due diligence farther and check out their ability to work with, and "build", the founder.
Building the founder
The single most important job of the builder CEO is to "build" the founder. The builder must first identify and recognize the founder’s genius, and then empower and manage it.
Some guidelines are:
- The shift should feel like a promotion for the founder.
- Work on freeing the founder so they can focus on the biggest threat and the biggest opportunity for the company. This is where the big bucks are.
The excuse that the founder won’t let go
When I interviewed search consultants about placing builders, they told me that in those situations where it did not work out, the builder usually gave this excuse: "Even though I checked out the founder’s willingness to let go, it turns out I was wrong – the founder just would not let go."
In my experience, founders will let go if they have something more interesting to do that makes more of a difference and if they trust the builder to run the company. Therefore, the excuse that the "founder won’t let go", simply means that the builder has not yet learned how to "build" the founder, or that the builder did not complete due diligence.
Hiring right is just the start
Getting the right builder for the company is absolutely critical. Done wrong, it can destroy the company. However, done right, it gives you a chance to produce a winning partnership.
But once the builder is in place, there is still a lot of work to be done to ensure that the relationship between the founder and the builder turns into empowerment rather than a power struggle. This will be the topic of my next article in the series.