Noam Wasserman studied hundreds of entrepreneurs and found “that by the time the ventures were three years old, 50% of founders were no longer the CEO; in year four, only 40% were still in the corner office; and fewer than 25% led their companies’ initial public offerings. He also found that founders don’t let go easily. Four out of five entrepreneurs are forced to step down from the CEO’s post. Most are shocked when investors insist that they relinquish control, and they’re pushed out of office in ways they don’t like and well before they want to abdicate. Founders are usually convinced that only they can lead their start-ups to success. At the start, the enterprise is only an idea in the mind of its founder, who possesses all the insights about the opportunity; about the innovative product, service, or business model that will capitalize on that opportunity; and about who the potential customers are.
The founder hires people to build the business according to that vision and develops close relationships with those first employees. The founder creates the organizational culture, which is an extension of his or her style, personality, and preferences. From the get-go, employees, customers, and business partners identify start-ups with their founders, who take great pride in their founder-cum-CEO status. But, as the company grows and matures, the organization has to become more structured, and the CEO has to create formal processes and policies, develop specialized roles, and relinquish managerial control over others.
The dramatic change in the organizational environment and the requisite broadening of the skills that the CEO needs at this stage stretches most founders’ abilities beyond their limits.” It also causes changes in the work patterns of all others remaining in the new organization who have to work with the new CEO and new culture that is created.