Vinod Khosla, the billionaire who founded Sun Microsystems shares his thoughts on TechCrunch about when it’s time for founders to consider replacing themselves as CEO for the sake of the company they started. This is Khoslas's article appearing on TechCrunch:
Unfortunately, unreasonable founders sometimes get in the way of good execution, especially when a company gets large enough to need structured management. It’s not always possible to keep the founder as CEO, and the best indication of whether a company needs a new CEO usually comes from the management team. New team recruits may not want to join, old ones may indicate a desire to leave or get disengaged, and the whole team may approach a board requesting a change.
The first stage of a company’s growth is one in which leadership generally happens in a “hub and spoke” style, where the leader/CEO/founder(s) is (are) at the center of most decisions and integration among functions happens mostly by the CEO. A CEO and his or her cofounders operate like a “kitchen cabinet” to make most decisions relatively informally and outside any normal process. This is often what I like to call the “feel” stage, or “make it up as you go along.” There are usually fewer than 30-40 employees, and many things are in flux as the collision of the founders’ vision and the real world is still working itself out.
Stage two of a company’s growth requires more integration, coordination, and sharing of leadership with the team as they begin to work cross-functionally and define processes and shared metrics. This is generally the stage where you want to start surrounding yourself with more senior people – both those who know the space, as well as those who bring experience from analogous areas to help you disrupt it. Usually, it’s best to have a mix of these different backgrounds, working well in “managed conflict” or “organized chaos.” At this point, you have to ask yourself as a founder – can you do this CEO job?
Stage three of growth occurs when your business requires more functional depth and more consistent, integrated execution. Business processes need to be more defined and predictable, and the CEO becomes more of an orchestrator to make sure that each leader is driving functional excellence and all the functions are integrated across the organization. This helps to meet overall goals in keeping with an agreed upon vision.
As the company grows, you should ask yourself, what are you, as the founder, doing well and what don’t you have time for? Can you bring in a “hired gun”/partner to cover some of the time-consuming but less critical/less top-of-mind/less well-executed aspects of what you do? Maybe the right person will even help you stretch your vision.
A good leader should strive to have 50 percent of their time free at the beginning of each week. This way, you can be proactive about where you want to lead instead of being reactive and buried when urgent events, emails, calls, and requests pop up. At some point, you may realize that you do not have the skills or experience to lead the organization on to its next stage of development, and/or it may be moving so fast that you don’t have the time (or often the interest) to develop them. This isn’t failure – it’s success!