The 'Harvey Weinstein' Problem Need Not Be a Death Sentence for Companies
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It was only a matter of time for Harvey Weinsten. Once media reports began swirling around allegations of sexual harassment and abuse against this big-name movie mogul, the company he co-founded seemed destined for bankruptcy.
After the New York Times ran its tell-all piece in October, The Weinstein Company lost TV deals and, on its own, canceled film releases, fell behind on bills, fired more than a third of its workforce and was hit with lawsuits from creditors over unpaid debts, according to Variety.
A few outside parties considered throwing the company a financial lifeline, according to the Times, but The Weinstein Company's future and image increasingly moved to a point beyond repair.
An acquisition deal fell apart just last month, in early March. What made the company's financial troubles worse was that Weinstein was widely acknowledged to be its creative mastermind. He obviously had to leave, but his departure raised questions about whether The Weinstein Company could survive without him.
Weinstein was not the first founder to leave his company reeling, and he certainly won't be the last. But the flawed logic that accompanies an event of this kind is our assumption that someone who starts a company is indispensable to its success. That's just not so: Founders may be essential in the early days, but their creations are not doomed to fail without them at the helm. Here is what we've learned up to now:
Founders shouldn't be lifers.
The popular notion that founders are indispensable to their startups is backward. The business comes first; the leader comes second.
The founder is the person (or team) who answers the tough early questions. Founders imagine the company's future, decide which customers to target and create a value proposition for those customers. Strong leaders occasionally create advantageous cultures or personal brands, but those are rare cases.
When people envision entrepreneurs, their thoughts often drift to visionaries who started, grew and led their businesses for a long time. Bill Gates and Ingvar Kamprad accomplished this, respectively, with Microsoft and IKEA, but they are the exceptions rather than the rule.
More often, entrepreneurs help their companies find a niche, then become a burden as the business attempts to exploit that niche. Established companies no longer require the sort of ground-breaking trial and error actions and the radical shifts that founders do so well.
Rather, these businesses need quality assurance, cost-cutting and effectiveness. That managerial skill set is vastly different from the one that most disruptive founders possess.
Related: 3 Tips for Dealing With the Inevitable Departure of Key Employees
Consider how Walt Disney's death in 1966 affected his company. At first, the organization achieved subpar results by attempting to emulate its deceased founder's vision. When Michael Eisner became CEO in 1984, he changed everything by transforming the company into a media conglomerate.
Eisner was not Disney, nor did he try to be. Instead, he followed a new strategy to manage and grow the organization -- one that would have been impossible had the company not deviated from the business practices of its namesake.
None of this should indicate that moving on after a founder's departure is easy. Some companies rely on the sales contacts of their founders to make money. And then there are the companies whose founders are their owners -- a connection which can make it more difficult to remove them if they don't want to go. (Consider the ugly divorce between Steve Jobs and Apple.)
Yet, while such a parting of the ways might seem like an impossible task, even companies closely tied to their creators can flourish after those founders leave.
There are strategies for recovering from an entrepreneur's exit.
Leaders of firms whose founders leave must take steps to minimize the damage and capitalize on the chance to change. They can accomplish this transition by keeping three suggestions in mind:
1. Focus on value. The founder was the leader -- not the product or service. Focus on what the company does well that customers appreciate. Forget about the old vision for a moment, and get back to basics by ensuring the company continues to offer value.
Despite seemingly endless troubles at the top of Uber, that ride-hailing company still boosted its sales by 61 percent last quarter, according to Bloomberg. Regardless of negative actions committed at the top of the company's food chain, people still want to use their smartphones to summon an Uber ride.
The lesson? The members of any company's C-suite will change over time, but success can continue as long as the product continues to meet a need (and does it well).
2. Rewrite your brand story. The product might not be affected by the founder's exit, but many startups rely on their creators' stories to guide their brands. If the founder's story was the company's story, it's time to write a new one -- a story that places the business and its achievements ahead of a single personality.
Sometimes, that means pivoting to focus on something that does not remind people of the old regime. Zenefits, an insurance-broker startup, initially sold policies to customers. After its co-founder and CEO resigned during a scandal about licensing, the new leadership repositioned the operation to focus on software instead of policies.
The lesson? A pivot in the brand's focus won't excuse a founder's mistakes, but it could save the business by distancing its operations from its past sins.
3. Launch in a new direction. The exit of a founder is a grueling event. In small operations, the departure of the first employee can make those who remain -- and the company's customers -- feel directionless. So, prevent this confusion from taking hold by hosting a launch party for the company's new direction. Even if the launch party is more of an internal meeting and a press release, the definitive step in a new direction provides clarity for everyone.
Remember when Groupon ousted its founder in 2013? Instead of floundering after his departure, the company launched Groupon+ to let customers link deals directly to their credit cards. This shift toward a more fluid experience flew in the face of the company's traditional strategies but provided Groupon with the boost it needed to power through its founder's departure.
The lesson? Overall, launches are happy events. While a huge celebration in the wake of turmoil might seem absurd, a new direction tells people that this company is starting fresh. That doesn't mean the business should turn its back on existing customers, though; it should take care to invite those customers to share in the next stage of the business.
Moreover, the company should consider new names, new designs and anything else that shows the world it is making major changes.
Certainly, founders are pivotal people at startups. As their companies grow, however, their importance to the enterprise dwindles. Some entrepreneurs see their companies through for decades; others don't. Regardless of who is in charge, follow these tips to ensure that your founder's exit -- should that event occur -- doesn't take the company along with it.