Co-founder CEOs often need to step aside

Clay Collins' transition from co-founder and CEO to chairman of the board of the fast-growing Minneapolis company Leadpages could not have been managed any better.

August 3, 2017 at 2:42PM
Clay Collins, co-founder of Leadpages, who handed over chief executive duties to colleague John Tedesco earlier this week. (Evan Ramstad/The Minnesota Star Tribune)

Clay Collins' transition from co-founder and CEO to chairman of the boardof the fast-growing Minneapolis company Leadpages could not have been managed any better.

The blog post Collins wrote explaining it all was flawless as he described how he was a good CEO up through $20 million in annual revenue. The company has already shot well past that.

The effective date of the handoff to Chief Operating Officer John Tedesco was Tuesday, but as a practical matter the transition was already well underway. Tedesco had been leading the executive meetings and already had most of the organization reporting to him.

It's worth noting, though, that a carefully planned transition like this isn't an event but a process and one that could still slip the rails. A lot depends now on how co-founder Collins chooses to spend his time as board chairman of the marketing technology company. Hopefully he spends a lot of it out of the office.

The challenge of how to best lead a young company as it matures into a valuable business has spawned a lot of books, blog posts and articles, but the lesson that best applies to a situation like this is hardly a new thought. It's been around at least since "The Canterbury Tales" of Geoffrey Chaucer in the 14th century: "Idle hands are the devil's workshop."

The primary challenge for founders who step aside as the boss is that they usually don't simply disappear, as would be common when a CEO steps aside at a large company.

More than six out of 10 founder CEOs of technology start-ups who get forced out by their own boards remained involved in the business. In three quarters of situations where a founder steps aside as CEO voluntarily, the former CEO actually remains a part of the executive team.

These observations come from author and professor Noam Wasserman, now with the University of Southern California. Yet from his book, "The Founder's Dilemmas," it's not completely clear how all the former founder CEOs actually keep their days filled with productive work.

Wasserman described an often awkward process of finding the right full-time job for the former CEO, particularly if key roles like the chief technology officer's job are already filled by a strong performer. That seems to be why it's common to see a founder take the title of board chairman.

But by hanging around the office, even the most well-intentioned founder has the opportunity for almost endless mischief.

Chip Pearson is a co-founder and board chair of software firm Jamf, stepping out of day-to-day leadership as co-CEO two years ago as the co-founders turned over the job to a professional manager. What he's doing now sounds a lot like what Collins said he would do at Leadpages, and Pearson still has an office at Jamf's Minneapolis headquarters where he may work a few days a week.

In a nutshell, Pearson said his job now is as adviser, not decisionmaker. If approached by an employee he knows well, and there's a lot of them still at Jamf, he makes a point of carefully listening. If he has thoughts about a corporate decision, he may share them — with the CEO.

He advised "what not to do" as a former CEO is to join in the water cooler grumbling, or worse, lead it.

This sounds like common-sense advice for any board member looking to do a good job. It's admittedly very difficult to imagine a member of the U.S. Bancorp board wandering unescorted through the headquarters, dropping by a meeting uninvited to deliver a little critical commentary on the company's strategy.

Collins is certainly aware of Wasserman's work on the pitfalls for start-up founders, quoting in his blog post from Wasserman's best known paper. Called "Rich Versus King: The Entrepreneur's Dilemma," this piece was based on Wasserman's sort of the data on nearly 460 technology companies.

Wasserman concluded that the founder CEO had a choice — keep control of the company or get rich. That is, the founder could remain as the boss and likely stifle the company's growth or get out of the way and see a very promising start-up blossom into a really successful company. And the founder's stock could grow into a fortune.

To achieve both, becoming another Mark Zuckerberg of Facebook, is such a long-odds quest that it's silly to even seriously talk about it. A lot of entrepreneurs apparently don't know that, which helps explain why most of the founder CEOs in one of Wasserman's studies had been fired by the very companies they had founded.

Give it a little thought and it seems like an obvious observation that the job of CEO at a company with 10 employees bears no real resemblance to the day-to-day work of leading a company of 2,000 people.

One of Wasserman's most interesting observations was that the superstar founder CEOs are the ones who most quickly work themselves out of a job. These were the founders really good at understanding what potential customers needed and rallying a small group to come up with a solution that really worked — and that made money for the company.

Once these first big steps were made — product launched, customers coming on board and sales beginning to really accelerate — that's when the CEO needs to get good at assembling an organizational structure to keep the now much-larger group of employees working effectively.

To his credit, Collins at Leadpages acknowledged that Tedesco is simply going to be better at what needs to be done now as CEO.

The company "won't be the exact same thing as it was under my direction," Collins concluded. "That's a good thing."

lee.schafer@startribune.com 612-673-4302

about the writer

about the writer

Lee Schafer

Columnist

Lee Schafer joined the Star Tribune as a columnist in 2012 after 15 years in business, including leading his own consulting practice and serving on corporate boards of directors. He's twice been named the best in business columnist by the Society of American Business Editors and Writers, most recently for his work in 2017.

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