Can Your Company Survive Once The Founder Leaves?

by Mark Goulston, Doc Barham, and Jeffrey Weiner

You're a 60 to mid-60-something founder/CEO. You're not only well known to your customers, vendors and investors: you and your brand are nearly inseparable and you are LARGER THAN LIFE.

What would happen to your company if you weren't there (because of death or a less morbid exit strategy)?

We have asked that of a number of the companies we work with where the above description applies.

When that description holds true, we have yet to encounter a senior management team where there hasn't been a mixture of palpable anxiety and nausea in the pits of people's stomachs, admixed with eager anticipation to finally get the chance to try their hands at running the show.

With a number of founder/CEOs we have met who are proud--generally justifiably--of their company yet exhausted and battle weary, we have begun to see a willingness to pass on the baton to the next in line. The reasons for this willingness are many and varied. In some cases, it may be failing health; in others it may be a desire to do something else for their "final chapter"; in still others it may be a perception, well-founded or not, that selling price multiples will be depressed for years to come, or that looming competitive threats may require additional capital or other resources not easily available to the founder/CEO.

Whatever the reason may be for this growing willingness to pass the baton (a subject for another day), our client experiences over many years have led us to conclude that if the ten conditions below are present, then the company is likely to survive and thrive even after a "larger than life" founder/CEO departs:

1. Customers have deep brand trust and loyalty that is greater than their awe of the founder/CEO.

2. Investors, employees and others with a direct financial stake in the company's survival and well-being have deep confidence in the next CEO (either the founder/CEO's skill set and maybe even some of their Personal Genius* is being passed on/made scalable, or the new CEO manifests their own).

3. The next CEO has earned the trust and confidence of people inside and outside the company by having demonstrated a track record of successful judgment** and judgment calls regarding:

(a) Vision--able to grasp the realities of the present, see clearly into a disruptive future and articulate a vision so that others "buy in" instead of "buy out"

(b) People--able to get the right people in the right positions doing the right things

(c) Strategy--able to define, chart and articulate a plan that feels right, makes sense and seems doable to the mere mortals who will be tasked with executing it

(d) Crisis Management--able to effectively and efficiently deal with obstacles, mistakes and conflicts head on, to correct problems fully so they don't reoccur and most importantly to learn the important lessons these setbacks have to teach

4. A process for leadership and management development is in place whereby:

(a) High potential personnel and high performers are identified, and are then nurtured and coached in ways designed to enable them to fulfill their potential

(b) People's judgment and judgment-call skills are developed (this is the key to being able to delegate to people with confidence)

(c) Skills are learned to confront and resolve conflict early, effectively and completely (conflict avoidance at all levels is one of the greatest obstacles to success)

5. A process for change management is in place whereby:

(a) Vision, Strategy, Execution, Metrics*** is clear to everyone involved in the process and all are committed to it (Vision = 5-year outcome; Strategy = 3-year outcome; Execution = 18 months to 3-year outcome; Metrics = measurable outcomes)

(b) Everyone involved knows who will do what, by when and why

(c) Specific and measurable outcome criteria for advancement and pay are clear to everyone to prevent the frustrating, demotivating and often demoralizing process of people working hard only to be told they have done the wrong thing after they have done everything they thought they were supposed to do

6. Attitude has been replaced by gratitude: anyone who works for or with the company feels a deep sense of appreciation and gratitude.

7. Pride and paranoia have been replaced by:

(a) Asking for help when you need it (but being specific about your request and having tried everything possible before you ask)

(b) Offering help to other people and other parts of the company without their needing to ask for it (as in taking people aside and saying. "I've noticed something that might help you or your division get better results. Might we set a time to speak?")

(c) Instead of hoarding information, giving it to whoever it might help

8. People are committed to not letting each other fail--people seem to have each other's back more than they fear turning their backs to anyone.

9. There is a "this is the place you want to work" buzz in the company, the community and the world at large.

10. Anyone who buys or uses the company's services or products has a nearly evangelical "you gotta try this!" zeal that they spontaneously tell others about.****

While we would not be so presumptuous as to say that any company missing one or even more of the above items is doomed after a LARGER THAN LIFE founder/CEO turns over the reins, we would urge every founder/CEO (in the next 60 seconds) to look in a mirror, and ask himself or herself: do I have in place in my company all 10 of these corporate "lifesavers"? If you do, congratulations--that's great! But if you don't--and please do yourself a favor and recognize that you are hurting yourself and everyone else in your company's "ecosystem" if you're not brutally honest about this--then start working on a plan to develop and implement whatever item(s) your company may be missing. Making sure that your company is "built to last" (which is ultimately your responsibility), will help you and your family, and your employees, customers and vendors, all to sleep better at night, and to face each day with confidence and enthusiasm, and, ultimately, will lead to a higher valuation for your business.


*Personal Genius is a process developed by Xtraordinary Outcomes to deconstruct the largely intuitive "special sauce" of the best performers in companies so that others can get breakthrough results following the same steps. When the best performers learn "how" they do what they do, this process helps them do it more consistently and to achieve even better results.

**For an excellent discussion of this subject, see: Judgment: How Winning Leaders Make Great Calls by Noel Tichy and Warren Bennis (Portfolio Trade, $17.00).

***Vision, Strategy, Execution, Metrics is a process developed by Cisco for identifying and implementing business initiatives.

****The Ultimate Question: Driving Good Profits and True Growth by Fred Reichheld (Harvard Business Press, $32.95) explains in a clear and readable book how the ultimate question is whether or not a customer would recommend your product or service to a friend.

Doc Barham is CEO of Xtraordinary Outcomes a business advisory company that helps individuals and companies achieve positive measurable results beyond their imagination.

Jeffrey M. Weiner, Esq. is corporate partner in the Century City office of Steptoe & Johnson LLP, and represents companies and individuals in mergers and acquisitions, business financing and technology transactions, and general business and securities law matters.

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