How to make the transition from founder to CEO
How to make the transition from owner-manager to visionary leader
Letting go of control can be a bitter pill for owner-managers used to the thrill of operational execution. It’s also a necessity for those wishing to secure a long term role in a fast-growth firm. Here are some pointers on making the transition from owner-manager to visionary leader.
From venture investors to public shareholders, when new voices start to have a growing influence on the running of your company, how do you react? It might be wrong to see red when the board disagrees with your plans, or even suggests that you’re becoming a burden on the company that you founded and built with your own hands, but you’d be in good company. Some of the biggest names in British entrepreneurship have been found wanting when the time comes to let go of control and take up the mantle of visionary leader. While there’s no disgrace in cashing in, moving on and starting over if that kind of role isn’t for you, if you do want to retain a long term role in your own company, how will you adjust to letting go of control?
In the UK, there’s little distinction between the titles of CEO and MD, but a number of entrepreneurial companies are starting to adopt an American style definition that sees the CEO responsible for the overall strategy, while the MD looks after the day-to-day execution. Where the founder has been managing director, the role of COO is sometimes created below them as they make the transition to CEO and step away from management duties. The distinction might be formally artificial, but it denotes a progression that many founders will need to make, whether they give it a name or not.
Owner-managers will have often shared their considerable operational skills to build the company, but once it has sufficient scale, it will demand a more corporate and consultative leadership style. This can be anathema for entrepreneurs.
“The challenge for many is stepping back from the ‘doing’ and ensuring they are allowing others to slot into that role,” says David Perkins, CEO of marketing firm Indicia Group. “The entrepreneurial CEOs that struggle are those that keep going back into the day to day operations, because that prohibits them from driving the overall strategy.
“Entrepreneurs have a passion for what they want to do. Stepping from one role to the other means the entrepreneur often has people to report to, consult and persuade, whereas before they could proceed unhampered,” says Perkins, who also has significant corporate experience as a former MD of Wegener DM and Carlson.
For all the grand plans, the early stages of a company can involve a lot of fire-fighting, while the latter will involve stakeholder management and a longer term view. “A good CEO must be able to look up from what is happening in the here and now and focus on the bigger objectives that are three to five years ahead,” he adds.
Mark Turrell, who founded innovation software firm Imaginatik in 1994, says that learning to step away from a quotidian involvement in the business takes time. He also believes that hanging on to too much operational responsibility can hold your company back. “It’s a five year transition, but it should be something entrepreneurs take with glee. No business owner should want to do that stuff as a day job.”
A lot of entrepreneurs have a specialist knowledge in a certain area, Dyson as an engineer, for example – what then? “Map out the bits you’re good at and want to keep doing. Clarity of role is very important,” Turrell responds.
Perkins agrees that the transition can be tricky. “The operational role becomes a comfort zone, and it can be hard to leave it behind,” he says. “Working with a mentor, perhaps a non-exec, can be really helpful. The most important thing is discipline. You must be rigorous with yourself and focus on leadership, vision and culture. You won’t be fulfilling the CEO role if you can’t leave operational issues to someone else.”
Need to know
If you’re handing over operational control, how much detail should you be involved with? “There are certain things you have to control,” says Turrell. “Targets, cashflow, cash in the bank, new revenues. As a visionary CEO, you need to focus on the big numbers – when I speak to our head of sales, I ask the target for new revenue for the month and what we achieved. I don’t want to know the details – if the numbers don’t make sense, then I’ll ask.”
Carphone Warehouse CEO Charles Dunstone, arguably the UK’s finest example of an entrepreneurial CEO, says a short attention span can be a strength when you’re running a larger business. “It allows you to give intense attention to something for a short period of time and then move onto something else,” he says.
“I butterfly over lots of stuff and remember key bits of data. You learn the bits that matter quite quickly.” Dunstone gets a text message twice a day with the company’s broadband and mobile phone sales. “I know the figures that will show whether we’re doing well or badly,” he says.
Keep your hand in
When you do step away from operational duties, it’s crucial that you don’t make the mistake of losing all connection with the business. “CEOs can forget the passion for customers and for what they actually do,” says Turrell. “It’s easy to disassociate yourself too much from the day-to-day business. Spend some time with the customers and employees at the front line. Otherwise you’re spending all your time with lawyers and non-execs – the business is there but you don’t have the passion.”
If you don’t talk to people and you’re hearing everything second or third hand, you won’t know when and where to make the right investments. Dunstone is renowned for spending time on the shopfloor, speaking to employees and getting a feel for customers’ experiences. “You have to stand on the pavement and look at your shop and think of what you have to do to make your customers happy,” he says.
Even if you’re highly visible, it’s inevitable that the loneliness at the top grows in line with the scale of the company. “The CEOs of successful companies tend to become lonely within their business but have lots of friends outside the firm,” says Turrell. “As a CEO, you need a different network of people so you have to create that and it takes time.”
Once you’ve managed to strike the balance between strategic vision and continued engagement, you’ll need to start thinking about a time when you’re no longer influencing the business. Turrell advises a pragmatic approach, and scoffs at the popular notion that your business is ‘your baby’.
“I’ve seen this company grow, shrink and back again, and sometimes it’s not very nice to you. Fundamentally, it’s a business. It’s not a baby. I have two children. You wouldn’t want to sell one of those because you got a really good offer from IBM,” he says.
David Perkins, CEO of the Indicia Group, offers his tips on negotiating the transition to visionary CEO as your company grows:
- Make sure your vision is communicated and understood
- Ensure that the people below you understand how delivering that vision benefits them so they are vested in the process
- Ensure your key directors have clear objectives and timetables
- Help your directors start off in their new roles, and then stand back and let them manage
- Catch people by stepping in below before they fall; watch and help them at the early stages as the mistakes appear.
- Don’t be tempted to step in and do their jobs because you think that you can do it better. Your people don’t learn and you get back among the trees when you should be looking at the forest