

Firms, investors tend to prosper with founders at the helm - nickb
http://www.usatoday.com/money/companies/management/2007-08-21-founder-ceos_N.htm

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nostrademons
Another hypothesis as to why companies do better with founders:

A company's culture is set by its founder(s). As long as a founder is in
charge, the CEO is working _with_ the corporate culture. When an outside
manager is brought in, he usually ends up working _against_ corporate culture.

In every company I've worked in, the culture was essentially a reflection of
the founder's personality. If there are multiple founders, it reflects a weird
amalgam of all the ones that are involved in the daily business. If an early
employee tends to run things in the early days, the culture reflects them as
much as the founders. Think Intel and Andy Grove, or 3M and William McKnight.

Companies tend to inherit both the best qualities and worst faults of their
founders. However, their position in the marketplace usually reflects the best
qualities. After all, nobody buys from a company for what it sucks at.

An outsider brings his own strengths and weaknesses to the company, but it's
very unlikely that his strengths will line up with the culture and market that
the company already has. Think John Sculley and Apple - great executive for
cola, not so great for computers. The founder, instead, may have tons of
liabilities, but at least he won't be fighting the corporate culture he
himself has created.

There's some evidence to back this up, for instance:

1.) It echoes the findings in _Good to Great_ : the turnaround process
involves applying the "hedgehog principle" of asking yourself what the company
is really passionate about, then getting the right people on the bus and the
wrong people off the bus, and only then changing strategy. The hedgehog
principle is essentially a question about culture: where does the culture of
_this_ organization fit into the overall economy. Then getting the right
people on the bus and the wrong people off the bus consists of strengthening
the positive aspects of the company culture and weakening the negative ones.

2.) In cases where an outside turnaround CEO has successfully turned around a
company, they usually spend a significant amount of time acclimatizing
themselves to the existing culture, and only start changing things after they
already "fit in". Think Lou Gerstner and IBM. Even then, they often make
decisions that mortgage the long-term health of the company by destroying the
previous cultural values. Gerstner eliminated IBM's status as an R&D
powerhouse, for example, while James McNerney nearly destroyed 3M's innovation
culture with Six Sigma.

3.) Companies that survive the departure of their founders usually do so by
institutionalizing their culture as a set of company values, bringing in fresh
recruits out of college before they've been able to pick up a different
corporate culture, and then promoting from within to put in place management
who already understands the existing culture. Think GE.

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mynameishere
I worked in a factory during college--the founder was long dead, but people
were _still_ talking about how wonderful he was...these were cynical blue-
collar union types.

Obviously, everybody knows that the founders are the real operators and that
subsequent CEOs are basically asskissers and backstabbers. Everyone knows
this, and you're bound to get cynicism and disloyalty as a result.

This is true, even of good CEOs. Walt Disney vs. Mike Eisner? Henry Ford
versus Robert McNamara? (bad example).

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portLAN
> _"It would really bother me to think that in a few years, my successor could
> weaken something I've spent 35 years building, my entire adult life," says
> Zimmer, 58. "That would be disturbing."

>When pressed, Mason says it's unlikely that his successor will be as
successful. _

Of course, because no successor has as large a stake in it as the original
founder. Maybe they should do it like a kingship, slightly modified -- where
the successor inherits HALF of the founder's equity. You would stand a much
better chance of attracting the best people if they were going to get the
billions when you stepped down -- subject to vesting and performance. Why
would the top people want to join an existing company when the big equity has
already been taken out of it?

So, when you retire you vest half of the Founder's stock, if you've been there
"long enough". Take a company from $10B market cap to $20B and you've doubled
the Founder's share, so you get an amount equal to what the whole thing was
when you started, and leave an equal amount to lure the next CEO.

It's late so I may well be missing obvious flaws in the scheme, but some kind
of equity retention strategy seems to be needed to promote long-term vitality
because the current m.o. is the original founders and investors bleed it all
out.

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portLAN
> Amazon's 15-year stock gain: 4,381%

Amazingly they have predicted Amazon's exact stock performance for the next 5
years. Someone over there better hide the electric drills.

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pg
I'm all in favor of having founders run the company, but their 4x number not
very meaningful. The company doing badly can be a cause of founders leaving,
not just as result.

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daniel-cussen
Maybe this will make VCs less eager to kick founders out of their company.

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augustus
Good article on Usatoday

