My Founder/CEO Dilemma10 September 2021
By Ben Holewijn (Founder Newpeople)
“Accept that stepping down is sometimes the only way to move forward”
15 years ago I founded Newpeople because I wanted to make a difference with a new company, I wanted to do some good in the world and because I knew that I wasn’t suited to a corporate job. Many years later I felt increasingly trapped in my position because of all the responsibilities that came with it. As Founder of Newpeople, I was responsible for many stakeholders like clients, candidates, interim managers and employees. Next to that I also had quite a social life with family and friends, all of which combined was quite a lot. Stopping was of course something I thought about regularly, but actually turning these thoughts into action was something I found surprisingly difficult. Generally, Founders, myself included, feel a lot of responsibility. Stopping is not what made me or the company successful. Furthermore, I thought the timing to take a step back was never quite right, I thought that no one would be as good as I was and what if the new CEO failed? And of course, who would the right person be to follow in my footsteps and where could I find them?
The choice to take a step back
The thought that stepping down might be the only way for myself and my company to move forward was one that was confronting and difficult to accept. I struggled with questions like: “am I not good enough? How come there are others that do do this successfully? And what do I tell clients, candidates, interim managers and employees?” Apart from that I did still really enjoy my job. Does taking on a new CEO also mean that I should stop with my job as consultant and say goodbye to all the relationships I had built up over the past 15 years? Does it mean saying goodbye to my social life in a certain way?
An old Chinese proverb goes: “entrepreneurs need to decide three things at the start: the rules of the game, the stakes and when it’s time to stop.” When the timing is right – and don’t wait too long (like I did) – start by hiring an external (executive search) consultant once the matter has taken on some shape. Test your questions on others, people are usually more than happy to ponder the matter with you. Ask an external, independent consultant to help you, not just as a confidant, but also to help you organise your thoughts and to oversee the process. Take your time for this, setting up the ideal profile and finding candidates will come later.
In my case, I spoke to a candidate, initially for a different position, but said person triggered me to put words into actions, take a step back and make room for a new CEO. This is a moment for which I am still very grateful.
What helped me to accept the new situation was putting these changes into perspective; this is and will be the future and what does that mean for me personally? Acceptance is not easy and takes a lot of time sometimes, but this time is necessary to prepare yourself for the new situation. I began to get to know myself a lot better, I did some soul-searching and spoke to a lot of people both in and outside of Newpeople. I began to listen more and to ask even more questions (why, how, what, describe, tell me about…, what do you think about/of…). Of course I was also lucky, it’s my job to meet new people and during all these conversations I can ask a lot of questions. What would my new story to the outside world be? What were my plans for the future? And of course, I want to work for the company, not in the company, but what does that really mean? Can I accept that my company will get (partially) disturbed? And, after all this “soul-searching”, was I still convinced that I needed a new CEO? Really? My answer was yes!
The right leader for the phase of your organisation
Have discussions with people, even initiate them, think outside the box. Research which phase your company is in, what the challenges are in bringing it to the next stage and what kind of leader works for this? A scale-up that needs to roll out internationally quickly, needs to raise money to fund this and to hire people to make it happen, needs a different type of leader than a more traditional organisation that needs to change into an omnichannel strategy that will integrate online and offline and will optimise all channels for the best possible customer experience.
Many companies and their Founders lack consciousness of this. I want to emphasise that this needs to be really clear before the process of finding the new CEO starts. It’s also essential to talk to all stakeholders before a function profile is written. Don’t hesitate to ask others for help in writing this profile and make sure others feel free to provide input and that everyone is aligned. Ideally, important people in key positions in your company are involved in the process.
Of course I run the risk of preaching to my own parish, but it is my emphatic advice to always work with an external executive search consultant. The sooner they are involved in the process, the better, I’m inclined to say, even if it’s just to ask the questions that have yet to be answered or are very difficult to answer.
Involve employees in the process
Within our company, we involved several employees in the (interview) process, they were the mouthpiece of the team and the voice of the rest of the organisation. We didn’t always agree with each other and I learnt to listen better and accept that the team might have a different preference. Listening carefully to their points and asking questions gave me more insight and eventually is what helped me make a decision. If you don’t agree with each other, don’t force a decision but go back to the drawing board and start again.
All in all, in our case, the whole process (from the idea first being put on the agenda to the CEO actually starting), took about 9 months. Looking back at the duration of the process, that period of time was not ideal for us, not for the organisation, not for the employees, not for the new CEO and not for me. In 9 months time a lot of things change. Important strategic decisions didn’t get made in this time meaning that the new CEO started by already being behind. On top of that, our employees became restless, despite them 100% supporting the decision and the timespan. Besides, I didn’t want to wait longer and hand the company over to the new CEO to start my new adventure. My advice: a maximum time frame of six months to set the process in motion and allow the transition to happen smoothly, is ideal.
As soon as the new CEO started I changed my job title to Founder and cleared my workspace at the office. Accept that employees, even the all-stars that you hold in high regard and that helped make the company what it is, might leave the organisation. The company has a new leader, and for employees, especially those that have been there from the start, it might be a moment where they start looking around.
Be prepared, because you’re always taking a risk when hiring a new CEO. Despite all good intentions, it might be wise to accept that the new CEO you take on might not be successful. Decide from the start whether you yourself emotionally and your employees and your company financially, can move on from a big “fuck-up.” What will the damage be, not only financially, but also regarding believability, involvement of employees, company culture and long-term problems. Realise that the damage might be bigger than you initially think. Also ask yourself the question of whether if everything does not go as you had hoped, you can and want to go back to the situation as it was before the arrival of the new CEO. For some the answer is ‘yes’ but for many it is ‘no.’
When it fails
As Founder you can’t always take a huge gamble. At the very least, make sure that when your new CEO starts you make an exit agreement with good agreements. If things don’t go as expected, make a list of learnings, discuss them, and don’t become emotional. Be realistic, have faith, don’t blame others and sometimes accept that you yourself have failed in hiring a successor. If things go wrong, focus on the future and ask yourself the big question: “how will you increase the chance of success next time?”
My ten personal tips for after the start of the CEO
The start of the CEO marks the start of a difficult journey for you, for the new CEO and for your employees. Be conscious of this, and be conscious of the fact that the process never really ends but demands constant time and energy. The first year hardly ever goes as planned, be prepared for this. This doesn’t always have to be negative.
A number of tips lined up:
1 – In an ideal world you hire a CEO that you also like and respect on a personal level. Do realise that this is not the only important factor for success. Create a safe atmosphere in which all doubts and uncertainties can be discussed. Share your doubts and see if the new CEO understands them and can deal with them. This is a good moment to create a bond, gain each other’s trust and get to know each other better. Be modest, it’s not a competition. Be open to new insights, discover opportunities and enjoy surprises. Also discuss with the CEO what your role and level of involvement will be in the organisation as Founder.
2 – Share all information with the CEO and check if he/she wants to know more. If the CEO shows little interest in the history, business, customers and people and/or you, ask for an explanation. Ask yourself whether the explanation is valid and if not, be alert because this might not be the right person for the job.
3 – Install a non-executive board and be a member of that, but not the chair. Ideally, the Founder remains involved through the board (supervisory/advisory board).
4 – Ask the CEO to determine the budget. Make sure the budget is supported by the whole (management) team. Be realistic and don’t let the CEO try to impress everyone by setting unrealistically high expectations. If it’s possible, adjust the budget that the CEO draws up downwards. Ideally the team will perform above budget in their first year to gain confidence and be excited for what the future will bring. Also make sure that, where possible, everyone has the same (financial) interests and is aligned.
5 – For the new CEO: manage expectations well. Formalise the financial reporting on a monthly basis and emphasise the importance of this. Plan this monthly rapport immediately, work with an agenda and fill this with relevant points, together.
6 – Discuss using a pre-escalation coach that both parties 100% agree with. Someone you both trust, who’s there if necessary and who identifies sensitive topics that could cause problems if not dealt with on time.
7 – Limit your contact with employees. Don’t ask how they’re doing because before you know it, you might find yourself in a difficult situation. They might still see you as their boss and this is counterproductive.
8 – If one of the employees does escalate the situation, be alert. Plan a meeting and make sure the CEO is also there. Be a coach during this meeting, don’t escalate the situation further and help them come to a solution.
9 – Adapting is often necessary in the first year. It’s tempting to think of ad hoc solutions, but be conscious of the long-term impact and ensure that any changes and adaptations fit with the plan for the future as much as possible.
10 – Don’t talk about ‘your’ company, but talk about the company.
Finally, whilst writing this article, I realised that I’m not complete and that every situation is different. Every Founder is of course unique, just like every CEO, every company, and every situation. Ignoring this uniqueness is possibly the most common mistake when it comes to problems of succession.
Would you like to talk about this topic? Feel free to call or e-mail me to make an appointment at email@example.com or at +31 (0)6 54 23 32 12.