It’s easy to start a business but it’s harder to make it a success. Starting a business only needs an idea and capital to invest. However, managing it requires a lot more than that.
It does not matter how big or small your business is, you will have to deal with customers, employees, agencies, etc. This requires skills and experience, and sadly not all founders or entrepreneurs may have these qualities.
Society idolizes entrepreneurs who build multi-billion valuations. However, the likes of Bill Gates, Mark Zuckerberg, and Richard Branson are far and few. Not all founders go on to be CEOs. Look at David Neeleman, Jerry Yang, and Mike Lazaridis.
In fact, 90% of all startups fail within the first five years. One of the main reasons for such a huge failure is a lack of proper management.
According to Michael Useem, the author of “The Leader’s Checklist”, it boils down to what kind of qualities a person has. Some of the qualities of a good leader are:
Leaders have to go through a lot of challenges. They need to be resilient and strong if they wish to succeed and not crumble under the pressure, which can also often cause them to feel stressed.
According to this report from Resiliencei, being resilient can reduce depression by 30%, improve skills mastery by 33%, push physical well-being by 46.9%, strengthen emotional intelligence by 25.3%, and grow cognitive ability by 35%.
The key lies in not giving up even if there are hurdles.
- Articulate and Risk Taking
Leaders have a vision. They take risks and are willing to go the extra mile to make their dream see the light of the day.
No business can succeed without risks. While you can take steps to mitigate risk, the factor can never be completely eradicated.
Founders, however, are often not willing to take risks. They don’t look at risks as an opportunity but as a danger. As a result, they often let opportunities slip. However, CEOs, on the other hand, look at things strategically and seize opportunities whenever they can.
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A leader should be able to build the leaders of tomorrow. This is one of the biggest challenges that founders face. Since they have a sense of ownership, they are typically hesitant in letting someone else take control.
What the Research Says
It’s no more just a myth. Research from professors of Harvard, Vanderbilt, and Duke proved that founder-run businesses tend to be less productive than businesses that hire an outsider as a CEO. Moreover, such businesses are also often more poorly managed.
The researchers studied 13,000 companies from 32 different countries to conclude that companies that were headed by founders were typically 9.4% less productive than companies that were run by outsiders. Moreover, it also found that the productivity increased once the founder-CEO was replaced.
In fact, another study found that only 40% of founders remain CEOs after four years of the launch. Many strip down when they go public since investors are typically not interested in investing in a founder-led company.
However, outside CEOs are not always good. In fact, many find them to be overrated. A good example is Apple, which was run by John Sculley from 1983 to 1997 but did not find success until Steve Jobs, the company’s co-founder took the seat in 1997.
This study showed the implications of the false image of CEOs on the job market. CEOs are looked at as charismatic saviors, which allows them to demand extravagant compensation, which is often not justified because they do not always deliver.
This is also a reason why some small companies do not hire CEOs. They are not willing to pay such a huge amount of money.
Can Founders Never be Leaders?
They can. In fact, many have. You can acquire leadership skills but it requires a lot of time and effort.
The solution is to start from the bottom. Founders should not try to be the CEO if they have leadership skills or experience on how to manage a business.
