When you think about replacing a CEO, what springs to mind? The drastic action of a desperate board struggling to right a listing company? Buying an entire company just so you can get Ring’s ex-founder as your new CEO?
When I spoke with Troy Bannister about why he replaced himself as CEO of Particle Health, I became curious about how people go through such a process.
CEOs are replaced for all sorts of reasons: because they’ve found a new challenge, because the company has outgrown them, or because the board has lost confidence in the CEO.
And it’s not uncommon, either, as Crunchbase reported last year. In 2015, only one-third of startups that reached IPO had their founders as CEOs. Perhaps one of the biggest success stories of a founder walking away from their startup to watch it go on and achieve marvelous things is Marc Randolph at Netflix. But there’s Slack and Pipe and Fairphone and OnlyFans and Tubi, which all have new CEOs this year. Oh, and we heard Twitter has a new CEO as well.
As daunting as it might seem to step back as CEO and let go of the thing that you love, it’s often the right thing to do. It’s also something for which there isn’t necessarily that much guidance. DeeDee DeMan at Bench International, a life sciences and healthcare executive search firm, has been eagerly reaching for the bait when CEO-fishing season opens for more than 50 years. She joked that your CEO search ought to be more like “Finding Nemo” than “No Country for Old Men.”
Building a startup from the first flickers of an idea into a company with a product and staff and a payroll is an indisputably brutal process. For some founders, the self-inflicted stress is no longer tolerable. Others realize that they can’t take the company any further with their skill set.
“In the majority of cases, there comes a time that you need to have a professionally credentialed CEO to take the company to the next level,” DeMan said. “And that’s completely dependent upon the acceptance and the mentality of the founding CEO. They understand that their wealth of information is more a tradable asset as a domain expert, but that they still need the CEO on board to drive it. A professional CEO can [put] the rigor into the business to make it a ‘real’ business.”