Executive Coaching Series
CEO/Owner/Founder Vulnerability: The Founder's Traps
Robert A. Mines, Ph.D., Sally Hull, Ph.D., Daniél C. Kimlinger, MHA, PHR, Patrick Hiester, MA, Yvette Moore, & Marcia S. Kent, MS
As an organization matures, the role of CEO/Founder/Owner (these terms will be used interchangeably throughout the paper as the intent is to convey the sense of "personalized ownership") changes. Each stage of organizational growth presents new leadership challenges. Awareness of potential leadership traps prepares the CEO/Founder/Owner to manage his or her own behavior and lead the organization through anticipated transitions. One of the more vulnerable transitions in organizations is from the Go-Go phase to the Adolescent phase of organizational life cycles. In this phase, the organization has been making money; there are few policies and procedures internally in accounting, human resources, and other administrative areas; and the founder(s) are vulnerable to making decisions on the fly and to becoming overly self-confident regarding their business acumen. This white paper reviews the founder's "traps" in order to provide a framework for planning as an organization moves from one phase to the next.
When moving from Go-Go to Adolescence to Prime in an organization's life span, leadership is vulnerable to regress to familiar behavior, which leads to taking on multiple roles, relying on sweat equity, fears about loss of control, continuing to herd sacred cows, fostering "old guard versus new guard" splits, being displeased because the new leaders are not doing it the way they would, and the problems of habit patterns recurring without intentional awareness and buy-in to changes within the organization.
There are many traps when moving from a Go-Go phase (sales are king, down with structure) to adolescence (controls are needed, administration is put in, procedures are implemented).
Adizes (1999) noted that during a transition from Go-Go to Adolescence, it is understandable that under stress, people revert to long established patterns of thinking, behaving, and feeling.
The CEO/Owners/Founders are "simultaneously their company's biggest asset and biggest risk." They can regress and fall into the following traps:
- The owner is usually the first one to disrupt the development of administrative rules and regulations needed for the next level of organizational structure and is the one least likely to adhere to them.
- The owners may feel threatened when employees' judgments, values, needs, and preferences don't reflect their own judgments, values, needs, and preferences. This can then result in regressive behavior on the part of the owner (e.g., micromanaging due to perceived loss of control).
- Go-Go phase owners want to escape day-to-day management, but they don't want to yield control. What happens when owners who have been distanced return? They engage in the "Seagull Syndrome" (Adizes, 1999). Sailors hate seagulls when they flock over the boat and "crap" all over it, making a mess of everything. Owners in Go-Go may often be viewed as seagulls by their employees. Things may have changed while the owners were distancing. When the owners return, they change back anything they do not like. Founders/owners feel betrayed and unfulfilled. They want to leave and sulk, but they can't take time off. There is no one to replace them, and if there is a capable replacement, the founder/owner fears that this new leader will hijack the company and steal their dream.
- With no formal, well-oiled system of controls, Go-Go leaders rely on rumors and other ad hoc information. Someone is always in the dog house with the leader. The leader rejects him or her and privately accuses them of being responsible for the company's difficulties. Rather than fire him/her, the leader just makes his/her life miserable.
- Ownership has to be separated from management at this phase. Professional management needs to be put in place. The owners are vulnerable to making decisions by intuition or by the seat of their pants rather than a professional management process.
- Go-Go companies may be characterized by arrogance, uncontrollably fast growth, and centralized decision-making, as well as a lack of systems, budgets, policies, and structure.
In order to jump start your awareness of these founders traps, read the following and circle any you have noticed your company's leadership (CEO/Owners/Founder/Board of Directors) demonstrating.
Problems of Go-Go
|Eagerness||Lack of focus|
|High energy||Energy too thinly spread|
|Sales orientation||Sales and premature profit orientation|
|Seeking what else to do||No boundaries on what to do|
|Sales beyond the capability to deliver||Selling despite inability to deliver quality|
|Insufficient cost controls||No cost controls|
|Insufficiently disciplined staff meetings||No staff meetings|
|No consistent salary administration||Overpaid employees|
|Surrounded by claqueurs||Leader surrounded by (traitors in hiding)|
|Increasingly remote leadership||Seagull syndrome|
|Leadership's inflated expectations||Leadership's paranoia|
|Unclear communication||No communication|
|Hope for miracles||Reliance on miracles|
|Unclear responsibilities||Lack of accountability|
|Company subject to criticism||Company object of legal action|
|Internal disintegration||Diminishing mutual trust and respect|
|Cracking infrastructure||Collapsing infrastructure|
|Workable people-centric organizational structure||Unworkable people-centric organizational structure|
|Everything is a priority?||Everything IS a priority!!!|
|Founder indispensable||Founder still indispensable, but beyond remedy|
Problems of Adolescence
|Conflicts between partners or decision-makers||Return to Go-Go and the founder's trap|
|Temporary loss of vision||Inconsistent goals|
|Founder's acceptance of organizational sovereignty||Founder's removal|
|Incentive systems rewarding wrong behavior||Bonuses for individual achievement while organization is losing money|
|Yo-yo delegation of authority||Organizational paralysis during endless power shifts|
|Policies made but not adhered to||Rapid decline in mutual trust and respect|
|Board of directors' attempt to exert controls||Board's dismissal of the entrepreneurial leader|
|Love-hate relationship between the organization and its entrepreneurial leadership||Excessive internal politics|
|Difficulty changing leadership style||Unchanging, dysfunctional leadership style|
|Entrepreneurial role monopolized and personalized||Entrepreneur's refusal to delegate to a depersonalized role|
|Integration role monopolized||Divide-and-rule management|
|Lack of controls||Imposition of excessive and expensive controls|
|Lack of accountability||Profit responsibility delegated without capability to manage it|
|Low morale||Excessive salaries to retain employees|
|Lack of profit-sharing scheme||Premature introduction of a profit sharing scheme|
|Rising profits, flat sales||Rising profits, falling sales|
What roles and patterns do you see among each of the following: CEO/Owners/Founders/Board of Directors?
Which roles and patterns are helpful?
Which have outlived their usefulness?
In conclusion, the traps can create distraction on the part of management, a waste of resources, morale issues, potential loss of strategic direction, and in a number of cases, the death of the organization. As in any change process, awareness is the first step to developing an effective plan to manage the change successfully.
Adizes, Ichak. (1999). Managing Corporate Lifecycles. Englewood Cliffs, New Jersey: Prentice Hall Press.