Ralph is back in the Saddle (polo pony)

As we wrote at the time of the transition, this was was ill fated from the start.  With Ralph hanging around, there was little chance of a new CEO getting to set his own agenda.  Two years later he is gone.

http://foundertransitions.blogspot.com/2015/09/ralph-lauren-rides-his-polo-pony-into.html

Twitter Fumbles Succession (Again!)

The saga continues for Twitter who has struggled to replace its founder ... with its founder!  Jack Dorsey, who regained the throne after a very public recruit turned up no one else capable  of leading the company, seems to be having a rough go of it.  Last week four top executives exited the company.  Dorsey, who continues to also run Square, does not seem to know what to do.

The incestuous Board of Directors has been of no help either.  We reported in July of last year that three former CEOs, Dick Costolo, Evan Williams and Dorsey, who served once before as CEO, make up a good portion of the board.  For a company that seems to need some new ideas, it certainly is difficult to get things done with the old guard in charge, a direct consequence of parking former CEOs on a board.

Apparently, Twitter is considering putting the company up for sale, highlighting the enormous cost of a founder transition gone awry.

Allure Founder Written Out of the Plot

Allure Founder Linda Wells has abruptly been ousted from the magazine she founded.  Often referred to as the voice of Allure, Linda has been replaced by Michelle Lee formerly of Nylon.  Allure, owned by Conde Nast, announced the move. The magazine bills itself as the only magazine to focus exclusively on beauty and is knows for its annual Best of Beauty Awards.

Wells (left) and Lee (right)

Apparently, Lee was brought in to add youth and interactive beauty content to the magazine Wells founded in 1991.  While not a direct statement about Well's age, which she unabashedly wrote about, it seems that the publisher felt that a beauty magazine could be better represented by someone of a later generation.

It will be seen whether a publication where the founder has left such an indelible imprint can rebound under new leadership.

The Odd Similarity Between Founding Teams and Snakes

Anyone who has experience with a successful and growing early stage company has seen it.  Venture capitalists often struggle with it.  Boards end up agonizing about it.  Other employees complain about it.

Sooner or later it becomes obvious.  Founders try to avoid taking action on it. It festers.  Organizations suffer.

Early stage leadership teams can become a constraint on future growth.  Not that they weren’t valuable along the way.  It’s just that their skill sets and capabilities may not scale at the same rate as the company’s growth.

It is the savvy founder who plans for this in advance.

Shedding members of a founding team is as natural as a snake shedding its skin.  Snakes shed their skins multiple times during their lives, more frequently during their early years.  So too is the fate of most leadership teams - at least if the company intends to grow.

“The old skin has to be shed before the new one can come,” said Joseph Campbell, American mythologist, writer and lecturer.  The snake shedding its skin has been seen as an ancient metaphor for inner growth. 

Coincidentally, a snake about to shed its skin begins to experience physical changes.  Its skin becomes dull, its eyes cloud, and increasingly it exhibits nervous behavior – perhaps because its vision is blurry.  Companies in need of transitioning their leadership might exhibit similar symptoms.

Rather than ignore this issue and hope it goes away, savvy CEOs should plan for it.  There always will be some early team members who have the farsightedness and ability to grow their skill sets in step with the company’s changing needs.  But most will naturally be left behind. As organizations mature, the leadership required is quite different.  The skills and experience necessary to lead the next phase of growth changes.  There is nothing unique or tragic about this process.  It is a natural part of organizational maturity.  Shed your skin so you can grow.

Just like ripping off a band-aid, shedding leaders can be momentarily painful. 

Early leaders provide critical value during their tenure and should be compensated for their impact.  But compensation for past contribution does not mean they are assured a continuing role on the team. 

Is demotion appropriate?

Often we hear that founders, in an effort to assuage the pain, re-assign the former executive to report to the new upgraded leader.  The exec brought in to contribute new skills and capabilities becomes the former leader’s boss.  What effectively occurs is a demotion in place.

The process often plays out like this:

• Founder realizes (often from outside influence) that a team member requires upgrading.
• A search ensues and a new executive is recruited.
• To avoid having to sever what has become more than a mere working relationship between the founder and his early team member, the founder tries to appease his friend by keeping her around.  She now reports to the newly hired exec.
• Early team member is offended but outwardly agrees to the demotion.
• Early team member complains to anyone who will listen, sews cancerous seeds, and if you are lucky leaves as soon as they have a better opportunity.

No one ever succeeds after being demoted.  That’s is a psychological certainty. Rip that band-aid off!

Just like a growing snake, the founder (or successor) should expect to shed leadership team members multiples times as the company matures.

Tragic Transitions (UPDATED)

In an update to a post from October, American Apparel apparently will now emerge from Bankruptcy after the court rejected a last minute hail mary attempt by founder Dov Charney to propose a takeover plan.  Charney was fired in 2014 amidst turmoil over his behavior

Charney had attempted to team up with Capital Group and Silver Creek Capital to present an alternative bid to the court.  The judge ruled in favor of a restructuring and Mr. Charney now appears to be out for good.

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Yesterday American Apparel filed for US Bankruptcy protection.  Besides their challenges with revenue and debt, the ugly transition from their founder - Dov Charney - clearly played an important role in the company's demise. Founded in 1989 by Charney, the company struggled with its inability to effectively sever its relationship, leading to months of turmoil and a cloudy future.  

If you don't think that founder transitions are fragile and important, American Apparel will be an important lesson for you. Was it right for the company and its board to seek a replacement for Charney?  Seemingly based upon the financial condition and alleged behavior of the founder, the answer is YES. Did the board handle this transition poorly exacerbating the problem? Based upon the allegations and the pending lawsuit, that answer is also definitive, YES. Could the company have been righted and put back on the right path, with a new CEO and a clear new direction? Although I am clearly not an insider in this company, I also bet the answer would be, YES!

Perhaps bankruptcy is the appropriate path for the company.  It will give them some breathing room, make the lawsuit filed by Charney a much more remote liability, and enable the board to decide on how to move this company forward.

Ralph Lauren Rides His Polo Pony Into the Sunset

Stefan Larsson, a former H&M executive and president of Old Navy, Gap brand, is taking over the helm at Ralph Lauren.   Mr. Larsson is credited with reviving Old Navy, one of the a bright spot in Gap’s portfolio. (I will purposely fail to mention that the last CEO of Gap, who didn't fare nearly as well, was a kid from my hometown.)

The change is a purposeful attempt by Ralph Lauren to get its financial house in order. Recent earnings beat analyst estimates, but revenue dipped more than 5 percent, causing a precipitous drop in share price.

According to the New York Times, Mr. Lauren said that he intended to remain active at the company he founded in new roles as executive chairman and chief creative officer. 

What does active mean? Mr. Larsson apparently will report to Mr. Lauren. However, Lauren described it as a partnership. “But I don’t feel like I’m stepping back now,” Mr. Lauren said.

If not stepping back, what is this change all about?  If Lauren is not going to give Larsson full authority to do what is necessary to remedy the financial performance, why promote him to CEO? And the new CEO is reporting to the former one?  Does that mean change is at hand, or more of the same? 

It appears that the two executives come at this business from vastly different perspectives and experience. Unlike Lauren, Larsson made his mark in the low cost fashion world.  Will his cost conscious views conflict with those of Ralph?

If You Can Stand the Heat, Stay in the Kitchen

Several months ago we published our blog about Hamdi Ulukaya being pushed out of the CEO role of Chobani. Apparently we were a bit premature.  Hamdi is still in charge and now his private equity investor TPG is happy with his current performance. But is there a problem still lurking?

Hamdi was recently quoted by Business Week when asked about the prior press relating to his imminent departure: "Nobody could think of Chobani without me and me with Chobani."  Uh oh! This convergence of the person with company he founded may ultimately be the downfall of both.

As we have pointed out many times, founders and the companies they found often approach a singularity of identity. Certainly for a charismatic founder like Ulukaya, this is a natural result of his outsized personality. But the fact that the two are inseparable is not a reason for either to celebrate, at least if capitalistic results are the goal of Chobani's investors (which is no doubt the case for TPG). Both would be well advised to begin re-separating into two distinct personalities - no matter how long Hamdi's tenure may last.  Too many great companies have had to rebound from the inevitable surgical removal of the founder from his company. And, too many founders have found themselves with a large void in their lives.

While Chobani is apparently now seeking a COO (rather than replacing the CEO), Ulukaya's presence and stature will make this a difficult job to fill. In fact, I wouldn't be the least bit surprised if the board and its private equity investors, only succumbed to keeping its founder around to now seek a buyer for the company rather than trying to navigate what will surely be a fragile founder transition.

A Nick for a Nick

Nick Robertson

The Guardian reported that Asos, the British on-line retail company founded as: "As Seen on the Screen", has replaced Nick Robertson, its founder who stepped down, with its COO Nick Beighton, who appears to have been groomed for this role since early last year.  Robertson recently sold a significant part of his holding (worth approx $30million US) in January of this year, although still retains almost 10% of the capitalization.

According to the article, a person familiar with the company praised Robertson for the move, noting that he realized he didn't have the skills to run the business at this time.  The company was founded in 2000.  Beighton joined in 2009 as its finance director.

We praise the company for establishing a long runway for its transition founder and for Nick Robertson for being a self-aware founder and  understanding his evolving role in the success of the company.  Now we will need to wait and see how the company fares under this new leadership,

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.

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.