Succession Planning: 4 Steps to Transition a Founder-CEO
Replacing a founder-CEO requires intentional succession planning. You’ll need to transition them to a new role, honor their legacy, and carefully embed a new leader. Below is a summary of our article published in Wharton Healthcare Quarterly detailing the perplexity of founders.
By Bob Clarke and Joe Mazzenga
You may have heard the term “Founder’s Syndrome” to define what happens when organizations outgrow a long-tenured leader. But what happens when legacy leaders are so successful that it seems impossible for the organization to continue without them? Unfortunately, this phenomenon is just as common as the latter.
In their truest sense, a founder is a leader whose personality and guidance have so deeply imprinted on the company culture that they reflect it. Typically, founders have led the company for 10-20 years. But in cases where radical transformation occurred during their tenure, they could lead for as few as five to eight years.
Subsequently, the founder’s embodiment of organizational culture can either work to their detriment or lead to outstanding success.
The Challenges of Succession Planning
Many founders innately believe processes and systems may dampen the organization’s creativity, urgency, and agility. This perspective translates into a culture where loyalty reigns supreme and reluctance to establish and define procedures and systems permeates, often affecting investment in developing talent.
Most of all, decision-making processes are often ambiguous. The collective belief is that success hinges on the ability to be agile and flexible — a system that relies heavily on the founder’s persona, values, and expectations.
In their book, Founder’s Mentality, authors Chris Zook and James Allen explore how leading like a founder helps overcome growth challenges by utilizing founder-like behaviors to restore speed, focus, and connection. Founders are often visionary, mission-driven leaders with a hyper-focus on delivering results.
Consequently, founder succession planning is challenging because seeing a future without them can be difficult when the organizational culture and success is so entrenched in a specific leader or influential personality.
Below, we’ve outlined 4 strategies to successfully transition from a founder-led to founder inspired organization and ensure new leaders are set up for success.
1. Transition with Transparency
Much like a scene ripped from the movie classic, The Godfather, the confidential discussions of a founder’s inevitable retirement or transition rarely reach a healthy level of transparency. Instead, they may only create an internal power struggle to the detriment of the company your founder built with their blood, sweat, and tears. For this reason, continuing the momentum of a successful founder-led organization relies on the intentionality of the transition.
Choosing a CEO is the most important decision the Board will ever make on their watch. Additionally, the importance and level of challenge grow exponentially when a founder is the incumbent.
2. Develop a Succession Plan
To begin the journey, bring the transition discussion out into the open and agree on the rules of engagement. Openness is critical to moving forward with successful succession planning. Ideally, the structure of discussions should include these five steps:
- Define decision rights and how decisions will be made.
- Commit to rigorous discourse of key decisions.
- Practice candor and courage.
- Establish clear boundaries.
- Solicit and deliver feedback.
By defining this framework for communication around founder transition, the Board can tackle fundamental questions:
- What does the culture need?
- What are the criteria for success in the next leader?
- What do we want to preserve and change from the previous founder?
3. Honor the Founder’s Legacy
When a founder is such an integral part of the culture, there is a deep and often unspoken desire to preserve the leader’s legacy as they transition. The Board and executive leaders must ask themselves:
- What is the honor of a legacy we create?
- What does it mean to show we respect them?
- What does that look like (e.g., naming a wing of the hospital in their honor)
Then, there’s the challenge of the transition period and the future role of the founder:
- Do they serve on the board?
- What is their role in the transition?
- Should they maintain an office on-site?
- How long does the founder stay around?
- Are they on the speed dial of the new CEO, or do they move on and completely disconnect from the organization — whose decision is this?
4. Practice Kindness through Courage
No two CEO transitions look the same, especially when a founder is involved. Having the courage to bring the discussion into the open is the kindest thing you can do for everyone involved. In contrast, letting it fester underneath the organization’s surface only leads to misunderstandings and irreparable damage to the leader’s legacy, the new leader installation, and the future success of the organization.
Using the succession planning framework outlined above, you can create clarity, identify key components of the transition, and define the roles of the Board and executive leadership team. It may seem simple on its surface, but there are many nuances to consider regarding the far-reaching impact of the final decision and the process used to make that decision.
The Perplexity of Founders
Imagine for a moment that someone comes to you and asks you to replace the frame inside your hospital or headquarters, but there is one catch—everyone must remain in the building safe and sound. This task will be difficult because changing the structure without destroying the building’s integrity is hard. The frame is where all existing pieces connect to maintain shape and keep the building safe and stable.
The challenge is the same when it comes to replacing a founder whose departure creates a massive gap that is difficult to fill. It is up to the Board, the new CEO, and the executive leadership team to develop a solid succession plan for an effective transition that:
- Maintains the integrity of the organization
- Honors the founder’s legacy that masterfully shaped the current culture
- Guarantees the success of the new CEO and their team
Does your succession plan include these steps? Take the Succession Assessment below to receive a report outlining your strengths and areas for improvement to take your succession management to the next level.