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Founder's Mentality Blog

Founder-Led Companies and the Professional CEO: Setting Up the First Year of Marriage

Founder-Led Companies and the Professional CEO: Setting Up the First Year of Marriage

New CEOs can take a dozen actions to help founders scale their impact on the firm.

  • 11 mars 2019
  • min

Article

Founder-Led Companies and the Professional CEO: Setting Up the First Year of Marriage

As we learn, we share. We’ve now had ten enlightening conversations with CEOs and founders on a pressing problem: What are the right set of actions that a “professional” CEO should take when entering a business where the founder is very much alive and well?  

While all situations differ, there are two reasons that a highly successful founder might bring on a professional CEO:

  • The founder is finding it increasingly hard to scale as an individual. Her clear sense of the company’s insurgent mission has diluted as the business expands. She can’t be everywhere at once. A founder must remain involved in all critical decisions and act as a behavioral role model to keep the insurgent mission alive. But this is no longer working.
  • The founder is struggling with two contradictory events. On one hand, as the business grows, she’s trying to gain the benefits of scale. Yet at the same time, her early attempts to bring on professionals has led to an excessive emphasis on systems and bureaucracy. The professionals bring complexity without necessarily bringing the benefits of scale. They’ve run systems before, but they haven’t built them. Although her early experience with professionals has been mixed, the company’s need for professionals continues to grow.

These two issues are completely at odds. The first demands more professionals focused on the benefits of scale. The second demands more “Founder’s Mentality®,” or more from the founder and less from professionals.

We’ve been exploring this basic problem for five years now. How does a founder move from insurgency to scale insurgency without becoming a bureaucracy (see Figure 1)? More specifically, how can a professional CEO help the founder without becoming part of the problem?  

Figure 1

Ideally, a fast-growing company achieves global industry leadership without sacrificing its Founder's Mentality

You can approach this issue from the perspective of either a founder or a professional CEO, but we chose to write a checklist for the CEO. Our checklist covers how the CEO can help establish an agenda for the founder, himself and the rest of the organization, in that order. Finally, it covers how everyone can work together happily—or, at least, effectively. (Happiness is another blog entirely.)

Setting the founder’s agenda 

The CEO must solve the first problem of a founder: “How can I scale my impact on the firm?” A good CEO starts by setting up the founder’s agenda. This means ensuring that the founder will be able to contribute to the business in a focused and sustainable way. Some new CEOs start with their own agenda, carving out their role in contrast to the founder. That’s a big mistake. It leads to immediate distrust and zero-sum conversations. The founder remains the most important person in the company, and new CEOs will forget this at their own peril. Six actions can help them focus on the founder first.

  • Get the facts and establish one version of the truth. The founder and CEO should agree on the facts of the problem they’re trying to solve together. In our experience, the Founder’s Mentality diagnostic and video can be greatly helpful here. The goal is to avoid cartoon conclusions of the problem, by establishing the following:
    • Our goal is to become a scale insurgent in our industry, with a strong sense of Founder’s Mentality and the benefits of scale. We can’t make this an “or” problem.
    • Therefore, we need to scale the founder in the business and bring on new professionals.
    • We need to build an organization that resolves the three great conflicts in business. We can agree where the founder should play the most important role in these conflicts:
      • Scale vs. intimacy. We want our customers to benefit from our intimacy. Our knowledge of each customer allows us to tailor our offerings to their needs. We also need our customers to benefit from our scale, or sameness. We offer sameness if it leads to lower costs or more focused innovation. Is the founder’s voice stronger for scale or for intimacy? Or does she tend to be the best at managing the trade-off?
      • Routine vs. disruption. We want our customers to benefit from our playbooks, or our ability to flawlessly execute established routines and behaviors. We also want our customers to benefit from our ability to disrupt ourselves continuously. Is the founder’s voice stronger for routine or for disruption? Or does she tend to be the best at managing the trade-off?
      • Deliver vs. develop. We want our customers to benefit from our ability to deliver existing business ideas on time and in full. We also want them to benefit over time from our ability to develop new businesses. Is the founder’s voice stronger for delivering current businesses or for developing new businesses? Or does she tend to be the best at managing the trade-off?
    • As we think of new recruits, we’re aligned on the existing capability gaps between the six implied skills of the conflicts:
      • Do we need more customer-facing teams (intimacy) or more functional experts (scale)?
      • Do we need more talent to help us scale our playbooks (routine) or more talent to help us innovate (disruption)?
      • Do we need more talent to build our current businesses (deliver) or more people to build new businesses (develop)?
  • Codify the insurgency with the “strategy on a hand.” Before the CEO can decide his own role, he must align with the founder on what must be preserved, nurtured and scaled. This isn’t a soft conversation about the founder’s vision. It should be specific. In our “strategy on a hand” metaphor, the thumb represents the insurgent mission. The fingers represent three to four “spiky” capabilities that will help you achieve that mission. The founder and CEO must align on the strategy on a hand and agree that executing it is imperative. Too often, we see founders and CEOs agree on the need to protect the founder’s vision without alignment on what this means day to day. To avoid misalignment, we recommend that the CEO and founder co-create the strategy on a hand and explain it to the organization with one voice.
  • Identify the franchise players and connect the founder directly to them. Before the CEO brings in new people, the CEO and founder must agree on which current players are vital to executing the strategy. We refer to these people as “franchise players.” They are the leaders who deliver the benefits of intimacy to customers (the front line) and the people who deliver the spiky capabilities that improve with scale (typically, the leaders of key regional or global functions). It's important to understand that franchise players don’t come from every customer-facing or functional team. They are the leaders who directly deliver the spiky capabilities. Every action the CEO takes should help connect the founder directly to the franchise players. This is critical for future trust. The CEO isn’t there to build walls between the founder and key leaders, but rather to help the founder spend more focused time with these leaders.
  • Develop a compass of nonnegotiables. A critical part of the CEO’s job is to work with the founder to co-create a “compass” with the right leaders. What do we mean by a compass? The founder should help set guiding principles on how the company’s insurgent mission translates into the routines and behaviors of the frontline teams. The founder already runs the company with a clear set of essential routines that she role models every day. But as the business scales, we often find that these rules haven’t been codified. Fewer and fewer employees have seen the founder in action. The CEO needs to help the founder codify these nonnegotiables and ensure that the core leadership team is not only aware of them, but also lives by them every hour of every day.
  • Agree on the founder’s role. The four items above establish the “what” of potential founder roles: nurturing the strategy on a hand, managing the three core conflicts and/or reinforcing the compass. The founder might decide she’s passionate about being the voice of the strategy. She wants to train everyone on the insurgent mission and spiky capabilities. The founder might decide that she’s key to the three conflicts. She wants to fight for intimacy or disruption, or routine or scale. She might decide that she’s uniquely good at managing the trade-offs between all three conflicts. Or the founder might decide she wants to work directly with the franchise players and reinforce the compass every day. No matter the role, the CEO must help the founder set her agenda by giving her the full range of options where she can be most useful. The CEO must also manage the inevitable conflicts that arise if the founder tries to do too much. The CEO can’t begin to set his own agenda for the company until the founder is confident in her agenda. Too many CEOs start with their own role and later find themselves wondering how and why their relationship with the founder deteriorated so quickly. It’s sad, but true.
  • Scale the founder through iconography, pioneers and boot camps. After helping the founder establish the “what” of her agenda, the CEO should help the founder think through the “how.” A smart CEO helps the founder scale her role rather than reduce it—there’s a world of difference here. During this step, the CEO can offer multiple solutions (this list is only the beginning). The CEO can help the founder use iconography to deliver core messages about the company’s history or values (you can read our blog “The Iconography of Founders” to learn more). The CEO can help the founder “clone” herself by distributing roles to other leaders who were part of the company’s early history. One founder calls them “the pioneering team” and puts them at the center of the company culture. The CEO can also offer training programs. One CEO created “boot camps” for all new brand and regional managers. The most important trainer at the boot camp? The founder.
Learn More

Founder's Mentality

Fast-growing companies can become global leaders without losing the values that helped them succeed. Bain’s research explores how large incumbents can also reignite their growth by recapturing their Founder’s Mentality®.

Setting the CEO agenda 

After setting the founder agenda, a smart CEO sets his own agenda that complements the founder. This approach is politically wise and a good way to determine the right roles for each. Specifically, CEOs can take two actions to determine their own role.

  • Set out the scaling agenda with the strategy on a hand. As the CEO reviews the spiky capabilities, he’ll find that at least one of them will provide massive customer benefits at scale. The Yonghui supermarket chain has fulfilled its insurgent mission of providing “safe food” by continually improving its supply chain and logistics capabilities. If done right, the bigger, the better. Jaipur Rugs delivers the promise of weaver-designed rugs by constantly improving its proposition for weavers—many of these benefits result from getting bigger and better. By agreeing on the spiky capabilities and working out which benefit from scale, the CEO can help the founder establish the company’s scaling agenda, which helps guide and shape the CEO agenda. 
  • Agree to the CEO’s role in the three core conflicts. More broadly, the CEO can work through the three great conflicts to define his role as complementary to the founder. For example, when considering scale vs. intimacy, if the founder champions intimacy, the CEO can champion scale. Alternatively, if the founder is a master at managing the trade-offs between scale and intimacy, the CEO can focus on making sure the voices of intimacy and scale champions are heard before each decision.

Setting the franchise player and executive committee agendas

Now that the CEO and founder understand their roles, the CEO’s next goal is to establish the agenda for the franchise players and the rest of the executive team. 

  • Set out the two-year agenda for franchise players. The CEO must work with the founder to create an agenda for the franchise players and define how both leaders can support it. In most cases, we’ve found that the founder wants to maintain a special and direct relationship with the franchise players. It’s important to agree on how to do this. For example, we’ve worked with founders who have direct relationships with key software engineers, salespeople and innovators. Yet one of the most frequent causes of CEO-founder breakdown is that the founder sees the CEO as blocking access to these groups. The CEO almost always has a good reason, such as bringing clarity to the org model. But in the founder’s eyes, this move feels like a power grab that isn’t in the best interest of the company. Rather than fight these special relationships, CEOs should work to nurture and preserve them.
  • Set out the two-year agenda for the executive committee. The CEO will also want to establish an agenda for other leaders who will be brought in to professionalize the organization. This is the last people-related step, because in our experience, the best way to set the agenda for the rest of the team is to make clear that their job is to support the founder, the franchise players and the spiky capabilities.  

Developing an integrated view of the calendar 

The final pair of actions brings everything together into ways of working. It sounds simple enough, but the steps we recommend might surprise you.

  • Set out three types of meetings and the founder–CEO “social contract. I have to confess that I never thought this step would work, but we’ve found it’s one of the most important tools for CEOs and founders. It teaches them to work together. The previous actions focus on “what” a founder and CEO can do to build the right working relationship. They set up a common agenda. But they also must figure out “how” to work together. Everyone knows that founders and CEOs want to figure out how to trust each other. But few founder-CEO pairs know how to build this trust. 

    We borrowed an idea from our own internal training on “three types of meetings,” which has proven to be a great tool for founders and CEOs.
  • Type I is a brainstorming meeting without any materials. The goal is to align on the question that needs to be answered, the hypothetical answer and an approach to build confidence in that hypothesis.
  • Type II is a fact-based assessment of the hypothesis and alternatives. From this meeting, the group agrees on the answer.
  • Type III is all about execution. Everyone has agreed on the “what”; Type III meetings are all about the “how.”

    In a company’s early days, the founder played a critical role in all types of meetings and almost all of the company decisions. With the CEO on board, the founder has probably shifted to covering only a subset of critical decisions. Even on critical issues, there are only a few areas where she participates in all Type I, II and III meetings.

    We want the founder and the CEO to map this out. What is the current situation? How many decisions does the founder view as critical? How deeply does she participate on each decision? Next, we want the founder and CEO to ask: What is the desired end state in 12 months? Which decisions does she want to remain involved in? How deeply involved? Remember, you’re planning for the end state, not Day 1. Given the established agendas, the answer should be that the founder wants to be involved in a narrower (fewer decisions) and less deep way (fewer decisions going down to Type III meetings).

    The three meetings come with a social contract. The CEO will involve the founder in all decisions that she wants to be involved in at Type I and II stages. The founder and the CEO agree that the founder reserves the right to be involved in Type III meetings, if she feels her input is critical. The CEO will manage that agenda, assuring the founder that she can and will remain involved in Type I and II meetings for all the decisions she cares about. But the CEO will also ask that, over time, they narrow the founder’s role on Type III meetings, and later on, some Type II meetings. But this is earned. Over time, as the founder builds real trust in the CEO, she will happily decrease her involvement in Type III and II meetings, because she trusts that the CEO will involve her in Type I. She knows that she can give her thoughts on most decisions before too much work is done.The three meetings are very practical, easy to implement and effective. It sounds very process-intense, but it isn’t. Gradually, it becomes a way of working. The CEO can give the founder’s views on important decisions early and often. The founder trusts the CEO to execute the agreed-upon recommendations. 
  • Arrange the schedule of meetings to ensure the social contract is on track. First, the CEO and the founder should plan a biweekly meeting. Like all relationships, the most important factor is communication. No matter how well we express things on paper, what really matters is that both parties feel the relationship is built on increasing trust and complementary activities. This requires constant discussion and adjustment. Founders and CEOs need to plan for it. They should assume that things are going wrong all the time, but that both parties are committed to learning and changing course. They should assume that both parties want the pairing to work brilliantly and commit to adjustments. Ronald Reagan frequently used an old Russian proverb, “trust, but verify.” We think this applies perfectly to the best relationships.

    Once the CEO and founder have regular meetings, the CEO can use the 10–30–300 model to define a series of meetings with the rest of the organization. The “10” refers to about ten people from the executive committee. This forum tackles the delivery of the current business and development of new businesses. The “30” refers to the franchise player forum, a meeting with the top 30 to 40 people accountable for delivering value to customers. The meetings should focus on accelerating growth. Through experiential and communal problem solving, franchise players can find ways to scale the company’s culture with the founder’s voice (think of Jeff Bezos’ annual letters to Amazon shareholders). The “300” refers to the annual or biannual interactions with the entire company. This is the chance for the front line to hear the voice of the founder directly. It’s a critical opportunity to share the founder’s compass of nonnegotiables with the whole company.

There are a dozen ideas here, and we hope that three or four might be helpful. We’ve found that six or more apply in all situations, but it’s never the same six. Please pick and choose based on your situation. The CEO is the most important recruit for a founder—and you’re only 10% of the way with that choice (and here’s a blog to help on that). The other 90% is about the investment you each make in one another and the willingness to learn and adapt. These ideas have helped a lot of couples, and we hope they help you, too.

James Allen is a senior partner in Bain’s Global Strategy practice and is based in London. He is coauthor of The Founder’s Mentality.

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