Getting fired from the company you created is probably the last thing you can imagine. Unfortunately, it’s a fairly regular occurrence that can have devastating effects on both you and the company.
Dismissing a founder is never an easy decision for a board to make. In general, investors have good reasons to want to see you lead the business to long-term success. You are the person who got the investors excited about the company and sold them the vision, and you are the person they bet on to lead the company. Start-ups have lots of luck hiring managers but generally little luck hiring visionaries. Not to mention the fact that hired CEOs are quite expensive.
But boards have an obligation to investors to do what is in the best interests of the company, and if you give them no better option, they will get rid of you.
I have found that there are a few failure modes–fireable offenses, so to speak–that ultimately persuade a board to replace a founder. Here are the three most common.
Fireable Offense no. 1: Failing to Address Real Problems
In my experience, the most frequent failure occurs when founder CEOs don’t confront the hard facts. You get so invested in selling the grand vision of the company that you fail to deal with the challenges that the company is facing every day.
Moreover, fear of appearing incompetent can cause you to downplay any problems in the business. By failing to address those challenges, however, you start to lose all credibility with the board of directors. I’ve seen CEOs who insist that things are going well, even though the company is demonstrably far behind plan. It is nearly impossible to take meaningful corrective action as a company when a CEO is insisting that everything is rosy.
Fireable Offense no. 2: Neglecting Functions Outside Your Comfort Zone
Most founders have expertise in a single area–be it engineering, product, or marketing. Staying within your core experience and neglecting other areas is a common problem. For example, I see lots of founders who come from product backgrounds (my bias as the best background for a start-up CEO) and fail to recruit and manage a great sales and marketing organization.
Too often, they undervalue the importance of less-familiar functions to the company’s success. When a product-experienced CEO is struggling in all areas but product, that person should probably consider stepping down as CEO and simply running product.
Fireable Offense no. 3: Not Recruiting an Awesome Senior Team
Founders are frequently threatened by leaders with more experience. Perhaps you worry that the board regards senior managers as your potential replacements. In my view, however, the best evidence that you should stay in the CEO seat is if you demonstrate the ability to recruit and lead a team of experienced functional leaders. If outstanding talent is willing to work for a less-experienced but inspiring CEO, that’s evidence enough that you are doing a terrific job as a leader.
To be sure, I have seen numerous underperforming start-ups whose board members are so impressed with the founder that they find it simply unthinkable that anyone else would lead the company. If you can manage to avoid the mistakes above, you’ll earn the support of your board, and you’ll stay in the CEO seat long enough to get the business back on track.