With our required MBA course in Entrepreneurial Management under way, I have less time to post research results and related items here. However, here are three quick items I recently accumulated related to the “After the Firing” side of my founder-CEO succession research.
Nike’s Post-Succession Woes
I recently got a call from Daniel Roth, a senior editor at Fortune magazine who is doing a story on Nike’s post-succession problems. In short, a little over a year ago, Phil Knight, the founder of Nike, brought in Bill Perez, the very successful CEO of consumer-goods company S.C. Johnson, to take over as CEO of Nike. A year later, Knight fired Perez.
One of my observations that I discussed with Daniel is that post-succession problems can come from 2 very different directions: When the company isn’t ready for the founder to let go, or when the founder isn’t ready to let go of the company.
Nike’s story illustrates both sides of this, and how the situation can go from one side to the other relatively quickly. In March 2005, Daniel wrote a story entitled “Can Nike Still Do It Without Phil Knight?” That headline captures really nicely the first “company isn’t ready for the founder to let go” side of what I discussed with Daniel.
Tellingly, Daniel’s March 2005 story ended as follows:
The baton may be passed, but Knight, as chairman, is still going to be there, strolling around, dropping in on people and projects when he feels like it, and most important, staying in their minds, reminding them that if they have problems, all they need to do is triple their speed.
Now, less than a year later, the sub-header on Business Week’s recent story on the latest development is, “Founder Phil Knight is a case study of the charismatic leader who can’t let go.” This is a great example of the second “when the founder isn’t ready to let go” side of what I discussed with Daniel (and the risks I described in the New Business story, regarding the challenges for successor CEOs when the founder stays active in the company), showing how things have flipped since Fortune’s March 2005 headline.
Cyberposium: Kapoor and Dalton on Firing Founders
At HBS’s annual Cyberposium event, there was a Q&A session with some VCs. One audience member asked them about the rationale behind VCs replacing a founder-CEO with a “professional” CEO, despite the fact that some of the best CEOs in the IT industry were founders of their companies.
Both Raj Kapoor, a co-founder and CEO of Snapfish and now a VC at Mayfield, and Sean Dalton, a General Partner at Highland Capital, had interesting views on founder-CEO succession. An excerpt from each of their comments:
- “VCs have very few buttons they can push in a company — one of them is whether to hire or fire a CEO,” said Kapoor. “With so much information coming to them about a company, and so few outlets for them to act on that information, it makes it more likely that they will press that button at the wrong time.”
- “I love first-time CEOs,” said Dalton. “They actually want to learn. I look at how hungry they are and how relevant they are. Look for the Desh Deshpandes,” referring to the founder of Cascade Communications and Sycamore Networks. “That’s going to create your career.”
Going the Distance
Last week, Rick Spence of the “Canadian Entrepreneur” blog picked up on the HBS New Business story on my founder-CEO succession research, did a detailed summary of my findings, and injected his own opinion that, “[M]ost entrepreneurs aren’t the right people to manage large, complex businesses. We all have our limits.” He then posed a blog-question to Jim Estill, the founder-CEO of a $1B Canadian distributor of technology products, asking him, “[W]hy do you think you’ve been an exception?”
Mr. Estill posted the following reply-comment:
I like to learn and see a great need to do so. I have always had a vision of running a large company and worked hard to be prepared to run one.
I think the best CEOs are ones that know themselves well. This way they surround themselves with capable people to fill areas they need help in.
I think CEOs that do well long term put their company first – ahead of themselves if need be.
When a CEO stops learning or developing, it is time for them to move on.
On the one hand, it’s hard to argue with what Mr. Estill says (in a “Mom and Apple Pie” sense :->). On the other hand, I have seen plenty of founder-CEOs who have believed and done everything he says, but still couldn’t “go the distance,” so I’m still in search of what really separates those who can from those who cannot.
UPDATE (2/25/06): See the comments for more extensive thoughts from Jim Estill. Rick Spence follows up with an entertaining look at the game of blog ping-pong that led to the online dialogue about this issue.