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When the founder of an otherwise successful company stumbles, the board of directors faces a wrenching decision: Should we force out the one person whose vision, drive and skills have brought the enterprise this far?
Founders, for their part, often admit that they’ve made a mistake and promise to learn from it. Mark Zuckerberg has done so many times. When Uber co-founder Travis Kalanick came under attack on several fronts in 2014 he wrote on the company blog that “acknowledging mistakes and learning from them are the first steps” toward doing better.
If the mistakes are unethical or criminal—sexual harassment, backdating stock options, misleading investors or the like—then termination should be swift. But if they are errors, even big ones, of business judgement, then boards should think long and hard before they fire a founder who has demonstrated the skill to lead the company ably but has temporarily landed it in trouble.
The board should of course first address how the founder intends to fix the mistake in the near term. For instance if it involves a security breach, what steps will be taken to prevent such breaches in the future? If it’s a public relations gaffe or some other reputational threat, what will the founder do to make it right? But beyond the specifics of the mistake lies the bigger question of the founder’s fitness to remain in charge. Are more mistakes likely, despite the founder’s manifest skill to date?
To answer that larger and more consequential question the board should focus on the founder’s motivations. There are two kinds: explicit motivations and core motivations. Explicit motivations are the conscious needs we recognize and can usually name. Implicit motivations are deep-seated, difficult to uncover and usually spring from our most fundamental emotional needs like pleasing a parent, overcoming feelings of unworthiness or getting revenge for being humiliated.
When it comes to the explicit motivations for founding and attempting to grow a business, entrepreneurs can be downright glib. They say they want to realize a great idea, be their own boss, make a lot of money, have fun, or shake up an industry. Unfortunately, none of those motivations are enough to see someone through the arduous, stressful process of creating a business and growing its value.
Explicit motivations merely create short-term projects that are eventually abandoned or superseded. When hard times hit—as with a major mistake—the entrepreneur coasting on an explicit motivation like fun is likely to wilt. Similarly, entrepreneurs driven by a great idea are in for a shock when the market yawns in response. And nobody who is trying to please customers and attract investors is ever really their own boss.
Successful entrepreneurs are driven by strong implicit motivations that help power them through the fear, fatigue, pressure and, yes, the mistakes that go with the territory. For them, a major mistake is a traumatic event because it strikes at the heart of their most profound desires or primal fears, emotions buried so deep that they may not be aware of them. Nevertheless, those motivations are driving them.
These primally driven entrepreneurs will do far more than superficially learn from mistakes. Because failure is so psychologically unsettling to them, they don’t simply make a mental note to be more careful next time or offer a promise to do better. They do whatever it takes to get at the root cause of the mistake. If it was mistake of competence—poor allocation of resources, a faulty competitive strategy, a regulatory blunder—they will work to improve the relevant skills and to find people who can help compensate for their shortcomings. If it was a mistake of leadership—alienating a major customer, making a public relations gaffe, driving away a key employee—they will hone their leadership skills, perhaps with an executive coach or a mentor.
For the board, the great and difficult question is to determine which kind of founder they’re dealing with—one whose entrepreneurship isn’t connected to their deepest motivations or one whose need to start and build a business goes to the core of who they are.
That’s a tall order. A great many people have spent a great deal of time studying the explicit reasons successful entrepreneurs cite for having taken on the burden of starting an enterprise. But they have shied away from investigating the private and emotional reasons.
Boards, more at home with numbers than with psychology, might be even more reluctant to delve into motivations that founders themselves often aren’t consciously aware of. But not wanting get at such things—especially in the face of a company crisis—is analogous to a doctor giving a physical exam to a fully clothed patient. The patient may feel more comfortable, but the doctor is unlikely to find the rash that is a symptom of a disease that could be treated before it becomes fatal.
The fact is, the boards of most leading corporations, when they are going through a CEO succession, enlist the services of consultants or executive search professionals who, among other things, put shortlisted candidates through a rigorous vetting process, including psychological vetting. Many companies also enlist such help in conducting leadership assessments of executives and managers, again with a strong psychological component.
There is no reason boards of founder-led companies shouldn’t ask the founder to go through a similar process following a major mistake. It would constitute a valuable development opportunity for the founder and give the board some basis other than arbitrary judgement or gut feel for deciding the founder’s fate.
In fact, since CEOs of founder-led companies have never undergone the rigorous vetting that’s customary in CEO succession events, the board might have such an assessment conducted even if there has been no mistake. In either case, the board can learn whether they have a leader with the right stuff for the long haul or someone who is not cut out for the punishing demands of entrepreneurship.
If you enjoyed this article, I encourage you to check out my book: Startup Leadership: How Savvy Entrepreneurs Turn Their Ideas Into Successful Enterprises
January 7, 2019 at 05:30AM
Forbes – Entrepreneurs