Last month, Jack Dorsey resigned (suddenly/not suddenly) as the CEO of Twitter. After earlier calls for him to resign over the last few years, it appeared that he had beat back the tide of calls for him to leave. And then, on a day where Twitter employees had been given a “rest” day, he announced that he was leaving immediately and turning over the reins to CTO Parag Agrawal.
Dorsey’s exit wasn’t typical on many fronts – for one, he is also the Founder/CEO of the financial payment platform of Block (formerly Square). The question of what he was going to do next (a question that plagues most CEO/Founders I know) really wasn’t on the table. After being criticized for staying too long, it was curious to me that he was now saying that it was imperative that a company be able to stand on its own – “free of its founder’s influence or direction.”
“There’s a lot of talk about the importance of a company being ‘founder-led.’ Ultimately, I believe that’s severely limiting and a single point of failure…I believe it’s critical a company can stand on its own, free of its founder’s influence or direction.”– Jack Dorsey, Founder and Former CEO of Twitter
This week I read “How Long Should a Founder Remain CEO?” in the Harvard Business Review. It’s a short (5 minutes) article and provides a quick overview of research on companies that are CEO/Founder led at IPO. Interestingly, many Founder led companies have a higher value than non-Founder led companies at IPO. However, within three years any valuation differences have dwindled to zero.
By far, the majority of my client companies are not preparing for an IPO. Many look to cash out by selling or transitioning their business to another entity – most likely to Private Equity, a competitor or even employees. Regardless of how a business is sold, the article has some valid points that can be applied to any change in ownership.
The authors in the HBR article identified three key strategies that any Owner/CEO should explore to a successful Founder leadership transition. They are:
- Funnel founders to non-CEO positions.
- Funnel founders to personal passions.
- Involve founders in succession planning.
For the non-IPO transition, it’s simple. The sooner the company can operate successfully without the founder in selling, creating, or managing functions, the more valuable a company is. Why? Founders are often a wild card for many acquirers and they would rather remove that variable from the transition.
As a Certified Value Builder™ these are all key measurements in the Value Builder™ System tools and surveys. If it’s been a while or you have never received your personal Value Builder™ Company Score or Personal Readiness PREScore, I highly recommend you take these surveys to understand where you and your company are on this journey.
If the past few years have been challenging for you, having clarity with these critical factors will illuminate your path forward into 2022!
P.S. I have been a Certified Value Builder™ since 2017 and whether or not you ever plan to sell your company, it’s always a good idea to know that you could. If you want to understand how you could increase the value of your business (or it’s been a while since you’ve received your last Value Builder™ score,) you can get your Value Builder™ Score here or setup an appointment to learn more about what the Value Builder™ System can do for you and your business.)