As a start-up grows, can the founding team continue to make decisions collectively, or does someone have to rise above the others and become the final decision maker?
A couple of years ago at a panel discussion at HBS’s annual Entrepreneurship Conference, the 4 founders on the panel disagreed about almost every topic raised by the moderator. The one thing on which all 4 agreed was that “a start-up has to be a dictatorship.” Each of the founders had started a company with at least one co-founder, and had tried to make all decisions by “consensus.” However, in all 4 cases, this structure had caused major problems for the start-up. Therefore, summed up one of the founders, “Either I have to be making the final decisions, or I have to be working under my co-founder who is. ‘Co-CEOs’ just doesn’t work.” At the time, I had just finished writing my Ockham case, where this issue caused disruptive tension between the founders.
On the other hand, back when I first started focusing on founders half a decade ago, one of the first companies I studied was iWon, which was run pretty successfully for a while by two co-founders and co-CEOs, Bill Daugherty and Jonas Steinman. In our Entrepreneurship MBA class, we refer to this as the “Neverland” approach (the Peter Pan one), after the place where there are no parents, only children.
Here’s an excerpt from an old story about Bill and Jonas. It’s Bill response to the question, “Explain how you manage to both share the CEO title. Doesn’t one person have to make the final decisions?”
Daugherty: Jonas and I met at Harvard, so we’ve been friends a long time. Even though we hadn’t worked together, we had a real good knowledge of each other’s strengths and weaknesses. We shared the same values about what type of organization we wanted to create and focus on getting things done. This is a very open environment and decisions are made continuously during the day, 24 hours, and we’ve had very few issues where we’ve had differences. Where we did, the one who’s been most passionate about his position has carried the day. You talk things through just like any good relationship.
In a query posted to “Founding with Friends,” hiphopentrepreneur resurfaced this issue: “we are currently working out positions in the company and responsibilities…we know each others strengths and weaknesses, but we haven’t yet solidified a business making structure…my question is….Can you really have more than 1 CEO? We all have important product ideas that are a major part of the business so who should reign supreme?”
- Overall, what have been your experiences with the Neverland approach?
- More specifically, were you able to maintain a “consensus” approach within the founding team?
- If so, for how long were you able to keep it up, and how effective was it?
- If not, why did your approach change? At what stage? What did it change to?
- Beyond any personality-specific factors, to what do you attribute your success or failure with the Neverland or Dictatorship approaches?
- From an investor perspective: If a Neverland venture is succeeding, would you be more or less inclined to invest in it than in an equivalent Dictator venture?