When is the right time for the founder to step aside?

For a busi­ness leader who has also found­ed a com­pa­ny, decid­ing to step down as CEO and leave a com­pa­ny in some­one else’s hands can be dif­fi­cult. 

Twit­ter chief exec­u­tive Jack Dorsey is the lat­est to make this move. Ear­li­er this month he announced he was leav­ing Twit­ter for good, cit­ing the need for the com­pa­ny to “break away from its found­ing and founders” as one of the key rea­sons behind his deci­sion.

In a com­pa­ny-wide email that he also tweet­ed, he said: “There’s a lot of talk about the impor­tance of a com­pa­ny being ‘founder-led’. Ulti­mate­ly I believe that’s severe­ly lim­it­ing and a sin­gle point of fail­ure.”

This marks the end of Dorsey’s sec­ond stint as chief exec­u­tive of Twit­ter, fol­low­ing its spin off from Obvi­ous Cor­po­ra­tion — a start­up incu­ba­tor and invest­ing vehi­cle head­ed up by Dorsey and his Twit­ter co-founders Evan Williams and Biz Stone — in 2007. After tak­ing on the ini­tial CEO role, Dorsey was forced out of the role just over a year lat­er but stayed with the com­pa­ny in roles includ­ing chair­man of the board and exec­u­tive chair­man. He even­tu­al­ly returned to the role of chief exec­u­tive in 2015.

For­mer CTO Parag Agraw­al now replaces Dorsey with imme­di­ate effect. In his let­ter, Dorsey adds: “I believe it’s real­ly impor­tant to give Parag the space he needs to lead. And back to my pre­vi­ous point, it’s crit­i­cal a com­pa­ny can stand on its own, free of its founder’s influ­ence or direc­tion.”

Dorsey is not the first founder to take this deci­sion. Amazon’s Jeff Bezos hand­ed the CEO reins over to Andy Jassy ear­li­er this year, although he remains with the com­pa­ny as exec­u­tive chair­man.

Many founders, how­ev­er, end up being forced out rather than get­ting to decide when they leave. For exam­ple, Uber founder Travis Kalan­ick was forced to step down as CEO under acri­mo­nious cir­cum­stances in 2017, while the same is true of WeWork’s Adam Neu­mann.

Know­ing the right time to move away can be cru­cial for ensur­ing the future suc­cess of an organ­i­sa­tion.

Should I stay or should I go?

This was a ques­tion that crowd­fund­ing plat­form See­dr’s founder Jeff Lynn had to ask him­self fol­low­ing the busi­ness’s suc­cess­ful Series A fund­ing round in 2015. After the invest­ment, the com­pa­ny quick­ly grew from 25 employ­ees to 60 and Lynn felt that many of the chal­lengers the busi­ness now faced were not suit­ed to his skillset.

“The skills and the tal­ent required to take a busi­ness from zero to one are vast­ly dif­fer­ent from what’s required to take a busi­ness from one to 100,” he says. “I don’t tend to get bogged down in in-depth analy­sis and plan­ning, I act on instinct and I move quick­ly. These were all things that were cru­cial in the ear­ly days but when you’re run­ning a big­ger busi­ness you need to be much more method­i­cal and com­pre­hen­sive. There are peo­ple out there who are capa­ble of doing both but – I’m not one of them.”

After approval from the board and an exten­sive recruit­ment search, Jeff Kelisky was brought in as the new CEO, while Lynn moved to a new role as exec­u­tive chair.

Lynn adds: “Because I took con­trol of the sit­u­a­tion by recog­nis­ing that I need­ed sup­port, I was then able to carve out a role for myself and nobody had any great con­cerns about me being a prob­lem­at­ic for­mer boss.”

Bar­ry McNeill, founder of exec­u­tive coach­ing com­pa­ny Work Extra­or­di­nary, believes many scale­up busi­ness­es get to a stage where new ideas and ener­gy are required for con­tin­ued growth. “As you grow a busi­ness and bring oth­er peo­ple into the organ­i­sa­tion, it can take on its own sense of iden­ti­ty,” he says. “If the founder ends up being a block­er to that, because they’re still fixed on their ear­li­er vision, then that can become real­ly prob­lem­at­ic.

“That will be the point where the founder might need to step aside in order to let new lead­er­ship come in and bring the organ­i­sa­tion to the next lev­el of devel­op­ment.”

Ulti­mate­ly he believes if you get to a point where the founder is weigh­ing up whether to stay or go, then “it’s prob­a­bly time to step away”.

How­ev­er, reach­ing this deci­sion is not easy and the founder’s ego can often get in the way of the company’s suc­cess. “Founders can some­times see them­selves as the hero because they were able to take the organ­i­sa­tion to where it is today,” McNeill adds. “It can require a lev­el of matu­ri­ty for a founder to recog­nise that it’s time for new lead­ers to come in and take the busi­ness for­ward.”

Finding a successor

Any founder mov­ing out of a posi­tion of pow­er will want to ensure that the busi­ness remains in safe hands. In the case of Twit­ter, Agraw­al was pro­mot­ed from with­in, hav­ing been with the com­pa­ny since 2011 and served as CTO for four years. The appoint­ment was unan­i­mous­ly backed by the board of direc­tors.

The founder of CEO advi­so­ry firm VOS Group, LaDawn Townsend, believes this shows Agraw­al had built up a pos­i­tive rep­u­ta­tion with­in the busi­ness. She says: “When look­ing for a suc­ces­sor, the board has to ask who does­n’t always say yes and who chal­lenges us in a healthy way. If that answer is no one, then you may want to look for an exter­nal can­di­date that believes in the cul­ture of your com­pa­ny and what you’re doing.”

There are obvi­ous ben­e­fits to appoint­ing an inter­nal suc­ces­sor, such as hav­ing already demon­strat­ed their capa­bil­i­ties and com­pe­tence in a lead­er­ship role and being known to peo­ple with­in the organ­i­sa­tion. How­ev­er, there are instances when a fresh voice and new or dif­fer­ent skills can be more ben­e­fi­cial for the com­pa­ny’s progress.

Townsend adds: “This is espe­cial­ly rel­e­vant for com­pa­nies that want to scale or expand inter­na­tion­al­ly. The skill set that’s required to guide a larg­er ship will be dif­fer­ent; the founder can either grow into it or choose to bring in anoth­er leader.”

For Lynn and See­drs, this proved the bet­ter option. How­ev­er, it did not reduce the sense of anx­i­ety he felt when hand­ing over lead­er­ship of the busi­ness.

Lynn explains: My ner­vous­ness was less about the prin­ci­ple of hand­ing over than it was about mak­ing sure that it was the right per­son. Hir­ing the wrong CEO is the kind of thing that can kill a busi­ness.”

Ulti­mate­ly, this change in lead­er­ship has proven suc­cess­ful for See­drs, which was acquired by US start­up invest­ment plat­form Repub­lic in a $100m deal last week. “I don’t think we ever would have got­ten to that point with­out Kelisky’s lead­er­ship,” Lynn adds.

Time will tell whether Twit­ter’s change at the top will have the same effect.