Making the shift from founder to leader

21 November, 2022

As companies scale up, founders need to find their way to become effective leaders.

Last weekend, I read Michael Dell’s autobiography, “Play Nice But Win”, where he writes about the battles that defined him as a leader. Along with the engaging stories, the subtitle of the book intrigued me – “A CEO’s journey from founder to leader”.

Apart from Michael Dell, there are many founders like Bill Gates, Phil Knight, Jeff Bezos and Howard Schultz who had exemplary track records of superlative value creation over many years as CEO’s.  Research by Bain & Company suggests that founder-led companies outperform by 3 to 1.

Yet successful founder CEOs are a rare breed. Professor Noam Wasserman who has studied founders for many years found that 4 out of 5 entrepreneurs are forced to step down from the CEO role.

Among the many challenges that entrepreneurs have to surmount, the transition from a founder to leader is one of the hardest. Industry veteran John McDonnell, who has served as board member and investor in several organisations, says in his Forbes article: 

One truth I’ve learned is that a founder isn’t necessarily the ideal leader going forward. Entrepreneurial invention isn’t the same as leadership skill. 

Conviction, hustle, boldness and passion are the hallmarks of successful entrepreneurs. Building and sustaining an organization though requires additional muscles. Along with developing new skills, founders also need to make sure that the strengths that made their start-ups successful don’t become liabilities as their ventures scale up. 

So, as their companies get into the adolescence stage, founders find themselves at a crossroads – what role to play? Some choose to step back and hand over the reins. Many prefer to stay on in an operating capacity, either as CEO or in a specialist role leading one or more functions.

To succeed at this next stage, founders need to make the transition from founder to leader. Those who won’t (or can’t) will become a bottleneck that holds the company back. Eventually, they may even be forced to exit by investors or the board. 

This week, my message focuses on how to navigate the shift from founder to leader. Here are 10 recommendations for you to consider as your start up scales up:

1. Develop self-awareness.

Set your ego aside. Take a long hard look in the mirror. Are you truly interested in running a larger company? Do you have the necessary skill set? Or can you develop what is needed? As McDonnell observes:

It’s clear that even Steve Jobs, as brilliant as he was with technology, was less comfortable with people. With more insight into himself, he may have come to that realization on his own. If he had proactively turned the management of the business over to someone else with proven leadership skills in a larger organization, who knows what else he could have achieved?

Do an honest assessment of what your company needs to succeed in the next phase? In her Forbes piece, start-up investor Miruna Girtu offers excellent advice:

Self-awareness is an ongoing practice that founders should embrace. Constantly assess your role – what are your strengths, what are your weaknesses, what do you have to learn to be better at, and what you can delegate. What do you love and what do you hate doing?

2. Be clear about your role and what you are accountable for.

If you are the CEO, then the role is quite clear. However, if you are playing a functional role, be clear about your responsibilities. What are you accountable for? What are your deliverables? How will your performance be evaluated? Separate your position as a shareholder versus your role being part of the leadership team. You can’t have one set of standards for the rest of the team and one for yourself.

3. Hire right and integrate them well.

As your company grows, you need to determine the skill sets required for the next phase, figure out who to hire when and for what and how to manage team members who started with you.  Depending on the stage of the company, founders have to decide whether to bring on (a) specialists vs generalists, (b) experienced vs. inexperienced hires, or (c) people from larger companies or similar sized companies. Your choice of hiring is critical for the company’s future success. As you sort through these decisions, my advice is to bring on doers, who are comfortable with rolling up their sleeves and getting their hands dirty. Make your team diverse. Avoid the temptation to hire people who think and act like you.

It is not sufficient to just make the right hiring decisions. You have to make sure that the new hires are integrated into the organisation. Founding teams in early stages tend to be very tightly knit. Your new hires will come from different backgrounds. Be proactive in assimilating them well. Integrating your hires well is even more important than hiring the right candidates.

4. Unlearn old habits.

As your company gets larger, some of the informal ways of working that enabled you to thrive in the early stages can become a big impediment. You need to leverage the benefits of scale while remaining agile. So put the right structure, processes and systems in place and adapt accordingly.

5. Solicit honest feedback.

Along with unlearning some of your old habits, seek and act on feedback. Founders who surround themselves with “yes-people” will set themselves up for failure. The journey to becoming a leader requires ongoing learning and course-correction. Reach out to your team members for feedback. Develop the humility to ask them on how you can improve. Consider having someone do an in-person 360-degree feedback that can provide you with valuable inputs. And be willing to act on the feedback and make changes. Being coachable is very important if you want to become a leader.

6. Develop better listening skills.

Founders are generally the loudest voices in the room and take up most of the airtime. Be present and pay full attention to other team members during discussions. Watch your “listen to speak” ratio (80:20 ratio could very well apply to this as well). Ask probing questions. Don’t interrupt others or drown them out. Shape a culture where all voices in the company and not just yours are heard. 

7. Learn to let others do it better than you.

As a founder, you are used to deciding on your own and controlling everything. As you bring on senior team members, you need to give them space. Overnight, these new team members won’t learn your business. And perhaps they will never be able to develop the same perspective you have. However, think about how they can amplify the work and bring in new perspectives, that will make the organisation better. Learn to trust your team. Treat them with respect.

Many founders are guilty of holding on too tight. Does every single decision still need your approval? Do people constantly come to you for instructions? Are you spending an inordinate amount of time in the weeds? As you move forward, it’s vital to start focusing on mission-critical areas that you need to focus on – and delegate the rest. Be clear about what decisions you will take. Make better use of your time – where and how will spend your energy? What priorities will you focus on? Define clear expectations for yourself and your team. Empower your team members so they can do their jobs. Stop interfering in everything and micro-managing. If you don’t want to change your ways of working, then why even bother to hire senior team members?

Reid Hoffman, co-founder and former executive chairman of LinkedIn, makes an astute observation: 

Many founders are so talented that they have a hard time letting go of tasks once they start performing them. They often think things like, “Will someone else be able to do this as well as I can?” The answer is almost certainly, “No, especially not at first, but they’ll probably figure it out over time, just like you did.” 

Start-ups get off the ground thanks to the individual talent and hard work of founders like Mark Zuckerberg and Brian Chesky, but they blitzscale into giant companies like Facebook and Airbnb because these founders learn how to delegate.

8. Raise your communication game.

As a leader, you need to inspire and motivate people. As the organisation scales, so must your communications approach. You need to work harder to communicate the company’s vision and values, especially as newer team members come on board. Many of the new hires will not be as familiar with the company’s direction. You will need to dial up your level of engagement.

As a founder, you bring a strong personal and authentic touch to the organisation. Find ways to sustain that even when the company becomes larger. When the company is small, the founder is usually very accessible. However, many founders get distant from the front line. Ensure that you find ways to remain connected with the team through regular check-ins, one on one discussions and town halls.

9. Invest in your personal learning and growth.

Identify a few key skills that you need to develop. Do you need to reinvent yourself? Have a systematic personal scale up plan. Remain curious. Seek out experts to speak with. Find a mentor who can guide you. Carve out time for reading and reflection. It is important for you to accelerate your learning and remain relevant as your company grows.

10. Hone your leadership style.

Ali Rowghani, a partner at Y Combinator, notes that great founder-leaders come in all stripes: 

Some were introverts, some were extroverts, some were technologists, others were storytellers, some were diplomatic and very calm and others were emotional and a little bit hotheaded. Some were nerds and some were cool kids.

Given that there is no single archetype for success, Rowghani advises resisting the temptation to imitate the greats: 

You can’t try to imitate Steve Jobs and hope that people will just kind of think that you are a Steve Jobs… You can only be yourself in the end because humans are very good at detecting inauthenticity… We don’t generally follow or trust those that we find inauthentic. 

At the same time, while there is no one single model of leadership, successful leaders share common attributes. Figure out which of the tips in this post apply to you and what changes you need to make in your approach to make the transition from founder to leader.

Great founders don’t automatically make great leaders. The person who takes a start-up from 1 to 100 employees might not be the right one to take it to 1,000 employees. Founders who continue to lead their companies as they scale up will need to develop the appropriate leadership mindset and skills. Cultivating self-awareness, embracing honest feedback and empowering team members are all vital steps in this journey.


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