This post was first published on Techstars on January 20, 2016.
This is the second post in a series of five on co-founder conflict.
The most common manifestation of co-founder conflict is what happens when one co-founder doesn’t scale. This conflict is often recognizable by one founder’s comments to the other that “I work harder than you,” or “I don’t know what you do anymore.”
Let’s start at the beginning. When two co-founders come together and decide to found a company the first question is always: Who’s going to be CEO?” Eventually someone has to be CEO. Depending on how the company grows from there, you have differences in scaling.
By definition, the goal of most venture backed startups is to scale. Scaling well is not easy. When you have rapid growth, it’s really hard to grow your skill set at the same pace.
I often find the CEO will scale faster than the non-CEO; the built-in requirements of the CEO position forces a growth that may not come otherwise: she has to pitch, do board meetings, etc. There are these things she must learn. It’s really trial by fire. Scaling is not optional.
The non-CEO founder (who may or may not go on the pitch meetings for raises, may be there for board meetings but not put the deck together) is responsible for certain things but not the company as a whole in the same way the CEO is. This co-founder usually goes on to lead a specific team or business function. While there are pre-built-in mechanisms that force the CEO to scale, it is not inherent that the non-CEO will scale or manage a group of people effectively.
If the non-CEO co-founder is not scaling and founders have done their job well and hired talented and driven people, the CEO will start to hear from team members who are upset with the leadership. These team members will come to the CEO saying things like, “This person doesn’t know what they’re doing,” or “I don’t think I can work here if they keep interfering/micromanaging/second guessing.” If nothing changes these key hires will start resigning–a huge red flag to the CEO and the board. While it is natural for the first generation of leaders to eventually move on, what Fred Wilson calls “Turning the Team,” The resignation of later stage and often more experienced hires is frequently one of the first sign of failing.
The CEO who is scaling will try to save employees from leaving or repair the team(s) that are dysfunctional under the leadership of the other co-founder. This just snowballs the conflict because now it looks like the scaling CEO-founder is undermining the non-scaling founder. It won’t be long before the non-scaling founder comes out swinging, saying “Hey, you are telling my direct reports what to do and now they don’t respect me anymore.” It just crumbles into all kinds of other dysfunction. The scaling CEO has come from an earnest desire to help but has now created more conflict.
What’s a Co-Founder to do?
“We can’t solve problems by using the same kind of thinking we used when we created them.” – Einstein
I like the word “level” because one of the ways to deal with conflict is to move up one level above the current conflict to an outcome you both care about. At some moment both you and your co-founder cared deeply about the success of the business, what was best for the business and how to get it off the ground.
When you are in a place of conflict, it’s probably a place of personal conflict. All sorts of voices in your head start telling you things: “You are not scaling. You are not leading. People are leaving your organization. You are not delivering.”
To heal, you need to bump out of the “You” and into the “We.”
“What do we want for the people that work for us? What do we want for our investors? What do we want for the company?” From there you can work your way into asking, “Is this working?,” “Is this the best thing?” It is hard for anyone’s ego to to say, “I am building something great and I no longer can be a part of it in a leadership function.”
The inverse of the non-CEO not scaling is the CEO who does not scale. While not as common it is not infrequent either. It is just far less likely that they will be fired or removed from the company. You may be asking, “Why don’t founding CEOs get fired? The truth is that the thing all founders have that no outside hire will ever have in the same way is the vision for the company, and the passion and drive to make that vision a reality. The founder is the one who saw something in the world and said, “I need to create this.” They have been thinking about it deeper and longer than anyone else. You just can’t get that from an outside hire. That’s why when CEOs struggle to scale, they’ll sometimes hire a great executive in a senior role, or a seasoned coach, to guide them for a time. That’s one of the reasons why the Google guys hired Eric Schmidt, and Zuckerberg hired Sheryl Sandberg. This happens all the time, but the vision is always the vision of the founder.
Healthy co-founders ask what’s best for the business, what kind of company are we trying to build, what kind of experience do we want to have. What kind of company would we want to work for?
It’s a willingness to ask for help and it’s a willingness to allow somebody else to lead in a little while, while you catch up.
It’s here I love to bring to mind Larry and Sergei at Google. When Google was scaling rapidly they recognized they had a lot to learn and brought Eric Schmidt. They allowed an experienced CEO to come in for a little while, used that time to scale themselves and then took the reins back. It’s okay to take a pause and let somebody show you how to scale.
A lot of people will say, no, we only believe in founding CEOs –and yes, there is a lot of data that supports that. Absolutely.–there is also a moment where you have to ask yourself, what do I want for my company and how will I best grow? I don’t believe that one size fits all, but there is the right choice for you and your company and it is worth taking the time to figure that out.
These situations always stem from ego. As I stated before, this rapid scaling is hard, if not next to impossible to match with your skill set. Where founders get into trouble is when they put their ego and their desire to have a certain title, or be perceived in a certain way by the world, ahead of what the investors are backing and what the employees signed up for. You need to be willing to put the business first and be open to the fact that mean asking for help, or acknowledging that maybe you can best serve the business in a different role.
What is most important is you allow yourself the space to reflect on what you really want, what your motivations are, why you decided that this company had to exist and you had to be the one to build it. Make your unconscious motivations conscious and then decide what is right.
“Until you make the unconscious conscious, it will direct your life and you will call it fate.” -Carl Jung