I am one half of a partnership managing an international company. With more than ten business projects, including an e-sports media holding company, service and product IT companies, the production and distribution of merchandise, a venture studio, and more.
Several years ago, each of these was scattered businesses—united only by the founders’ names. In each of them, my partner and I had key roles, but there was one undesirable point: we were drowning in a sea of day-to-day business operation hassle—and companies were approaching the threshold of stagnation.
My partner and I delegated our CEO functions and concentrated on scaling up our businesses. Using my own example, I will explain why this might be a good idea for you and what control questions you should ask yourself.
TWO PERSPECTIVES ON DELEGATION
The problem confronting many founders is that they find it difficult to part with the sole executive status and are reluctant to transfer responsibilities to the appointed CEO. And I can relate: there is still no consensus on the distribution of powers in the business community.
American investor Ben Horowitz argues that founders have qualities that professional managers don’t. Namely:
- Comprehensive knowledge
- Moral authority
- Full long-term commitment
He calls these qualities the key ingredients for success. According to Horowitz, a start-up breakthrough under the leadership of a new CEO is rather the exception to the rule.
But it’s not quite so cut and dried.
In “The Founder’s Dilemma,” Noam Wasserman, dean of the Yeshiva University Sy Syms School of Business, cites the following statistics after analyzing more than 200 companies started in the 1990s and early 2000s: three years after launch, 50% of founders stop acting as CEO, and by the time the companies went public, only 25% of founders remain in the CEO position.
But why is this so?
Founders are product-oriented by design. They understand all the small details of their creation and know how to fit it to market needs.
However, the founders’ fixation on the product often plays tricks. They can be so obsessed with the idea of revolutionizing the market that they ignore other important business aspects—communication with the outside world and product promotion. Without proper marketing, even a cool innovation is unlikely to work out.
IF IT’S NOT BROKEN, DON’T FIX IT
Not every great founder is a great CEO. As the enterprise grows, operational work on the product takes less and less time, while more time is taken by expansion tasks. You start to have to sacrifice creativity for the sake of structure.
You can learn how to fulfill the duties of a professional CEO. But is it always necessary? If one person is talented in generating ideas, and the other in creating excellent organizational structures, there is no need to retrain each of them in the opposite direction.
My partner and I adhere to this approach in the holding. There are two types of CEOs in our companies now.
The first one is entrepreneurs. These are the founders of projects that we invested in. They know how to grow a business, while the holding stands above to help them operationally and deliver expertise in situations the other companies experienced at some point in time.
The second type is the managers who replaced my partner and me in our projects. They share our values, and their skills are more suitable for growing already running businesses than for creating new ones. It is with the second type of the CEO that the skill of delegation is needed.
THREE EYE-OPENING QUESTIONS
1. How large of a business do I want? The essence of business is growth and expansion. For me, I’ve always wanted to build a company that operates on multiple continents and with different audiences, while for some, a coffee shop with four tables and no scaling plans is enough. It is clear that the need for delegation is completely different in these two cases.
The truth is, no hired manager will love your business as much as you do. But one day you’ll have to make a choice: either you will take a risk, or the company will no longer grow. You will have to constantly search for this balance point.
2. How much does my non-delegation cost my business? The easiest way to answer this one is to analyze your day or week. I can spend the same time either on minor management tasks or on negotiations with a potential investor or project. The financial effect of these actions is incomparable—a small percent versus impactful multiplied growth.
Yes, sometimes urgent assistance with some operational tasks in any of the companies might be required. But if it is required often, this brings us to the next question.
3. What kind of individuals do I choose to delegate? Every now and then, I witness cases where founders delegate responsibility to hired managers, but they do it in a way that they still keep all the decision-making to themselves. As a result, they have to constantly monitor, or even redo the result. They justify it with “They just can’t do it right,” and continue to get bogged down in tasks.
If this is a systematic answer for you, look at who you put in a managing position. You might simply be doubtful of your hiring of someone really worthy. And delegation remains nothing but words.
Another thing is that good managers, who can easily be trusted to run the company, are hard to find. The solution may be to train smart people for your business in advance.
For example, my partner and I’s holding adds several projects every year. We instructed the HR team to create a program to train managers capable of leading new companies. As a team, we single out talented managers interested in their development and ‘grow’ them into the role of CEO, giving them practical knowledge of how the holding and the business they have to manage works.
The larger the business becomes, the more authority will have to be given. And the more fearsome it can be to do it every time. But a competent approach to delegation will pay off in the end.
Yura Lazebnikov, Managing partner of TECHIIA Holding / Investor in Tech innovative projects