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What motivates founders to hire a CEO?

Posted by Shivali Anand

September 27, 2021    |     4-minute read (629 words)

In 1987, Intel co-founder Robert Noyce passed the keys to Andy Grove, who had led Intel through a period of exponential development. Under Grove’s tenure as CEO, Intel's sales increased by 336%, with a profit margin of almost 25%, from 1991 to 1996.

When Google co-founders Larry Page and Sergey Brin announced in 2019 that they would step down as Alphabet CEO and president, Sundar Pichai took the reins as CEO of parent company Alphabet, in addition to continuing his role as Google CEO, triggering Alphabet's stock to jump.

After Satya Nadella took charge as CEO of Microsoft, the company's stock price increased fourfold in less than five years. Under Nadella's leadership, Microsoft remains one of the largest and most influential firms in tech.

Former LendUp CEO Sasha Orloff announced in 2019 that he was leaving his role as CEO, the business he co-founded with his stepbrother seven years earlier.

Growth necessitates new leadership

There are many examples of founders and co-founders who either stepped down as CEO or hired their company’s first-ever CEO. This raises the issue of why these successful business owners choose to hand over the reins. 

Orloff claims that LendUp had reached a stage when what was required and what he excelled at had diverged significantly. Meanwhile, because of the "increasing difficulty managing both organic growth and strategic big best opportunities," Seedrs co-founder Jeff Lynnf to recruit a CEO. He couldn't be as productive as he wanted to be because he was always jumping between two mindsets.

According to LinkedIn co-founder Reid Hoffman, a successful growth-stage CEO must be prepared to manage a large staff and spend significant time on duties such as holding meetings and other business procedures. Hoffman recognized that a CEO gradually needs to focus on functioning and structure, which was not his passion, so he surrendered power.

Fastly founder Artur Bergman announced his resignation as CEO in 2020, less than a year after his internet infrastructure business went public. "At my core, I am a developer," he said in a message to his workers. Bergman has held the posts of chief architect and executive chairman since then.

Steve Ells served as CEO of Chipotle until November 2017, when he stepped down amid foodborne disease crises that caused the company's profits to drop. "Bringing in a new CEO is the right thing to do for all our stakeholders," he said in a statement. "It will allow me to focus on my strengths, which include bringing innovation to the way we source and prepare our food.”

Treating the business like a child

Page and Brin compared Google to their child in a joint open letter announcing their plan to step aside in 2019. "Today, if the company was a person, it would be a young adult of 21, and it would be time to leave the roost," they wrote. “While being closely involved in the day-to-day administration of the firm for so long has been a tremendous honor, we think it is time for us to take on the role of proud parents — providing guidance and love, but not daily nagging!"

Chris Costello, who co-founded Blooom in 2013 with Kevin Conard and Randy AufDerHeide, agreed. "When you start a company, it becomes almost like a child, said Costello. Blooom recruited Matt Burgener as a chief marketing officer in 2016, and he was later elevated to CEO. "I get to do what I do best — evangelizing the Blooom mission — and Blooom gets a better CEO to lead it on a day-to-day basis,” added Costello.

Conclusion

When it comes to when and how a founder/CEO should stand aside, there is no one-size-fits-all solution. A well-timed transfer from the founder to a capable successor, can propel an already successful business to higher heights.

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