In This Issue:
Seemingly Conflicting News about Founders Running Companies
It is often said that entrepreneurial types found the company and get the business off the ground, but that a completely different kind of leader is needed once the business is well beyond start-up. The press recently offered some seemingly conflicting viewpoints about this, which appeared along with reporting the return of founder Tim Wintergren as the CEO of internet radio company Pandora Media. Wintergren is replacing Pandora Media CEO Brian McAndrews, whose background includes prior experience at ABC, which is a unit of Walt Disney, at General Mills, and at Microsoft.
High profile news of a founders’ return can stimulate discussion of whether founders are successful at running companies long past the start-up phase. And, indeed, prominent publications, like the Wall Street Journal and USA Today, reported on Tim Wintergren’s return to Pandora Media and also wrote about the track record of founders as leaders. But, these two publications appeared to have conflicting viewpoints on the subject.
The March 29, 2016 Wall Street Journal article “Pandora Counts on Founder to Strike Deals” by Hannah Karp portrays founders’ track records as mixed. The article does mention the spectacular success of Steve Jobs after his return to Apple, but also tells of other returned founders that did not fare so well. This contrasts markedly with the March 29, 2016 USA Today article “Founders Make Great CEOs: Here’s Why” by Matt Krantz. The USA Today article reports that “founders have a great track record” and it shows considerable evidence supporting that viewpoint. A chart in USA Today illustrates that companies run by founders outperformed the S&P 500, and there is also a chart showing impressive three year rates of return for founder led companies.
So, why the difference? Why does the Wall Street Journal portray founders’ results as mixed, while USA Today glorifies founders’ stellar track records?
For one, there is a difference in what kind of track record each of these publications is reporting on, so in a sense comparing what the two publications are saying is like comparing apples and oranges. The Wall Street Journal article limits its discussion to returning founders. The USA Today material, on the other hand, covers companies led by founders, not necessarily by founders who left and returned. Perhaps, founders who can provide strong leadership for their companies may often be the ones that stay on for the longer term, rather than leaving.
But, as someone who has been researching business success and failure patterns for years, I think it’s more important to identify what we can learn from these articles despite the contrast between how the two publications portray founders as leaders. Consistent with my research into business success, here are some key points I see from the articles:
- Some founders can be very successful leaders, even over the long term and well beyond the start-up phase. And, there are several founders doing so. The performance of the companies these founders run is often far superior to that of companies run by non-founder CEOs.
- Not all founders will be able to achieve great success for their companies over the longer term. Those that cannot will often bring in an outsider to serve as CEO and provide professional management. And, we see a mixed track record for returning founders, as the Wall Street Journal article reported.
- When replacing a founder with a CEO who brings big company leadership experience, it’s not unusual to choose the wrong person for the job. Conventional wisdom often blames this on founders who refuse to let go, but I have found that this is not necessarily the case. As Pandora Media’s situation illustrates, even when the founder leaves, as Wintergren did, the newly recruited CEO is not necessarily the right person to run the company.
In summary, it’s a myth that founders cannot be successful leaders after a company grows. But, not all founders are capable of that. Not all CEOs recruited to replace a founder will work out, and the founder’s unwillingness to let go may not be the reason why. Sometimes, founders return after leaving their business, and returning founders may or may not be successful at the helm of their company.
La Grange Park, IL