Building a company from the ground up requires determination, innovation and strong leadership. But what happens once that company gains success? It still needs strong leadership, but it may need a different kind.
Every CEO aspires to be the next Bill Gates or Steve Jobs. But these are more the exception than the rule. Most companies go through several CEO transitions over their lifetime. For startups especially, it’s rare that a founding CEO will stay on throughout the company’s growth.
Through his research into startup businesses, Harvard business professor Noam Wasserman found that four out of five startup founders are forced out of the CEO role. And, in an interview with Harvard Business School’s Working Knowledge website, he explained the reasons for these frequent oustings of founding CEOs.
“The challenges within the company change so dramatically that the person who was best suited to lead the early stage of company development is no longer the best person to continue leading the company,” Wasserman said.
Startup founders need to be entrepreneurs with vision and audacity. But scaling a company requires a different set of skills. The CEO needs to have operational expertise and know how to manage people. Few people have both sets of skills.
It is for this reason that many CEOs step down from their leadership roles. Let’s look at three of these former CEOs and the situations that forced them to leave the companies they themselves had started:
1. Jerry Yang, of Yahoo! Inc.
Jerry Yang and his pal David Filo started a website to index the internet back in 1994 and called it “Jerry and David’s Guide to the World Wide Web.” This online directory was the beginning of Yahoo! While the company found great success in its early years, it fell behind as other giants came into play -- like Google.
In 2008, Microsoft offered $44.6 billion to buy Yahoo! - which Yang turned down. Criticism of his decision along with the controversy surrounding his dealings in China led to this founder's downfall. In short, Yang was unable to keep up in a rapidly growing market. While his initial innovation put Yahoo! on the map, the company didn't remain relevant.
CEOs need to lead their companies through both the good times and the bad. Without the strength or know-how to get through difficult or even crisis situations, CEOs run the risk of driving their companies into the ground.
2. Mark Pincus, of Zynga
Mark Pincus founded social gaming company Zynga in 2007 and found explosive success with games like the wildly popular FarmVille. But the company wasn’t prepared for the shift to mobile and floundered as others sped past. The company's stock fell and employees were laid off; and in 2013, Pincus stepped down from his position as CEO.
Pincus has been very up-front about his shortcomings as CEO. In an interview with Re/code, he said, “I think I give myself high marks being an entrepreneur and entrepreneuring a big idea about how popular social gaming could be. But I learned a lot of hard lessons on the CEO front and do not give myself very high marks as a CEO of a large-scale company.”
Pincus is a classic example of the skills gap for someone transitioning from startup CEO to growth-company CEO. Without the right skills, leaders in this scenario won't be equipped to lead the company, and the company will suffer for it.
3. Andrew Mason of Groupon
Mason was criticized throughout his tenure as CEO for his wild publicity stunts and controversial tactics. In 2012, he was named "Worst CEO of the Year" by Herb Greenberg of CNBC. In an article for CNBC Greenberg wrote, "Mason's goofball antics, which can come off more like a big kid than company leader, almost make a mockery of corporate leadership -- especially for a company with a market value of more than $3 billion. It would be excusable, even endearing, if the company were doing well (think Herb Kelleher of Southwest Airlines) but it's not.”
Even at the point of his departure, Mason kept up the spectacle. He sent employees a memorable email, writing, “After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding -- I was fired today. If you’re wondering why . . . you haven’t been paying attention.”
When companies are struggling, it’s important for the CEO to stay on track and be a pillar of strength for others. If this person doesn’t seem like he or she takes the company seriously, why should anyone else?
What do you think is the most important skill needed to be a successful CEO? Let me know in the comments below: