Do Founder CEOs Tune Out Their Teams?

Facebook’s user base grew at an exponential rate after Mark Zuckerberg founded the site in his Harvard dormitory in 2004. Remarkably, today Facebook boasts over 2 billion registered users — that’s more than the number of citizens of any single nation, speakers of any specific language, or members of any one religion. Though Zuckerberg guided the company through product development early on, its rapid growth brought new challenges associated with making the business profitable, expanding overseas, and developing an advertising network. To accomplish these tasks, and to comfort outsiders who worried about the young founder’s ability to take Facebook to the next level, Zuckerberg in 2008 hired chief operating officer (COO) Sheryl Sandberg and other key executives to assist him as CEO.

The Zuckerberg/Sandberg story is a common one among high-growth organizations. Founders who possess the entrepreneurial skills to build a new venture may lack the competencies and judgment required to lead their companies through later stages of growth and complexity. As a result, lead investors, shareholders, analysts, and the media frequently pressure founders to either step down or to complement their leadership teams with experienced executives who can compensate for a young founder’s inexperience.

But do founders actually assimilate and leverage the knowledge from the seasoned executives who surround them? Or do they shrug it off and march to the beat of their own drum? To better understand whether founder CEOs incorporate or ignore advice from their leadership team, we collected and analyzed data on more than 2,000 companies that went public from 1997 to 2013, roughly half of which were led by founders and the other half by hired (nonfounder) CEOs. We then examined whether and to what extent founder CEOs tune out their leadership team when making important strategic decisions. This examination uncovered surprising insights relevant for leaders of large and small organizations.

Why Founder CEOs Need Great Leadership Teams

CEOs carry many responsibilities: They create hiring and training plans, build the brand, manage overall operations, oversee resource allocation, act as the primary point of communication with shareholders and the public, and the list goes on. In addition to being busy, CEOs — like all leaders — are also imperfect, with personal shortcomings, biases, and blind spots that can negatively affect their own and others’ performance. To lower a CEO’s risk of being spread too thin and to help offset a CEO’s personal deficiencies, companies expend extensive resources to assemble a strong leadership team.

This process of surrounding the CEO with an exceptional leadership team is especially crucial in companies led by a founder CEO. Whereas professional CEOs frequently boast advanced degrees and decades of experience making strategic decisions, founders with a novel business model are often thrown into the CEO position by default without degrees or substantive experience in decision-making.

For example, Brian Chesky and Joe Gebbia, the two founders of Airbnb, had design backgrounds but had no prior managerial or business experience whatsoever. In fact, they were so untutored that they thought people referring to “angel” investors believed in celestial beings. Chesky still retains the CEO position but is quick to acknowledge that his company’s phenomenal success would have been impossible without a strong management team, most notably COO Belinda Johnson. She and the other top executives helped streamline operations, create and implement growth strategies, and guide the company — and its founder — through regulatory hurdles and an existential crisis sparked by discriminatory behavior on its platform. Chesky admits he would have been clueless without this help.

Why Founder CEOs Ignore Great Leadership Teams

Founders need advice more than other managers, but the unfortunate irony is that they are also more likely to ignore it. Past research suggests that founders have different profiles and proclivities than other leaders, particularly in micromanaging their businesses. Founders often see their company as their “baby” and consequently commit a commensurate amount of time, energy, and effort into building it. Such emotional and personal attachment can lead some founders to believe that they alone are able to lead the company to success.

Indeed, several of the best-known founder CEOs maintain unsavory reputations for disregarding the advice of their leadership team, instead relying on their own intuition. For example, Steve Jobs was described not as a consensus builder but as a dictator who relied mainly on his own instinct. Elon Musk shares a similar reputation for being domineering. He has described himself not as a mere micromanager but rather a “nano-manager,” a style that led many of his top managers to leave. Likewise, Travis Kalanick led Uber with an iron fist for eight years before his accumulated scandals blew up in his face and major investors demanded his resignation; mere months before his departure, he famously told employees that for “the first time I’ve been willing to admit that I need leadership help.”

Founders’ desire to retain control often leads them to disregard their leadership team members when making important strategic decisions. Our data provides striking evidence to support this conjecture. Although team structure (composition of the leadership team) has a major impact on the performance of companies led by professional (nonfounder) CEOs, we found that it has little to no impact on the performance of companies led by founders. In other words, the evidence suggests that it doesn’t appear to matter what type of leadership team the founder has around them because founders aren’t listening anyway. These results hold true even when comparing founder-led companies to nonfounder companies that share similar profitability, size, and corporate governance structures (such as the number of external board members, an external chairperson, and a dual-class share structure).

What are some key takeaways from these findings? We offer the following suggestions for leaders in founder-led companies and for those working with, investing in, or joining one of these companies.

One Size Does Not Fit All

Founders typically differ from nonfounders in their risk profiles and preferences for power, but not all are cut from the same cloth. Like Airbnb’s Chesky, some founders are acutely aware of their shortcomings and actively seek advice to address those gaps. If the founder is willing to cede some control, board members should encircle them with as much complementary experience and expertise as possible. Data from our research supports this view, revealing that a leadership team has more impact on performance in companies where founders cede more control.

Our research also suggests that, for all founders, the selection of the leadership team requires careful consideration beyond supplemental skill sets. Given founder CEOs’ tendencies to tune out their team members, a primary factor may be how potential team members mesh with the founder. Board members and other external stakeholders should also assess the founder’s leadership style to gauge whether the company is likely to benefit from an additional team member.

Thus, the size of the leadership team, in addition to its composition, appears to be critical. One company that has done this well is Andreessen Horowitz, a venture capital firm known for being “hugely in favor of the founder who intends to be CEO.” By recognizing that founding CEOs have different needs than other CEOs, and by building the company to cater to these idiosyncratic needs, Andreessen Horowitz has become one of the world’s most influential venture capital firms, with assets under management now exceeding $10 billion.

Adult Supervision May Not Help

Founder CEOs are often young and frequently appoint other young individuals to similar senior leadership positions.1 As these companies grow, many industry experts recommend “adult supervision” to shepherd the organization to higher heights. Examples commonly cited as support for such recommendations include Google’s Eric Schmidt, Facebook’s Sheryl Sandberg, and Dell’s Mort Topfer — hired to guide Michael Dell, who was at the time the youngest ever CEO of a Fortune 500 company.

Yet despite these high-profile success stories, our data describes a darker tale. Specifically, our analysis shows that adult supervision rarely serves its intended purpose. The executives brought in to supervise the founder are often met with unrelenting resistance. One such example occurred when Groupon went public in 2011. Each of the team members surrounding founder CEO Andrew Mason was more than a decade older than him. Despite this “adult leadership” and encouragement to change his ways, Mason continuously displayed “goofball antics” and used “controversial accounting techniques” that contributed to his firing within 18 months. Similarly, Adam Neumann was surrounded exclusively with older executives as WeWork attempted to go public in 2019. Neumann resigned following the company’s failed IPO, noting that he had become a “significant distraction” amid reports highlighting his extravagant lifestyle, raucous in-office parties, frequent drug use, tequila obsession, and other oddities that left colleagues upset and unwilling to support him going forward.

As a general rule, if founders need adult supervision, they probably should not be operating and overseeing multimillion-dollar organizations. A board that finds itself with this type of CEO is better advised to replace the leader rather than raise up and reinforce them. Such a shooting star may quickly become a falling star, dragging other stars down in the process.

The Whole Is Not Equal To the Sum of Its Parts

A group’s performance, rarely equal to the sum of its parts, is more strongly influenced by its strongest members. Consequently, investors, potential hires, and other stakeholders must remember that the CEO’s willingness to share decision rights with surrounding team members will disproportionately determine company decisions.

One such example is Amazon’s Jeff Bezos, known for hiring Larry Tesler, a famous and renowned user-interface expert whom many expected would help overhaul Amazon’s site. However, after going to the trouble of poaching Tesler from Apple, Bezos allegedly ignored everything Tesler said for the three years he was at Amazon.2 Nonfounder CEOs exhibit similar tendencies. Consider, as an illustration, Marissa Mayer’s first major hire at Yahoo in 2012: COO Henrique De Castro, whom Mayer described as “the perfect fit,” lauding his previous success at Google. Though the two had previously worked together at Google, their relationship quickly became tense at Yahoo; colleagues regarded the relationship as awkward and referred to De Castro as “Dead Man Walking.” Despite paying De Castro more than $50 million in compensation over the 15 months that he worked at Yahoo, Mayer inserted herself back into the roles that he was hired to fill before he even exited the company.

Those affiliated with founder-led companies should keep in mind that the fate of an organization hinges not only on the individual abilities of its leadership team but also on how the CEO and other executives interact with one another, influence one another, and become involved in collective activities. Seasoned executives considering opportunities to work under such a founder CEO would do well to enter the position with a plan B in place, recognizing that despite their best efforts, their brilliant ideas may be not be readily received.

Our research suggests a counterintuitive insight: It is often in the release of control, not the retention of it, that founders sustain the success of their organization. Founder CEOs who insist on maintaining a tight grip on decision-making may prevent rather than propel progress. Leading a complex organization generally requires a joint effort; founder CEOs unable or unwilling to share collective responsibility for the organization’s success may be advised to consider stepping down. While this may be difficult for emotionally attached founders to do, it may be necessary for the success of their business.