
Founders are terrible CEOs - abuteau
https://work.qz.com/1125919/we-finally-have-proof-that-visionary-founders-make-the-worst-ceos/
======
haaen
The one kind of people who aren't named in this article: investors. Ben
Horowitz of A16Z explained why A16Z prefers to invest in founder-led
companies.

(...)

The macro reason: that’s the way most of the great technology companies have
been built

(...)

Professional CEOs are effective at maximizing, but not finding, product
cycles. Conversely, founding CEOs are excellent at finding, but not
maximizing, product cycles.

(...)

Innovator’s requirements – what does it take to find the product cycle?

So where did Jobs get this “founders courage” and what is it? In addition to
general brilliance, we see three key ingredients to being a great innovator:

1\. Comprehensive knowledge

2\. Moral authority

3\. Total commitment to the long-term

Great founding CEOs tend to have all three and professional CEOs often lack
them. Here’s why.

(...)

[https://a16z.com/2010/04/28/why-we-prefer-founding-
ceos/](https://a16z.com/2010/04/28/why-we-prefer-founding-ceos/)

~~~
gumby
> The one kind of people who aren't named in this article: investors.

Just to clarify, you mean private company investors. Typically a company goes
public as part of entering a different "life stage" and its operation and
needs on either side of that transaction are different.

Which, BTW is why there are so few "crossover" funds (like TCV) that invest in
both private and public companies: the things you look for are quite different
(in operations, risk, and return).

(I count the private equity guys like Silverlake and Carlisle in the "public"
side since they invest in companies that are already public and have similar
op needs to public companies).

------
awakeasleep
How many founders start their company as a way to enrich capital holders or
investors? That’s the job of a CEO.

A founder is supposed to think about stuff that often competes with that, like
making employees feel motivated or delivering value to customers.

Hell, even building a healthy company is often at odds with capital return. We
see daily examples where the ‘right’ thing to do (from capitals perspective)
is to sell off all assets, submerge the company in debt, and abandon ship.

~~~
Bartweiss
> _A founder is supposed to think about stuff that often competes with that,
> like making employees feel motivated or delivering value to customers._

Honestly, I think this explains why sidelining founders early has such a bad
track record. They may not be expert managers, but they have goals consistent
with building for the long term. (The ones who make it to successful
companies, anyway.)

A lot of the horror stories from the dot com era are of visionary-but-
unskilled CEOs being replaced by experienced executives from big 90s
companies. And so management improved and waste was cut, but the company
promptly became adversarial with its customers and even employees. Without the
capital reserves and institutional power of BigCo, weak talent and angry
consumers drove them into the ground. (I vaguely suspect this is why tech
companies this cycle have been so slow to rationalize around perks - it's
worth overspending on worse-than-cash offerings just to ensure you don't go
too far the other direction.)

I've heard it said that at a certain size, companies stop being entities in a
market and grow markets inside the company. Certainly, many large companies
appear to view their employees and consumers as enemies. (e.g. Walmart's view
on staff, EA's view on game buyers.) So CEOs who _don 't_ operate like that
after winning are framed as 'bad' executives, while startups that bring in
BigCo thinking too soon destroy all of their advantages.

------
robterrin
Did nobody read the underlying research of the centerpiece study supporting
this hypothesis? How did this headline and the article get written?

"We investigate these issues using the World Management Survey (WMS), an
international data set providing detailed information on the management
practices for a large sample of medium and large MANUFACTURING [emphasis
added] firms (Bloom et al. 2014; Bloom and Van Reenen 2007) in thirty- two
countries."

Sure, it seems relatively believable that large and medium sized manufacturing
firms are better run by professional managers than their original founders,
given the dynamics of that particular industry. Medium and large manufacturing
firms require relatively common knowledge, have repeatable processes, are high
volume/low margin, use commoditized inputs and outputs, as well as many other
factors that make it ripe for bean counting as opposed to risk taking and
vision. This is a straw man if I ever saw one.

[Edited typo]

~~~
j45
Many professional CEO's tend to focus on building moats around the business,
to slow down innovation or disruption to protect what they have while today's
product CEO's are far more into disruption.

------
tlb
There's no valid way to get a statistic on how founder/professional CEOs cause
success.

Using the methodology I think they use, the statistics are dominated by the
fact that only fairly successful companies are able to hire a professional CEO
at all. A company that starts and goes nowhere (perhaps due to the idea being
bad) is always in the founder-CEO column.

It's probably also true that companies with multiple offices are more
successful than companies with a single office. And companies with a superbowl
commercial are more successful than the average company without one. But that
doesn't imply you should do either for your early-stage company.

------
dpflan
A few recent HN posts and articles about CEOs to augment your reading of this
post:

_

1\. _How to Be a C.E.O., From a Decade’s Worth of Them_

>
> [https://news.ycombinator.com/item?id=15581087](https://news.ycombinator.com/item?id=15581087)
> [nyt | 14 days ago | 74 comment]

> [https://www.nytimes.com/2017/10/27/business/how-to-be-a-
> ceo....](https://www.nytimes.com/2017/10/27/business/how-to-be-a-ceo.html)

_

2\. _The Best-Performing CEOs in the World 2017_

>
> [https://news.ycombinator.com/item?id=15640548](https://news.ycombinator.com/item?id=15640548)
> [hbr | 6 days ago]

> [https://hbr.org/2017/11/the-best-performing-ceos-in-the-
> worl...](https://hbr.org/2017/11/the-best-performing-ceos-in-the-world-2017)

_

...and the research article from this post:

>
> [http://www.people.hbs.edu/rsadun/AreFounderCEOsGoodManagers....](http://www.people.hbs.edu/rsadun/AreFounderCEOsGoodManagers.pdf)

------
cocktailpeanuts
To the early stage startup founders out there who read this and think:

"Hey, from today I think I'll try to become a better manager, let me go pick
up that management skills and MBA book"

Please don't. Just be yourself. While working on a startup I had somehow
decided that I "need better management skills" when it was barely a small
startup and I should have been focusing more on product and product only, I
read too many business books and became a "great manager".

A "great manager" is totally necessary once the company reaches certain level,
but for most early stage startups, it will kill you. Focus on the vision and
make it top priority to get to that vision even if people think you're being
irrational.

I'm not saying you should be an ass, but just saying don't invest too much
time trying to become a "great CEO" after reading these articles, because
that's the last thing that matters in early stage startups. CEO doesn't exist
in early stage startups, only irrational founders do.

~~~
Bartweiss
> _let me go pick up that management skills and MBA book_

If a founder _were_ going to devote time to management skills, I wonder what
the most beneficial topic would be?

My first two guesses are a decent guide to hiring (if one exists), and an HR
guide to crisis management. CEO-style leadership is impossible in a startup,
so it seems like hedging against crisis is the best bet. If you can slightly
lower the odds of a bad hire or internal schism, that's probably higher-value
than any marginal improvement.

I'd definitely be interested to hear other thoughts, though: whats the best
rapid improvement available?

~~~
cocktailpeanuts
Assuming that you are working with smart people, they follow you NOT because
you read a leadership book and run some good leadership tactics on them. They
follow you because they "choose" to believe that you know what you're doing in
the context of your startup. Remember, they are smart people. And many smart
people have strong bullshit detector.

People followed Bill Gates and Steve Jobs even though they were assholes not
because they were "great leaders", but these smart people chose to believe
that these founders had a great understanding of the landscape and can
execute.

Therefore in my experience the most helpful books were those that gave me
insights on how the world around us works since that helps with your world
view. It's always great to have a higher level perspective.

For example, you could have looked at the chatbot fad last year and think that
chatbots are the future, and went all in. Or you could have thought deeper
into why the fad was taking place and work on a deeper problem. This type of
ability is what attracts smart people to work with you.

This is only possible if you have a deeper understanding of the world. So read
more philosophy and science books and more books that give you a better
understanding of the world, than shallow business books.

------
Juliate
Related read (with a grain of salt, always): CEOs don't steer.
[https://www.ribbonfarm.com/2017/11/09/ceos-dont-
steer/](https://www.ribbonfarm.com/2017/11/09/ceos-dont-steer/)

------
edf13
I'll fix it...

"Some" Founders are terrible CEOs of "Some types of companies"

~~~
devmunchies
Exactly.

> _Founder CEOs were by far the worst type of CEO_

That's a hyperbole.

------
maxxxxx
You have to admire people like Larry Ellison or Bill Gates who have the
bandwidth to lead a company from zero to large successfully. They have a very
rare set of skills.

~~~
rwc
I agree, and my comment is not to diminish yours in any way.

But...

Perhaps it's confirmation bias, it seems more and more comments on HN have
acknowledged the inescapable role of luck in the success of these leaders'
ascent.

It's difficult to reconcile, though, because we all want to be in control of
our own destinies. Articles that lionize the Ellison/Gates/etc. of the world
just feed that "I can do it too" mentality.

How many people here actually do have the capacity to be one of these high-
caliber leaders but never have the opportunity because the planets don't align
just right?

~~~
joshmarlow
Playing on your point of luck - I recall reading in a biography of Gates that
his mother was on a charity committee with the exec at IBM that was tasked
with outsourcing development of an OS for the IBM PC. Anyway, they got the
contract, provided DOS to IBM - and compatible vendors - and the rest is
history. We don't know - of course - how much that pre-existing relationship
influenced IBM's decision and we don't know if Microsoft would have had the
explosive growth they did without that contract, but it definitely looks like
the stars aligned.

------
golemotron
Worker productivity and managerial efficiency are the metrics they use in the
study.

From this I conclude that business school professors are terrible at picking
success metrics.

------
pesenti
GAFAM - today the five largest companies by market cap - are all about
founders CEO. So how do we reconcile these two sets of facts?

------
gmaster1440
I have not read the entire underlying study behind the article but I feel the
headline may be a bit misleading.

From the article:

"But founders’ poor success rate as CEOs also has to do with the kind of
personality that’s compelled to start a company in the first place. People
often start companies precisely because they want the freedom to run things as
they wish—which sometimes includes poor managerial decisions."

This may be true for some founders but I'm struggling to see whether this
represents a substantial sample size. My impression is that people often start
companies because they want to go through the experience of starting a
business and seeing it grow and succeed. Freedom may be a part of it, but this
article seems to suggest it's a dominating variable that ultimately leads to
the demise of the founder(s) which I'm struggling to see.

~~~
andrewingram
Some people want to run a business, some people see a big financial
opportunity, some people have a vision of something they want to exist in the
world. All 3 of these could lead to someone deciding to start a business, but
for the more visionary types, the fact that it's a business might just be
considered a necessary evil, rather than the goal.

~~~
gmaster1440
Gotcha, I misread it then, seems like they're not implying any substantial
sample size as much as recognizing the flaws of a particular motivating force
behind starting a company.

------
xbmcuser
For the stock market founders don't make good ceo in most other metrics they
are probably the best to build companies. In today's world it has all become
about the capital appreciation for stock holders to the detriment of
everything else. A company that has around a billion in revenue and just 1-2%
profit with few growth prospects is considered bad but a company that has a
billion in revenue but 5-10% loss and is growing revenue by 10-20% is
considered good.

------
j45
Can a founding CEO learn to be a professional CEO?

What if a product CEO first spent time learning to grow and scale businesses
via consulting or working in a professional capacity, and then walking away
from it to start something?

It seems likely greater number of future CEO's will come from the path of
CTO'S who have learned to touch, support and grow all areas of the business.

------
not_that_noob
Keep in mind that the smart founders all hand over daily control to top
managers at a certain point - FB->Sandberg, G->Pichai, Msft->Nadella.

The best strategy for founders from these data points seems to be to retain
control via stock ownership, but recognize your limitations and bring in good
managers.

------
s_kilk
I'd suggest that the kind of people who get things started are often not well
adjusted to the kind of guard-labour that's so often typical of management and
C-level roles.

------
mr_monkeywrench
You’d expect such findings from an entity churning out corporate workers —
MBAs

Reaching for large jar of salt

------
dalbasal
There’s something you’d probably need to describe in terms of “risk” if you
were to describe it in business school language at all.

..something about owning your own risk-reward. The irrelevance of whether or
not a failure/success was yours, bad luck or whatnot. The whys of success
aren’t as important to a CEO, at least not outside of his own head. Founders
and professionals face totally different incentives, different selection
criteria.

Professional managers, are constantly assessed. Their success depends others’
perception of them. Career incentives are intertwined with a system of
“winning” regardless of whether a company company wins, in a lot of cases. If
a company doesn’t succeed, a professional CEO will probably get another CEOing
gig… if the failure doesn’t reflect too badly on him. CEO actions need to be
justifiable. Failing despite doing the right thing is _always_ better than the
other kind of failure, much better. The Travis Kalkanik failure is a career
killer for a professional exec, regardless of successes. The John Scully kind
of failure… that’s not even failure.

A founder-CEO typically doesn’t care about that stuff, what the ultimate
narrative will be.

Imagine a founder neglects some basic aspect of business. Say HR stuff. No
periodic assessments. No employee development… A mess where some people do
nothing… Lets say it’s bad, visible consequences.

From a founder’s perspective, this _might_ be meaningless. If we manage to
make thingX, we’ll be successful. If not, we’ll fail. That “problem” doesn’t
help or hurt my chances much, so I don’t care about it. It’s just mess. Right
or wrong, if the CEO doesn’t see The Problem as something standing between
here and ThingX, then who cares.

To a professional CEO the same problem represents a massive target on his
back. If we fail, I fail. _The Problem_ will be a newspaper headline. The
board will hear. The narrative of failure will include “bad CEOing” in a nice,
narrative package. Even if we succeed, the stink will still stick to me.

I think this results in more consistent performance, across any metric where
performance is consistently measurable.

Consider how this article treats“CEO Performance:”

 _”a team of professors at the business schools of Duke, Vanderbilt, and
Harvard universities finds that founder-run companies to be less productive
and more poorly managed_ ”

“ _..were 9.4% less productive, on average.. consistently lower management
scores.. less transparent management practices—nepotistic hiring, et cetera.._
”

These are the generic assessment criteria of a generic professional CEO, not a
founder. They apply to Coca Cola exactly as they apply to Groupon, Stripe or
SpaceX. Nowhere in any of that will you find “ _but he knows how to get to
mars_ ” as a criteria.

------
xiphias
I'm not sure the market (weighted by market cap) agrees with the title.

