Some more thoughts on founders and professional CEOs

Last week I wrote about the the difference between the skills required in the early days of a company when innovation is the biggest driver of value and the skills required later on when execution and exploitation become more important. My conclusion was that the skills are very different, but that it is increasingly important that the capacity to innovate is retained, and that hiring a professional CEO (by which I mean execution focused) can be a mistake.

One thing I didn’t talk about was the value a founder brings to the business and the post sparked a Twitter conversation with @tewy on the merits of Zuckerberg’s approach of bringing in a professional COO. My final contribution to that exchange was to say that keeping the founder in the company is the best solution, ideally as CEO.

Today I watched the interview below with Ben Horowitz of hot Silicon Valley VC firm Andreessen Horowitz (AH) in which Ben talks about how VCs have traditionally brought in professional CEOs for their networks of customers and potential hires, I guess in addition to their execution skills, although Ben doesn’t mention that. AH have set out their stall as being very pro-founder because part of their mission is to help create some lasting companies with the scale of Amazon, Facebook, Salesforce, Google or Microsoft, and as Ben notes that all those companies, and the majority of other large companies that have stood the test of time, were run by their founders for a large number of years. He thinks that is because founders have a number of advantages that brought in CEOs can never match, namely, deep knowledge of the company, authority with employees, and commitment to a long term strategy/vision.

AH’s approach is to help founders grow into large company CEOs by having people on the AH payroll that help founders build out their networks, i.e. a high expense, high value-added model. As per Martin Stillman’s comment on my last post on this subject, in addition to helping building investors can also mentor founders to become better at execution, either themselves, or by encouraging the use of third party mentors.

I think that as the pace of change continues to increase innovation skills will only become more important and hence a bias in favour of founders will become more commonplace. However, as Ben also notes, this isn’t the same as saying the founder is always going to be the best person to run a company.

The video is 19mins and if you haven’t got time to watch it all the key section starts around 3mins in.

  • http://www.facebook.com/francesco.cardoletti Francesco Cardoletti

    As you say, the skills required by a CEO change considerably as the organization changes and becomes more complex. However, you stop short of defining a founder by his innovation skills and a ‘professional CEO’ by his execution skills. While founders are by definition ‘innovators’, their success is single handedly derived by their ability to execute, creatively and generally with limited resources. A professional CEO, on the other hand, is usually a master at managing complexity but in many case, the execution capability fall onto his/her team. 

    Founders are also instrumental in setting company’s culture – which, in my opinion, is a driving force behind the success of an organization. Often times, as a founder/CEO is replaced by a professional CEO, the company loses its internal ‘identity’ and inevitably this is reflected in the bottom line.

  • http://www.theequitykicker.com brisbourne

    Hi Francesco – great points re complexity and culture. I think we have a different definition of ‘execution’ though. I mean thorough detailed oriented planning and a focus on process to make sure things don’t get missed. I suspect you are thinking about the ability to roll up your sleeves and get stuff done. The latter is a founder talent, I agree, but I think it is different to the sort of execution skills required from a leader as a business scales.

  • http://www.facebook.com/francesco.cardoletti Francesco Cardoletti

    completely agreed –  semantic can be tricky.