When is the right time for the founder to step aside?

The decision by Twitter co-founder Jack Dorsey to step down as CEO to let the company u0022break away from its founding and foundersu0022 raises questions over when is the right time for those who started a company to move on

For a business leader who has also founded a company, deciding to step down as CEO and leave a company in someone else’s hands can be difficult. 

Twitter chief executive Jack Dorsey is the latest to make this move. Earlier this month he announced he was leaving Twitter for good, citing the need for the company to “break away from its founding and founders” as one of the key reasons behind his decision. 

In a company-wide email that he also tweeted, he said: “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.”

This marks the end of Dorsey’s second stint as chief executive of Twitter, following its spin off from Obvious Corporation - a startup incubator and investing vehicle headed up by Dorsey and his Twitter co-founders Evan Williams and Biz Stone - in 2007. After taking on the initial CEO role, Dorsey was forced out of the role just over a year later but stayed with the company in roles including chairman of the board and executive chairman. He eventually returned to the role of chief executive in 2015.

Former CTO Parag Agrawal now replaces Dorsey with immediate effect. In his letter, Dorsey adds: “I believe it’s really important to give Parag the space he needs to lead. And back to my previous point, it’s critical a company can stand on its own, free of its founder’s influence or direction.”

Dorsey is not the first founder to take this decision. Amazon’s Jeff Bezos handed the CEO reins over to Andy Jassy earlier this year, although he remains with the company as executive chairman. 

Many founders, however, end up being forced out rather than getting to decide when they leave. For example, Uber founder Travis Kalanick was forced to step down as CEO under acrimonious circumstances in 2017, while the same is true of WeWork’s Adam Neumann. 

Knowing the right time to move away can be crucial for ensuring the future success of an organisation.

Should I stay or should I go?

This was a question that crowdfunding platform Seedr’s founder Jeff Lynn had to ask himself following the business’s successful Series A funding round in 2015. After the investment, the company quickly grew from 25 employees to 60 and Lynn felt that many of the challengers the business now faced were not suited to his skillset. 

“The skills and the talent required to take a business from zero to one are vastly different from what’s required to take a business from one to 100,” he says. “I don’t tend to get bogged down in in-depth analysis and planning, I act on instinct and I move quickly. These were all things that were crucial in the early days but when you’re running a bigger business you need to be much more methodical and comprehensive. There are people out there who are capable of doing both but – I’m not one of them.”

After approval from the board and an extensive recruitment search, Jeff Kelisky was brought in as the new CEO, while Lynn moved to a new role as executive chair.

Lynn adds: “Because I took control of the situation by recognising that I needed support, I was then able to carve out a role for myself and nobody had any great concerns about me being a problematic former boss.”

Barry McNeill, founder of executive coaching company Work Extraordinary, believes many scaleup businesses get to a stage where new ideas and energy are required for continued growth. “As you grow a business and bring other people into the organisation, it can take on its own sense of identity,” he says. “If the founder ends up being a blocker to that, because they’re still fixed on their earlier vision, then that can become really problematic.

“That will be the point where the founder might need to step aside in order to let new leadership come in and bring the organisation to the next level of development.”

Ultimately he believes if you get to a point where the founder is weighing up whether to stay or go, then “it’s probably time to step away”.

However, reaching this decision is not easy and the founder’s ego can often get in the way of the company’s success. “Founders can sometimes see themselves as the hero because they were able to take the organisation to where it is today,” McNeill adds. “It can require a level of maturity for a founder to recognise that it’s time for new leaders to come in and take the business forward.”

Finding a successor

Any founder moving out of a position of power will want to ensure that the business remains in safe hands. In the case of Twitter, Agrawal was promoted from within, having been with the company since 2011 and served as CTO for four years. The appointment was unanimously backed by the board of directors.

The founder of CEO advisory firm VOS Group, LaDawn Townsend, believes this shows Agrawal had built up a positive reputation within the business. She says: “When looking for a successor, the board has to ask who doesn’t always say yes and who challenges us in a healthy way. If that answer is no one, then you may want to look for an external candidate that believes in the culture of your company and what you’re doing.”

There are obvious benefits to appointing an internal successor, such as having already demonstrated their capabilities and competence in a leadership role and being known to people within the organisation. However, there are instances when a fresh voice and new or different skills can be more beneficial for the company’s progress.

Townsend adds: “This is especially relevant for companies that want to scale or expand internationally. The skill set that’s required to guide a larger ship will be different; the founder can either grow into it or choose to bring in another leader.”

For Lynn and Seedrs, this proved the better option. However, it did not reduce the sense of anxiety he felt when handing over leadership of the business. 

Lynn explains: My nervousness was less about the principle of handing over than it was about making sure that it was the right person. Hiring the wrong CEO is the kind of thing that can kill a business.”

Ultimately, this change in leadership has proven successful for Seedrs, which was acquired by US startup investment platform Republic in a $100m deal last week. “I don’t think we ever would have gotten to that point without Kelisky’s leadership,” Lynn adds.

Time will tell whether Twitter’s change at the top will have the same effect.