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Hubris is the Enemy: Greg Blatt on the Dilemma of the Founder CEO
For many entrepreneurs today, the American dream is synonymous with becoming like Jeff Bezos, Bill Gates, or Steve Jobs: founding a business, building it from the ground up, and leading it on its journey for decades after. As a society, the rise of venture capitalists and startups has brought with it an obsession with the idea of the founder CEO, the leader who can both inspire passion and drive in his team while also pleasing shareholders and creating growth opportunities in an increasingly complex market.
However, in reality Bezos and the like are an exception – successful founder CEOs are much more rare than many of us realize. According to studies conducted by Noam Wasserman for the Harvard Business Review of over 200 startups, less than a quarter of the founders had led their companies’ initial public offerings, and 50 percent were no longer CEO after just three years.
Indeed, in recent years as ESG factors are increasingly being scrutinized by investors the shadow of the founder CEO has loomed larger. Adam Neumann at WeWork and Elizabeth Holmes at Theranos are just two examples of a founder CEO ending up way in over their head, and Jack Dorsey’s resignation from Twitter has highlighted the question: at what point is it time for the founder to diverge from the CEO?
“The whole notion of these 20-something-year-old men and women running huge business enterprises is relatively recent,” said Greg Blatt, former CEO of the American holding company InterActivCorp (IAC). “There is a risk of hubris, I think, with some founders who can think that because they invented something without having experience, that experience doesn't matter in the rest of a company’s evolution, either..”
Joining IAC in 2003 as its general counsel, over the course of nearly two decades with the company Blatt held a number of senior leadership positions for the company and its subsidiaries. Known for its early investments in some of the biggest internet companies of the 21st century, in addition to leading IAC itself Blatt also headed a number of other businesses under its umbrella including Match.com, Match Group and Tinder.
According to Blatt, the leadership requirements for a startup are significantly different from that of what is needed as a company grows and becomes more established. In a new business, the first priorities are all centered around developing its product or service, and many founder CEOs can see success in this regard as proof that they are able to effectively lead and manage. However as the company grows new challenges such as managing a growing number of employees, lowering costs, expanding product offerings, and streaming operations arise, not even mentioning the further complexities that come with going public.
For example, a founder CEO with a background in science or technology would certainly be able to hold their own in the early days, but as the company grows so too does the role of a CEO; at the end of the day the leader of the company must extend the scope of their vision beyond the product.
“What has to be understood is that being a founder CEO is like being a player coach. Sure, there have been successful player coaches in history, but they’re by no means rookies. Just because you came out of the NBA draft and you’re scoring 30 points a game: that means you’re ready to play, it doesn’t necessarily mean you’re ready to coach,” said Blatt. “Having the idea for a great product and having the wherewithal to build a huge enduring economic institution are not the same skillset. I’m not saying nobody has both capabilities. I just think people tend to think they’re more highly correlated than they are.”
The problem is, founders sometimes convince themselves that because they had the initial idea for the business, they are the only person who has the vision necessary to bring about its success. It is certainly natural for them to develop an emotional attachment to the idea of their companies as their “baby” – they have often poured everything they have into the business and sacrificed much to get the company off the ground. They form tight bonds with the first employees hired, and are the first to establish a company culture which is a reflection of their own personal attitudes and beliefs. There is a large amount of pride that comes with being a founder CEO.
The catch-22 entrepreneurs must face is that often in order to see their company reach new heights they have to relinquish some of their singularity in the company. Taking advantage of opportunities ultimately requires capital, and the fastest way in which to do so is to raise resources through outside investments. However, in order to attract investors founder CEOs must often be willing to cede more control over decision-making. In today’s day and age where markets are changing and growing more competitive than ever, “slow growth” is fast becoming a relic of the past.
The initial success of a company can make it hard for founder CEOs to understand the point in which they need to begin relying on people outside of themselves. As the initial market is exhausted new channels will need to be explored, and with each step forward the business will become increasingly complex. Processes will need to be developed, hierarchies created, and the overall structure of business must be solidified. This is a rapid and drastic expansion of the skills required in order for a CEO to be successful.
“For a lot of these founders, it's the first time they and their team are seeing most of the things that they're seeing. That will ultimately be a problem. The best founders are the ones who get people in quickly into important jobs where it's not the first time they're seeing these things,” said Greg Blatt. “Everyone understands experience matters even if they don't want to acknowledge it. In essence, by bringing in senior people sooner, people with more experience than they themselves have, they make it much more likely that they can remain in charge of their company longer.”
All of this isn’t to say that there is no such thing as a successful founder CEO. Thousands of companies are able to succeed as such every year. However, the more a company grows, the more complex its dealings become, and the more wise it is for leaders to bring in outside help. A truly successful company is one that is able to survive past its initial founder. They have built a culture so strong around an idea that it is able to continue attracting the best and brightest, evolving to meet changes in the market and consumer demands. A great entrepreneur is one who is able to objectively acknowledge what is best for the business they created.
“I think one of the things that, to me, has differentiated the successful startup CEOs from the unsuccessful ones is the ones who don't have that hubris, who understand that at a certain point they need help from people who know more than they do and have done more than they have. And are not threatened by bringing those people in,” said Blatt.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.