Startup Scaling Issues

The founder might ask, “Am I a Bill Gates or a Mark Zuckerberg?” In other words, “Will I be the leader of my company many years from now? Will I retain the powerful position of CEO forever?”

Leaving aside the unique talents and skills of those two individuals, carefully look at their businesses. Microsoft entered the software business for PCs when it didn’t exist. Its major potential competitor, IBM, became its supplier of business. IBM did not see the value in software and allowed Microsoft to control that market. This unique situation will never happen again. IBM’s foolish mistake is a lesson for the history books. Further, in a connected world, there will never be an opportunity for a company that can grow in isolation for so long and allow an individual to develop the necessary CEO skills at a slow and methodological pace, such as Bill Gates was able to. Look at the autonomous car market. Can you imagine a few companies that make cars and one that recently wrote software to drive them?

Regarding Facebook, there were multiple other social media platforms before Facebook, so time was moving more rapidly than it did for Bill Gates. Still, Mark Zuckerberg was able to grow his idea slowly, incrementally, and reach a very specific audience with a successful product. But this all happened before Facebook was created. In today’s highly-connected world, a new idea with potential would become immediately available, probably via Facebook. If the CEO does not grow the idea rapidly, it will be easily copied—likely by Facebook, Google, Apple, or Amazon. Look at what happened with Snapchat and Instagram’s rapid copying of its core features. There is simply no room for growing slowly in today’s startup culture.

Founder CEOs must assume from the beginning that they will likely not be able to adapt or acquire the skills required to grow the company at the incredibly rapid pace required in today’s business climate. As a visual analogy, the seasons change too quickly now for a tree to adapt and survive.

The question then becomes how the CEO founder can prepare for the inevitable.

As always, burying your head in the sand is probably not the right strategy. Proactive founder CEOs will seek out feedback on their performance from the board and self-assess their skills and talents on a regular basis. Are they accomplishing their goals? Do they perceive that a new challenge is coming that will be outside the skills they have? If so, the founder CEO must be proactive and initiate the search for a new CEO since it’s not an easy or rapid process.

By initiating the change in CEO, the founder CEO actually increases the likelihood of continued involvement in the company at a management or board level. In resisting the change, they guarantee that eventually they will be pushed out, and there will be an unpleasant transition. In the worst case scenario, that transition tanks the company, and the founder CEO loses everything they hoped to gain in terms of both financial wealth as well as ego support for the creation of their company.

As the startup grows, this is a significant problem for other founders as well. It is unlikely that they are still the best person for the job they were given and the titles they received. They, too, must self-assess and be ready to yield to a person who has more talent to handle either the existing challenges or the coming challenges of a rapidly growing company. If they don’t see it, then making them see is the job of the CEO. A founder CEO struggling with this decision proves yet again to the board that they aren’t the right person for the job.

Similarly, there are likely to be non-founder initial hires who’ve been elevated to higher positions than their skills justify. They may also be paid more than they should be based on their skills and talents. The founder and supervisors of such staff must be able to accept the potential replacement of such individuals even if they are family members. Resisting that replacement merely delays the day of their replacement. This again proves that there are leadership problems at a higher level. The positions of the initial hires are not guaranteed. New leadership will inevitably proceed with staff changes that are required based on company growth.

The message above is not one of hopelessness but the need to acknowledge that the company is growing and that, in today’s business market, change will come quickly. With growth comes change, and every founder in every position should recognize the high likelihood that, over time, a more qualified person should take over their position.