Governance

A Cure for Founder’s Syndrome

The co-founder and former head of Twitter, Jack Dorsey, officially returned to the top job last month. The company’s stock rose by 7 per cent. Welcoming the appointment, the director who led the search for the "new" chief executive declared: "As a founder and inventor of the product, Jack knows more about Twitter than anyone else."

What a difference five years makes. In 2010, despite knowing more about Twitter than anybody else, Mr Dorsey was ousted as its original chief executive. His co-founder told Vanity Fair of his dumping: “It wasn’t so much that the ship was sinking, but more like ‘Great job, Jack – we’ve got to up our level of experience and lay some foundation for a much bigger organisation.’” Now, with greater experience under his own belt and a second business to run in the form of Square, Jack’s back.

This is a familiar storyline. Steve Jobs was pushed out of the company he had cofounded, Apple, in the 1980s. He returned as its chief executive in 1997 and oversaw one of the most successful transformations in corporate history. In 2008, the man credited with turning Starbucks into the caffeinated powerhouse we know today, Howard Schultz, returned as chief executive after an eight-year absence. He made some big changes and closed an array of stores, and the company’s stock has tripled in value since his return. Mr Schultz may not have founded the Starbucks brand, but he created the coffee house concept we associate with it.

What these stories demonstrate is the unique, almost mystical aura that the founder of a company carries. Even after years away, the return of somebody who was there at the beginning – even if they were subsequently spurned – to a position of authority can boost morale, focus and, so it would seem, investor confidence.

In the Middle East, we almost sense this intuitively because of our relationship-based culture and the prevalence of family businesses. In any industry, a steady hand and a familiar face can bring human values such as trust and loyalty to what might otherwise be strictly commercial transactions. This power often lives exclusively with the founder, though, and can fade the further you get from the original source. In fact, a recent McKinsey and Gulf Family Business Council study suggests that only 15 per cent of GCC family businesses making the transition from the second to third generation of leadership are expected to survive.

However, founder involvement can be a double-edged sword. History is littered with companies that ended up relying too much on the instinctive judgment of their originators, shutting out fresh ideas and persisting with failed strategies. Rather than captains that went down with the ship, these were the ships that went down with the captain.

The problem is so common that we even have a name for it. It’s called Founder’s Syndrome, and refers to a situation when the creator of a start-up, established company or non-profit retains unchecked power over strategic decisions. Rather than being a source of energy and inspiration, a founder who holds on too tightly can end up holding their company back – or worse, pulling it down. That is why, according to estimates, more than 60 per cent of start-ups receiving venture capital funding are required to bring in more experienced management to take them to the next level.

For businesses, this raises an important question – how do you harness the knowledge, authenticity and trust that a founder brings without going too far and falling victim to Founder’s Syndrome? The key to finding the right balance is in a company’s governance processes.

First, businesses of all sizes can benefit from having a variety of voices feeding into the decision-making process at board and executive level. This includes women, young people – who represent our largest demographic – and ideally people from outside the founder’s inner circle. Those who are prepared to disagree and scrutinise ideas are particularly valuable, and often in short supply around a commanding founder. Certain choices need to be made at the highest level, and a founder’s instinct will often be the sharpest in the room, but the establishment of a diverse brain trust can help improve the quality of those decisions.

Second, founder chief executives need to build an executive team that they trust to make day-to-day business calls. If nobody is empowered to make a decision, or a founder micromanages his or her most senior lieutenants, a company is on the fast track to inertia. Strong internal policies and proper management processes can allow senior executives to confidently get on with their jobs under the high-level guidance of an inspirational founder chief executive.

Finally, all businesses – particularly those with an identity built around a strong founder – should always be thinking about succession planning. The founder must get behind this process, because others will only take his or her lead. It is nice to be considered irreplaceable, but it is far better to be actively developing candidates with the skills, experience and understanding of the company to carry on your legacy when the time is right.

We all have visions of coming up with the next great business idea. We rarely think about the challenges that can follow, especially for those whose light bulb moments become shareholder property.

So the next time you find yourself in a Starbucks, reaching for your iPhone to compose another tweet, consider the role that founders have played in the history of each of these companies. And remember that even the most ubiquitous brands in the world have relied on proper governance to strike a balance between a founder’s authenticity and the value of fresh perspectives.

As featured in The National on 1 November 2015.

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