Founder to CEO Transition: Did You Make the Right Decision?
Editor’s note: This is the final post in a series aimed at founders who are considering hiring a professional CEO to run their company. The author, Ori Eisen, is a member of Georgian Partners’ Advisory Board. As the founder of 41st Parameter, the leader in online fraud intervention, he underwent the transition from founder to CEO himself prior to selling the business in 2013. The previous post in the series was on what your role as founder will be once the new CEO is hired and the first post in the series can be found here.
Once you’ve hired a new CEO, everyone is going to be watching very closely to see if you’ve selected the right person for the job. Hopefully you’ve hired someone who is up to the task of successfully running and scaling your company. Of course, even the best CEOs need time to get their feet wet and to start making an impact, and you’ve got to give them the opportunity to do so. Invariably, there will be a few hiccups and growing pains along the way as they do. If, however, as the weeks turn into months, you aren’t seeing an impact you may start to second-guess your decision. You may even start to wonder if you’ve made a mistake.
Most new employees — no matter what role they’re in — need 90 days on the job to get fully oriented. For a CEO, those first 90 days will be the first opportunity to assess the company’s situation while on the ground and in the trenches. In the process, he or she should also be working closing with you the founder, resolving any potential issues that may have surfaced during the transition.
When the 90 days are up, new CEOs typically declare their new strategy and plans to their board of directors, senior management team and employees. If the new strategy and plans don’t hit the mark, they may not get the support of management or the board. By that point, you will also already be able to see how the company’s main KPIs are tracking under the new leadership. Those KPIs won’t just include sales and revenue, but also things like morale, camaraderie, and the overall tenor of the office.
If the KPIs are headed in the wrong direction and there isn’t widespread support for the new strategy and plans, you may have a big problem on your hands. Even so, it’s probably still too early to tell if you’ve made a mistake. You have let time take its course and remain positive no matter what. Don’t chat about your CEO issues with the management team. Instead, remain chipper and positive, and encourage them to give the new CEO a fair chance.
If after six months, however, tensions are on the rise, the management team is divided, morale and sales are down, and employees are rushing out the door at 5 p.m. each day, you’ve clearly got a problem on your hands and it’s probably time to start doing something about it.
Suffice it to say that changing CEOs is not for the faint of heart and it should always be the option of last resort. But if the new CEO isn’t working out, the board has to recognize this as soon as possible and take action to either correct the situation or initiate a transition process.
Ultimately, it has to be the board’s decision to hire or fire a CEO based on performance. Although most founders are on the boards of their companies, they cannot and should not make this decision alone. If and when the time comes that there’s no other alternative and the board needs to bite the bullet, they must act swiftly and deliberately in the transition and provide support to everyone whose left in the organization, including employees, management and you the founder.
It’s important that you don’t adopt a “wait and see” strategy once you’ve realized that things with your new CEO aren’t going to work out. If enough time has passed, and all efforts have been made to rectify the issues, it’s time to start discussing the transition options. While there may be concerns about how competitors or industry analysts will view the change, the reality is that if you’re a growing business with a bright future ahead of you, no one will remember or care about it in the future. Every company hits a few bumps in the road, but that doesn’t mean that they’re at the end of the road.
Some final thoughts on this series
Hiring a CEO is both a challenge and an opportunity and should only be done when the conditions are right. Founders should consider hiring a professional CEO when they feel that more firepower is needed at the top of the house to grow the company.
Taking advice from your inner-circle and being true to yourself are key parts of making this decision. It should not be done in haste. Remember, only fools rush in.
While letting go and sharing power are extremely hard to do, the benefits and rewards for a smooth execution are worthwhile. In nature, when two radio signals are transmitted at the same time, there are only two options: they either amplify each other’s signal, or they cancel each other out. The same goes with the founder and the CEO. They must find a way to make room for each other and divide and conquer so that the net result is a better outcome for everyone involved.