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Tuesday, October 22, 2019
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When is the right time for a founding CEO to step aside?

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As the founder and CEO of any company, stepping aside as a leader of your own venture can be a very hard decision. But sometimes, in order for the company to grow to reach higher levels, you have to make that sacrifice when that time comes.

Startups, especially here in Kenya face very many challenges in their initial stages, and since the founder is the one facing and finding solutions to these challenges, it can be very hard for him/her to trust the leadership of someone else in the company.

In one of the most recent announcements,  Travis Kalanick, CEO of Uber, was asked to step down by shareholders in order to move the company forward. This incidence brought 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.

 Entrepreneurs are characteristically creative, solutions-driven and detail-oriented. 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.

There are vital signs that will show its time for the founding CEO to step aside from the leadership of the company.

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.

Another way of realizing that it may be time to step aside as CEO, is when the job is no longer fulfilling. This is because entrepreneurs are creators, and the role of a CEO changes as a business grows – becoming more focused on business operations, financial 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,  although this situation is not unusual, it is best for a CEO to make this kind of decision for themselves, before they are asked. This is because 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.

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 study conducted in 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. Therefore, even if you step aside as the company’s CEO, do not totally abandon it altogether.

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