When is the right time for a founding CEO to step aside?

Anton Roelofse

Following the recent news announcement that Travis Kalanick, CEO of Uber, was asked to step down by shareholders in order to move the company forward, it brings to light the notion that there may come a time for a founding CEO of a successful start-up to evaluate whether they should handover the reigns to new leadership. Although this can be a hard pill to swallow, sometimes this option is worth exploring in order to successfully grow the business to its full potential.

This is according to Anton Roelofse, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who says that, as a successful business grows, so does the role of the CEO, and sometimes the entrepreneurial traits of a small business owner are not conducive to successfully creating and running a large to global business.

“Entrepreneurs are characteristically creative, solutions-driven and detail-oriented,” says Roelofse. “However, once a business grows, managerial skills and financial skills become more complex and necessary and these skills may not necessarily reside with the founding-CEO.

“Nevertheless, when a small business owner has put his or her heart and soul into a business, and grown it from fledgling stage to maturity, it can be extremely difficult to step away, which poses the question, when does one know when the right time to step aside is?” says Roelofse. 

“There are two instances in terms of growth that would affect whether a CEO should consider stepping aside: If the business growth has stagnated or if the business has scaled too fast.

“A new CEO will either be able to breathe new life into the business, offering fresh ideas and innovation or have the skills that the founding-CEO may not have the time to develop, due to rapid business growth,” he explains.

He adds that another way of realising that it may be time to step aside as CEO, is when the job is no longer fulfilling. “As entrepreneurs are creators, and the role of a CEO changes as a business grows - becoming more focused on business operations, financials and managerial tasks - it may be time for the CEO to take on a role that suits their entrepreneurial characteristics better such as heading research and development.”

Referring back to the resignation of Kalanick, CEO of Uber, Roelofse says that although this situation is not unusual, it is best for a CEO to make this kind of decision for themselves, before they are asked. “A sudden change in leadership can be disruptive for a business and can create uncertainty for other stakeholders. If the CEO makes the decision themselves, it gives them time to prepare and groom their successor adequately,” adds Roelofse.

However, should the CEO have to step aside suddenly, it is advisable for them to stay on board in a different role within the company such as a director, chairman or advisor in order to ensure the businesses integrity stays intact. “A study1 of S&P 500 companies revealed that businesses in which the founder is still deeply involved performed 3.1 times better than the rest due to the founder’s emotional connection with the company,” he continues. 

“For any entrepreneur in this situation, this type of decision would not come easily, and would demand a sense of bold leadership, free of emotional attachment,” says Roelofse. “An entrepreneur placed in this type of situation would have to be careful to make the right decision for the future success of the business, allowing adequate time for proper planning and a concise handover process,” he concludes.