Do Founder CEOs Tune Out Their Teams?

Founders need advice more than other managers do, but they are also more likely to ignore it.

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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.

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References

1. B. Hendricks, T. Howell, and C. Bingham, “How Much Do Top Management Teams Matter in Founder-Led Firms?” Strategic Management Journal 40, no. 6 (June 2019): 959-986.

2. B. Stone, “The Everything Store: Jeff Bezos and the Age of Amazon” (New York: Random House, 2013).

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