Business Growth Dilemma: Can You Make the Transition from Founder to CEO?

Foolhardy. Brazen. Willfully impervious to the enormous odds stacked against them. While entrepreneurs are aware that 50% of new businesses fail within a few years, every one believes that he or she is a success story in the making. New ventures need this enthusiasm, passion, and grit; they feed on it.

But there's another set of statistics that entrepreneurs also willfully ignore - and this one will get them. Within three years, 50% of successful founders are no longer in the CEO seat. The next year, that dwindles to 40%. And, most tellingly, 80% of entrepreneurs are forced to step down as CEO - of the company they shed blood, sweat, and tears to build. As a founder, can you make the leap to CEO? And, if you want to, how do you transition?

The Founder's Dilemma

Entrepreneurs can - and do - become successful CEOs. Look at Bill Gates. Larry Ellison. Mark Zuckerberg. Steve Jobs. Sam Walton. But, as Noam Wasserman points out, these folks "get all the attention because they are rare, not because they are typical."

According to Professor Wasserman's research, founder CEOs tend to get ousted when they do not perform well - and when they perform really well. And for much the same reason. "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."

In other words, you got us here, but you can't bring us any further. The skills required of a successful entrepreneur - passion, innovation, vision, optimism, tenacity, risk tolerance, self-belief - are not necessarily the skills required of a CEO.

Chief executives have to be methodical, disciplined, systematic: this is what growing organizations feed on. Passion takes a backseat as the ability to manage, organize, and delegate becomes paramount to the survival and success of the business.

A Leadership Crossroads

Sometimes, the decision to step aside as CEO is made for founders - investors or the board decides it's not in the best interests of the organization to keep them on. In other cases, the founders themselves make the call to move on.

Andrea Hershatter, of Emory's Goizueta Business School, says, "There's a big difference between people who have a passion for starting something specific and those who just live to create."

Some founders, like Jay Chaudhry, feel their best work occurs during the startup phase. "It is immensely satisfying to see something that you have dreamed of actually breathing and growing and happening in the market." For serial entrepreneurs, that's the goal. To create a business, see it grow, and then move on to incubate the next venture.

But what if you don't want to move on? What if you don't want to see that thing you dreamed of breathing and growing and happening without you?

Making the Leap

To make the transition from founder to CEO you need to "jettison" habits that impede business growth. One of the strongest, and most damaging, of these habits is associating your organization with you. It becomes your identity. You're the only one who can guide it. You're the only one who can lead it. You're the only one who can speak with clients or refill the copy machine.

As Michael Gerber writes in The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It, "If your business depends on you, you don't own a business - you have a job. And it's the worst job in the world because you're working for a lunatic!" When you can separate yourself and recognize that "the purpose of your life is not to serve your business, but that the primary purpose of your business is to serve your life, then you can go to work on your business, rather than in it."

And then you have a fighting chance of becoming an effective CEO.

Working On Your Business

Working on your business, of course, requires that you also have people working in it for you. This is a sticking point for many founders as they struggle to navigate business growth. According to Gallup research, only 25% of entrepreneurs have what they term "High Delegator talent."

As Hershatter says, "As you grow and expand...the leader must learn to trust in others. That's extraordinary difficult for some people." But failure to do so has a direct - and negative impact on the bottom line.

While difficult, and while entrepreneurs-cum-CEOs are a "rarity," it can be done. Darryl Rawlings, founder - and CEO - of Trupanion, a pet insurance company, was his only employee for some time. Today, he has over 200. He recognized the need to "develop new skill sets" and that he had limitations. He hired staff that could fill those gaps and free him to work on his business. He's able to pursue opportunities while his people "deal with the middle."

The transition from founder to CEO comes down to this: you've got to let go if you want to stay at the helm. Develop the skills, habits, and behaviors you need to become an effective executive, hire people to fill gaps, and then get out of their way and let them work. If that doesn't appeal to you - maybe it's time to start a new business.