Founders Do Not Always Become Good CEOs: Here Are the Reasons Why

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Mark Zuckerberg, Jeff Bezos, Jack Dorsey, Elon Musk, Bill Gates. These five geniuses created a product that the public needs, established their own companies, and became chief executive officers (CEO).

It might seem only natural that the company’s founder will lead the company, but that is not always the case. While the names above were able to shepherd their companies successfully, others floundered.

Being the Founder Does Not Make One a Good CEO

Over the years, you might have heard about founders being booted out of their roles as CEO. Mike Lazaridis, the founder of Blackberry, had to step down from his leadership role after the tech company lost hold of the market when Apple released the first-ever iPhone. Uber’s Travis Kalanick was accused of sexism and sexual harassment by multiple people and had to leave the company he founded.

However, Dorsey was once fired as the CEO of Twitter in 2008 because he reportedly was more interested in his hobbies, particularly fashion design and yoga, than running the company. He eventually was brought back into Twitter in 2011 and then as CEO in 2015.

Becoming an effective leader, especially of such a massive company, is not easy. People seek guidance from services like Miick, which trains aspiring leaders, to learn how to manage teams better and guide the company toward the path of success.

Businesses Do Better with the Help of an Outsider

While, in the tech realm, founder-chief executives seem to be plenty, they are more of an exception than the rule in the real world. A previous study claimed that businesses run by their founders were noticeably less productive than those that hired an outsider — an expert — to lead the company.

The study conducted by professors from Harvard, Duke, and Vanderbilt analyzed 13,000 companies from 32 countries. They found that founder-run businesses were, on average, 9.4% less productive than those that had outside help. Companies that replaced their founder-CEO improved.

Part of the reason why founders do not become CEOs is funding. An investor is unwilling to invest their money in a company run by someone who has no experience running a successful business. In some cases, investors make hiring an outsider as CEO a condition to granting funding.

However, most of the time, it has to do with skills. While the founder has the technical knowledge involved in developing a product, they might not possess the necessary skills to market and expand a company.

The Idea of Exceptionalism

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Founders are, understandably, attached to the company they founded. They think of their company as their child. After all, they gave birth to the company and worked hard to develop it into a profitable business.

Like all parents, they also think that their company will succeed where others failed.

Research conducted in 1988 asked 3,000 entrepreneurs what are the odds of their business succeeding and failing. Most of them (81%) believe that their business had at least 70% of succeeding, and one in three of the respondents believe 100% that they will not fail.

This, of course, is far from reality. The rate of failure of small businesses is 50% after five years and 70% after 10 years.

Not everyone will be successful, but all of them believe that they will be. Confidence is not a bad thing, but it might prevent people from preparing themselves for the hardships that they and their business will encounter in the future.

They Make Poor Managerial Positions

Founders who do not have a background in managerial positions will struggle when appointed CEO. They often do not have the capability to look at a certain situation objectively. They may instead let their emotions get in the way of making decisions that benefit the company in the long run.

Some CEOs also partake in nepotism. They founded the company and, therefore, they believe they can do what they want. So, instead of going with a candidate with all the skills and background that the company needs, they hire a friend or a family member who may not be the perfect fit for the position.

Decisions like these can take the company down. First, it demoralizes the staff, knowing that someone who might be higher than them on the corporate ladder is not qualified for their position. ; It also prevents the company from getting the right people to apply their expertise and knowledge into making the company successful.

A Limited Strategy

A founder may have a roadmap built to make a company a success but, after reaching one goal, where else would they take the business they founded? Although they may have been good as chief executive of a startup, once they start to scale on a nation- or worldwide scale, they may lose sight of their direction. An outsider, who has experience growing other businesses, knows exactly what to do when a company starts expanding.

This is not always the case. A founder can become a good CEO, too. However, it takes a great deal of love and belief in the company to recognize when a person no longer has the capacity to herald the business toward newer heights.

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