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  • taiguy232 taiguy232 Jul 14, 2013 12:34 AM Flag

    Why Founders Get Ousted

    Some snippets from an interesting article I stumbled upon:

    Noam Wasserman, a professor at Harvard Business School, has been looking at the subject of founder succession for nearly a decade. In 2003, Wasserman published his landmark study on the topic titled "Founder-CEO Succession and the Paradox of Entrepreneurial Success,"

    "The percentage of founders that stay on with the company for extended periods of time as the CEO are very low especially in high-potential ventures ... People like Bill Gates and Larry Ellison, who are able to lead their companies for quite a while, get all the attention because they are rare, not because they are typical,"

    "when founder-CEOs do really well, that also increases the chances that they're going to be replaced with an individual skilled to manage the growth, Wasserman says. In short, it's a lose-lose position for start-up founders; If they perform poorly they're out, and if they perform very well, they're out too."

    "what helps a founder become so successful in launching a company—his or her passion—can also detract from big picture managerial skills it takes to scale the company. "

    "The challenges within the company change so dramatically that the person who was best-suited to lead the early stage of company development is no longer the best person to continue leading the company. Now, the product has to be sold: You have to create a sales organization, manage multiple functions, deal with customers, handle more complex financial issues, and deal with a very different set of challenges for which many founder-CEOs are not equipped…it is precisely their success that has increased the need to replace them at this point."

    "founder succession happens most often when the venture capitalist—who has most likely invested with the company under the stipulation that he or she can remove the founder if necessary—feels the company needs to scale faster. "

    Sentiment: Buy

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