Are Founders the Greatest Assets or Liabilities of their Businesses?

Are Founders the Greatest Assets or Liabilities of their Businesses?

By Tim Sternberg
10 Min Read

If you have listened to a lot of podcasts interviewing founders, they all seem to have one thing in common: almost all of the Founders have exited their business, not always by their choice. Numerous data sources point to most founders surrendering management control long before their companies went public.

“By the time the ventures were three years old, 50% of founders were no longer the CEO; in year four, only 40% were still in the corner office; and fewer than 25% led their companies’ initial public offerings.”

The reasons are usually simple – either Founders lose their love for their businesses, or they are forced out because others have determined that their businesses would be better off without them – their weaknesses now outstrip their strengths.  This shift is sometimes referred to as “the Founder’s Curse”.

As a Founder myself, and someone who works with Founders every day to grow and build business value, I have wanted to understand why a Founder can be one of the greatest assets or liabilities of their business. Not just to work with my clients more effectively, but also for my own journey as a Founder.

Typical Assets of A Founder

Founders are a special breed of human beings. Identifying an idea, rebelling against the societal norm of a secure salaried income.  There is a huge investment of their time, emotions, money (and potentially investor money) into a concept. It takes a “je ne sais quoi” quality, which is why many people admire their confidence, determination and focus like they would a mountain climber.

As a generalisation, there is always one Founder in a business that is the “spark” who rallies everyone behind an opportunity and gets the fire started.

  • Vision, Ambition & Drive: Whether its wealth or purpose, there is a strong and driving ambition to achieve greatness.
  • Charisma: Most Founders I have met have some element of charisma. People are drawn to them.
  • Ideas & Innovation: Founders are brilliant at generating ideas and great at solving customer related problems
  • Agility & Flexibility: At a drop of the hat, Founders can pivot and jump on a new trend, seizing opportunities.
  • Strong Persuasion: To drive sales or attract and onboard new employees, suppliers and partners, requires great powers of persuasion.
  • Fantastic at Sales & Customer Relations: As most businesses take time to get off the ground, there needs to be a Founder that has strong sales or customer service to gain traction.
  • Market Influence: Often, a Founder will grow their personal brand in the market to grow the brand awareness of their business. It’s a cost effective way to grow market awareness and differentiate.

The survival rate of new businesses is extremely low. Therefore, all of these strengths can be vital assets to the start up. They are critical to stay strong and brave in the face of adversity, to get through the tough times.

Overdone Strengths Can Become Weaknesses – Even Liabilities

The main challenge is that many Founders often think that the old adage, “this is what got me here” will continue to serve them well as the business grows and matures. And while a lot of the attributes of Founders are critical, they often don’t develop and adapt themselves to the next phases of growth.

So in long periods of stressful situations, Founders can become overly dependent on  the strengths that have served them well at the beginning. If there isn’t counter balances internally within a leadership team, then many of these strengths can become overdone and become a business liability:

  • Impulse Control: There are a large percentage of people that are making decisions too quickly and relying heavily on their gut instinct and emotions in the decision making. When we are faced with big decisions, people feel uncomfortable and they want to move too fast.
  • Pivoting Too Much. Agility can be fantastic when you are starting out. I have seen many organisations jumping on lots of opportunities, but struggle to stay on track and implement concepts to their full potential.
  • Ineffective Leadership: Founders that rely on their charisma, rather than developing their Emotional Intelligence and situational leadership, struggle to lead a broader and more diverse group of people.
  • Control Issues: As the business grows, 1-2-1 persuasion is diluted and reliance is placed upon your leadership team. Frustrated Founders may then turn into micromanagers to maintain control over the business.
  • Poor Execution: Business models, sales opportunities and innovation all require execution. If a Founder hasn’t found their operational 2iC and strong organisational structure, then the business will struggle to scale through effective implementation of ideas via operations and systems.
  • Overreaction: When the identity of the Founder is inextricably linked to the business, many decisions and actions can be seen as personal. This can cause overreaction when dealing with issues regarding investors, suppliers, employees and customers.

How Founders Can Beat the Curse

I have learnt through my exploration that if a Founder can balance their core strengths with some proven leadership best practices, their “survival rate” will be much higher:

  • Self Awareness: Most Founders have a level of awareness around their weaknesses. What most are not aware of is that their strengths can also be overdone and there will be impacts on their business, especially in stressful situations. We suggest a combination of psychological profiling, well crafted 360 feedback, and executive coaching to increase awareness and keep you on track. The best leaders take time to pause, reflect and understand how they can continually improve your leadership style, without being too hard on themselves.
  • Complimentary Leadership Team: Unfortunately, most Founders have unconscious bias when hiring, including hiring “carbon copy” personality types. Similarly, it’s challenging for them to identify and articulate the skills and experience they need to balance their own. This ultimately reduces overall diversity and complementary strengths of the leadership team. We suggest you follow a robust leadership profiling, attraction, interview and onboarding process to ensure success.
  • Strong Planning and Accountability: Having a strong strategic plan, which looks at ambition and risks side by side, is a critical part of planning how you will mitigate or offset overdone strengths. Strategic planning should be done as a top down (Strategic Pillars) approach first and then validated from the bottom up (Departmental), to be comprehensive.
  • Timely, Fact Based Decision Making: Instinct is a valuable part of decision making and problem solving, but it needs to be backed up with relevant and rational data. We really believe in “slowing down to speed up” with a robust decision making process that maps out the requirements, variables and likely outcomes, together with timeframes and key stakeholders that may need to be consulted.
  • A Strong and Independent Board or Advisors: We all need to be challenged at times. If you can’t afford a good board, engage expert advisors that you meet with regularly. If you create a board, ensure that the majority are not working within the business, to improve the impartiality of their  questions and advice.

Ensuring that your assets as a Founder don’t also become liabilities requires a delicate balance, and there is no silver bullet. It takes time to see how your strengths, if overdone or accompanied by less useful behaviours, can negatively influence your business. Yet with strong self awareness, good advisors, a willingness to develop, and a great leadership team to support you, there is no reason why you can’t survive “the Founder’s curse” and lead your business happily and well for many years to come.

Tim Sternberg

Tim Sternberg

Tim is an expert in sales, marketing, recruitment and leadership with a particular flair for helping his SME...

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