02 September 2015

The Natural Evolution of a Founding Team

Unlike most other animals, the skin of a snake does not change in size.  Therefore in order to grow, the snake must shed its skin.  This happens multiple times during the life of a snake.  The process is a natural part of its maturity.

Founding teams are often similar.  If the members of the founding team are unable to grow, over time they need to be shed.  This should be as natural a maturing process as a snake loosing its skin, and need not be an emotional parting.  Founders who become overly attached to their initial teams often end up with teams constricting the growth of the organization.


During the startup phase, founders are prone to attract less experienced executives often based upon a pre-existing personal relationship.  Letting this relationship color their assessment can derail even the best entrepreneur. Maintaining an objective view of team members is critical to a founder intending to maintain her tenure.  Should the founder be unable to objectively assess her team, it is likely that her successor will. Unfortunately, terminations at the hands of a successor tend to be emotionally charged and traumatic for the organization.

13 August 2015

I Guess You Weren't THAT Bad?

In December we posted the blog article below on Sean Rad's departure from the leadership at Tinder.  Well on second thought, perhaps his egregious behavior was just not that bad.  He's baaaaaack!   Talk about a quick founder rebound.  

Today CNN reported that after just five months. Christopher Payne, the professional CEO the company hired to replace Rad, is now gone.  And Rad is back in the driver's seat.

"It's only been a few months, but there was mutual agreement here that it was not the right long-term fit, and given Tinder's rapid growth trajectory both Christopher and the Board thought prompt action was best for everyone," said Matt Cohler, of Benchmark Capital, a Tinder director.

Is there more to this?  Could a new CEO really have failed that drastically, or only been given the few months to succeed and then summarily tossed out?  Or did something happen?

Was it the twitter rant about the Vanity Fair story? Or was it the seeming overreaction to Hannibal Buress's comments at the 19th Annual Webby Awards?  Or was this just a bad hire?

No matter the cause, it is clear that the board did the company no favors in its choice of successors.  This founder transition stuff is hard!  Being forced to accomplish it quickly can lead to even more disaster.
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Tinder Founder to be Replaced with "Seasoned" Exec

There are few things that an early stage founder growing at double digit pace can do to cause his board to replace him.  This is one!  According to news reports Tinder will replace its cofounder, Sean Rad just two years after he founded the dating site.  Apparently, Rad had been the subject of a controversy this year when a female executive sued Tinder and its parent company IAC alleging harassment and discrimination.

“We’re recruiting a new CEO to lead Tinder through this time of explosive growth and expansion, adding world-class talent to the management team and allowing me to focus on Tinder’s product and brand,” Rad said in an e-mailed statement. “I look forward to working with the new CEO to realize Tinder’s massive potential.”

You don't actually believe that Rad is welcoming the new CEO with open arms, do you?  Not a chance.  And the new CEO will do herself good if she disposes with Rad altogether rather than let him lurk in the background undermining her ideas and authority.  I don't know Sean and he may be a very good and well meaning CEO/founder.  But after having his walking papers handed to him in such a public controversy, there really is no longer a place for him influencing the direction of the company in the future.  And his ability to work with a new CEO is certainly in question. We'll wait and see what plays out in this soap opera start-up drama.

09 August 2015

Founder Finds "Fast" Unfortunate For His Future

Hamdi Ulukaya, the founder, chairman and chief executive of Chobani, is being pushed out of his executive role by his new private equity owners.  He will remain with the company as its Chairman.

This is a text book lesson on how fast growth coupled with the need for outside financing can disrupt the tenure of a long term founder.  Whether the Chobani founder's replacement is due entirely to the financing and the change in control that accompanied the funds or the need for financing is just a result of the natural progression that a company makes from the creative founder to the execution oriented successor, this is a common theme among growing and successful companies still run by their founder.

While this news was first reported in January of this year, the company has yet to announce a replacement for Ulukaya.  According to Wall Street Journal reporter Annie Gasparro, 
“The deal occurred because Chobani had grown beyond his [Ulukaya's] ability to run it."
In the past, Ulukaya had voiced his disdain for buttoned-up professionalism, preferring his own “seat-of-the-pants style,” as Gasparro calls it. “We didn’t have any corporate executive types,” he said in previous interviews. “I didn’t want to hear all that marketing, supply chain, logistics stuff—most of it is BS.”

Apparently, what Ulukyay thinks about corporate types no longer matters. 

24 July 2015

What do you do with a Former CEO?

One of the big issues faced by CEO successors is the subsequent role of their predecessor.  All too often, these former CEO's, once replaced, take their place at the Board table, as the defacto boss of their new successor.

Let me lay this out clearly:

  • CEO gets replaced, often because the board demanded change that the CEO couldn't deliver.
  • New CEO comes in the role to replace former CEO with a clear change agenda.
  • Former CEO retains role on the board.
  • New CEO is scrutinized and judged by the person whom he replaced

You can probably see what's wrong with this picture.  Assuming this continues through multiple successions, this can become an even bigger mess, one that Twitter is currently encountering. There, three former CEOs constitute a sizable portion of the board.  As the company searches for its next chief, Dick Costolo will slip in along side Jack Dorsey and Evan Williams, all predecessors in the role.  In fact, Dorsey is playing an interim role as CEO while the search progresses.

Can this really work?  Would you want to take on this role as CEO with your three immediate successors looking over your shoulder and questioning every move?

Spencer Stuart, who owns this headhunter role, has remained mum on the topic.  But surely, any self respecting candidate would require a reconstituted board as a precondition to accepting this role.  Perhaps, that is what Spencer Stuart is hoping.

10 July 2015

Ka Pao!


CNN just announced that Ellen Pao been replaced as the interim CEO of Reddit.  Certainly she did little to ingratiate herself with the loyal Reddit community.  Certainly she was tone deaf when she fired long-time and very popular Victoria Taylor. And perhaps her reputation was muddied by her recent legal escapades that have antagonized the venture community in Silicon Valley.  Probably most important is that Reddit just wasn't ready for someone like Ellen, as an interim or otherwise.  She will be replaced by the company's founder Steve Huffman.

05 July 2015

The CEO Takes Flight @ Triumph Group

Triumph Group CEO Steps Down, Replaced By Company Founder

Richard C. Ill Replaces Jeffry D. Frisby as CEO




09 June 2015

All in the Family

Less than one out of three family businesses survive into the second generation.  Of those, about forty percent make it beyond.  So it's somewhat unique to find a third generation family business
Lori, Caryn, and Shelly Hirshleifer
thoughtfully preparing for a transition.  But that is exactly what Hirshleifers is about to do.  Founded over one hundred years ago in Manhasset, NY this luxury retailer has thrived.  While they are not yet sure if it will be family members that take the retailer forward, and although it is still several years from their retirement, the sisters are contemplating what is next.


17 May 2015

Fashioning a CEO Succession

Diane von Furstenberg
Diane von Furstenberg finally found her successor.  Tomorrow Paola Riva takes over as the first CEO other than Diane to run her fashion empire.  But why did it take her so long and is he the right guy?

Ms. Furstenberg describes her attraction to Mr. Riva.  "When I asked - why do you want to do this?" she inquired.  Apparently he responded: "First, because I love you, the person.  Second, because the potential of your brand is unbelievable.  And third, because you are a private company."

Perhaps the fashion industry is different than most, but proclaiming your love for the founder probably is tricky position to stake out for a successor CEO.  The first time he decides to make a change that Diane is not in favor of, the love affair will end.

While I am not in the business of predicting the future, my bet is that this will turn out to be a disastrous succession.  Diane selected someone she is comfortable with.  The industry is changing drastically and this business will need to undergo some drastic changes.  Success will require leaving the past behind.  Is Mr. Riva ready?

09 April 2015

Zynga's Founder Rebound

Mark Pincus has joined the growing list of founders returning to the helm replacing Don Mattrick originally hired in 2013 to replace Pincus.

As is often the case with a failed transition, the abrupt change in leadership was noted to be a setback for the company, according to a New York Times article of 8 April 2015.  In an interview, Mr. Pincus said that Mattrick was not fired, but the two agreed that it was time for Mr. Pincus to return.  Do you think Mattrick actually had a choice in this decision?

Although not visible in the office the past few years, Pincus apparently has seagulled in a bit leaving his mark, "occasionally emailing staff with his thoughts" according to the Times article.  Certainly this was not helpful for Don during his short time there.

The company's finances worsened under Mattrick.  Revenue is down from its high in 2012 resulting in a more than $200 million loss last year.  Apparently, employee turnover has also been rampant.  Interestingly, it appears that Mattrick was not a metrics guy, something that Pincus is much more focused on.

It certainly sounds like we can chalk this up to founder transition misfire.

03 April 2015

Founder's Family Joins Fray to Make Employee Uncomfortable

Julie Horvath
We've all read about how difficult it is for a woman to navigate the Silicon Valley good-ole-boy culture.  So it won't surprise you to see Julie Horvath, since gone from GitHub, describe in detail how she was impacted. But it wasn't just with the founder, or even the employees of GitHub that Julie had her issues. Apparently, according to the Business Insider, she was also harassed and even threatened by the wife of one of the co-founders of GitHub.  According to their reports, the founder's wife interrogated Horvath and suggested that she take certain actions that were antagonistic to Horvath.  In an interview published in TechCrunch, she stated her allegations about the founder's wife, who was not identified:

... the wife went on to claim that she was responsible for hires at GitHub, and asked Horvath to explain to her what she was working on. The wife also claimed to employ “spies” inside of GitHub, and claimed to be able to, again according to Horvath, read GitHub employees’ private chat-room logs, which only employees are supposed to have access to.

Apparently now, that Co-founder has been put on leave and according to a post of the GitHub blog, the co-founder's wife has been banned from the company's offices.

Horvath left the company in the midst of this episode.  She claimed an unrequited love professed by another male GitHub employee caused her code to be ripped from certain projects.  But her complaints about this episode seem to exacerbate her HR issues internally.  This combination of inappropriate behavior as well as family involvement caused an environment in which Horvath grew uncomfortable.  

The company said it is hiring an experienced HR resource to avoid this type of issue in the future.

Horvath left to Start Passion Projects, a initiative intended to strengthen the support network for women who may be experiencing similar things.