What is founder mode and why is everyone talking about it?

Last month, the co-founder of startup incubator Y Combinator, Paul Graham, posted an essay in which he coined the term “founder mode” and discussed its benefits for businesses.

Since the essay’s release, the phrase has been making waves across the internet, sparking a heated debate about how much founders should involve themselves in the running of an enterprise. Some have argued the benefits, such as ensuring the original vision remains intact, whereas others believe it poses the risk of micromanagement within a company’s organisational culture.

We’re going to look at what “founder mode” means and the potential advantages and pitfalls for businesses. how does it differ from typical business operations?

Key characteristics of founder mode

Founder mode is a management style where a founder or chief executive runs the company with a hands-on approach – interacting with employees across the organisation, not just their direct reports. 

Founder mode is particularly popular among startup cultures or companies that adopt a flat hierarchy structure. Its main characteristics include:

• Being deeply involved: Hands-on leaders who are actively involved in all aspects of the business, constantly reviewing data and having a strong curiosity about what makes the business work.
• Guarding the vision: A company’s operations rely heavily on its vision, mission statement and core values. Founders who adopt this approach want to make sure that the organisation sticks with these elements and doesn’t stray away from them during everyday work.
• Intentional interactions: Founders interact with everyone in the business regardless of their level and position. They’re also available to be reached by anyone and will respond personally.
• Skip-level meetings: Founders will meet directly with employees, bypassing middle management. These are designed to help leaders hear directly from employees, build a relationship and gather feedback.

Famous examples of founder mode in action

Former Apple CEO Steve Jobs reportedly ran an annual retreat for 100 of the “most important” employees at the company, not all of whom held senior leadership positions. The point of these retreats was to hold open discussions about the future direction of Apple, allowing employees from diverse backgrounds and different levels to share their ideas.

Brian Chesky, CEO of AirBnB also held a talk at a Y Combinator event in September, where he shared a story on how he was advised to run the company. This boiled down to “hire good people and give them room to do their jobs”. The results of this delegating leadership style were less than favourable, and through studying and applying how Jobs ran Apple, Chesky was able to improve AirBnB’s cash flow margin.

Why is founder mode beneficial?

There are several benefits of founder mode, especially in the early stages of a business. For example:

Clear vision and direction

Founders have the best understanding of the company’s vision and mission. In founder mode, they can ensure that every decision – from product development to marketing strategies – aligns with this vision and helps to maintain the brand’s authenticity and focus.

Quick decision making

Founder mode can lead to quick decisions without needing to go through layers of approval. This kind of agility allows them to respond to market changes faster than larger organisations where the decision-making process may be slower. Their direct control over decisions also means they can experiment and innovate in ways that bigger companies might avoid due to risk aversion.

Strong customer focus

Founders tend to have a close relationship with their customer base, understanding their pain points and preferences. This direct connection allows them to tailor products or services to meet customer needs effectively, leading to a good level of loyalty and satisfaction.

Stronger investor and stakeholder relationships

Investors and stakeholders often appreciate when founders are deeply involved, purely because it shows a founder is dedicated to the business. They tend to feel more confident that their investment is being managed carefully, especially when they see the founder driving progress.

What are the dangers of founder mode?

While adopting a founder mode approach can be effective, it doesn’t come without risks. These include:

Micromanagement

Most notably, many have argued that when founders become overly involved in everyday operations, it can lead to a toxic culture of micromanagement. Employees may start to feel like their expertise isn’t valued, while the constant oversight can hinder professional judgement, leading to too much dependency on the founder rather than initiative.

Lack of employee autonomy

Founder mode can lead to a top-down command structure where employees don’t have much room for input, leading to disengagement and a lack of ownership in their work. This can be particularly damaging to agile work environments that encourage teamwork and trust teams to make informed decisions. If a team isn’t able to adapt to new changes and collaborate effectively, this can lead to slower progress and less innovation.

Reckless risk taking

Innovating and experimentation are popular with startup companies, particularly in the tech industry. However, founder mode can lead to taking significant risks without considered thought, research and preparation. As the decision relies solely on the founder, decision-making becomes a gamble, leading to either substantial rewards or disastrous results.

Quick results over long term culture

This isn’t to say that short term successes shouldn’t be celebrated. However, too much focus on immediate results and “getting things done” over a sustainable company culture can lead to a negative work environment. Employees are more likely to get burned out, which can result in a lack of employee satisfaction, poor productivity and a poor company reputation.

Founder mode can be an effective way for business leaders to get more involved in a company’s operations – showing a good level of personal interactions and a commitment to the vision and mission. However, too much involvement can pose the risk of micromanagement and lack of autonomy, which can be detrimental to both business performance and employee morale.

Overall, the best approach is a bit of both. Founders can implement the hands-on approach to stay connected with the company and its operations, but should also know when to take a step back and trust teams to work efficiently. It’s not about choosing either approach but finding the right balance between the two during each stage of a company’s growth.