I couldn’t agree more strongly with your assertion that hired guns often kill potential value in companies when they are brought in. It’s been my experience that the impatience of the venture capital model drives them to push founders to operate their companies as if they are more mature than the actually are. Your example of the hired gun CEO is a good one but the one I see most frequently is VC’s insistence that the founders bring in a VP of Sales before the product/market/channel/sales rep profile/system engineering profile/… are understood. It takes a founding team and a set of good VC’s to get a company to $10M in revenue or so before thinking about professional sales or business management coming in. When founders cave into VC pressure and hire these folks it slows everything down and often creates an unrecoverable slide.

Anyway, great topic. Thanks for calling it like you see it!

I loved your article. I have done a startup and gone through very similar experience and think you articulate very well a typical startup experience. An addition from my experience which you should note is sometimes investors too play foul (actually shoot themselves in the foot) by opting for a convenient internal CEO as against a founder who is visionary and truly passionate about the company but not acquiescent to their partisan interests. Ultimately, this company also ends up in a disaster. In my company I was fired because I was opposed to certain investor interests that were harmful for the company. Investors got a “yes-man” co-founder as CEO who could not provide a vision, made disastrous changes to company culture to assert himself and began destroying value. A year later I was approached by investors who probably realized their mistake and requested me to join back. But I chose not to join as I did not believe that investors were sincerely reformed. Eventually the company lost all the customers and employees and had to shut down.

Pankaj

I thought it interesting that your article focuses so much on the “luck” of a successful CEO. Our concept of “luck” isn’t well defined, and often abused. Your usage risks making it into a passive endeavour. Many people have great opportunities put in front of them in life, but fail to take that opportunity. Many others do everything the right way, but for one reason or many, they never get that opportunity. Conversely, a lot of people have an opportunity put in front of them and they grab it by the horns and run with it. And then the cynics dismiss them as having been “lucky”.

A wise friend once told me that luck is where preparation meets opportunity. A successful CEO must be well prepared and open to recognizing opportunity and ready to act quickly and effectively on that opportunity.

So I agree with you about the “luck” thing, I just think that our language of luck is flawed.

The easiest thing to grab onto when seeking “help” in business is sales. The numbers are the numbers, and as such it’s easy to gamble in that direction. I have never met a truly great CEO that wasn’t a (natural or made) salesman. No one sells more to the CEO – vision, products, direction, strategy, etc. CEO’s sell. It’s what they do – covert or overt.

The problem comes into play when it’s the ONLY skill they have. A cheesy salesman is bad, a cheesy salesman playing CEO is almost guaranteed to end in doom.

Thanks

And while I love culture, perpetuating a culture of winning is more important than of one that loses. DEC never changed it’s culture and thus put itself out of business. The pre-Hurd HP was not winning – it was bleeding to death, so I guess I would argue that living to fight another day, even at the expense of cultural casualties, is preferred to riding the company Taurus into the toilet.

Love to hear your thoughts. Thanks.

Keep an eye on HP, when the company starts to tank it will happen very quickly.

This one resonated with me personally because I’ve been in both camps – as a founder (way back when) of a company that recruited in a CEO and now as the CEO recruited in. Funny how life is, huh?

I totally agree with all of your points. It’s a precarious thing to do to take a company that was built because of a founder’s vision and to incorporate new DNA in. That probably explains why it’s often not successful. There is some selection bias in your analysis though, since many companies that recruit CEOs in do so because something needs to change – hence the risk of failure is likely statistically higher.

In any case, this post made me think of the great Warren Buffet quote:

“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.”

I’ve found that people heavily underestimate the importance of luck in their lives and careers.

Overall, statistics will bear out the fact that if anything, the likelihood of screwing up happens at a higher rate with an outside CEO than a founding one. That’s an easy statement to make as it’s just numbers: most companies have outside CEOs and most companies fail, therefore, companies with outside CEOs fail more often than those with internal CEOs.

This is bad logic. Just because most fail and most have outside CEOs does NOT imply that an outside CEO is correlated with failure.

Still enjoyed the article though.