Founder Power Gone Awry

Power‎ sticks to founders like glue.

Without it, they'd never get their initiative off the ground, no less keep it there. Yet all that power can cut back on itself. Founders defeat their own purpose.

Founders come by power beyond the reach of the ordinary chief executive.

‎Ownership is one unique source of founder power. A controlling interest, 51 percent of ordinary shares, trumps everything. So can a special class of stock at places like Google

and Facebook that vests owners with ten or even twenty votes per ordinary share. A founder or founders of a so-called controlled company can't be made to do anything by anybody. Even a large minority stake can have a chilling effect. A start-up's board rendered itself "timid" in the face of the founder's 42.5 percent ownership.

‎That unique power can also be very intangible. To the founder of a venture that's up and running accrues an aura, a mystique, even a god-like aspect. I've heard it said, reminiscent of Genesis: "Without so-and-so, this organization would not exist."

That aura, that mystique slows down others from voicing their concerns or pressing their case. "Who am I to challenge her—she started this place." The danger is that people delegate up. At the extreme you have an organization of mindless followers, sheep that follow the tinkling of the bell.

That sense of the founder as special can easily infiltrate the founder's mind, in which case she or he may feel they can do no wrong. Success is a poor teacher.

The thing is, great power corrupts, often corrupts—corrupt in the sense of putting one's own needs ahead of the needs of the enterprise. It's the very definition of self-serving. "Power is so pleasant," wrote the 19th century novelist Anthony Trollope, "that people quickly learn to be greedy in their enjoyment of it."

Power corrupts in two ways, financially and managerially.

Financially, power corrupts when a founder commits to a salary increase or a bonus for the COO and never gets around to it or agrees to a stock grant for board members and reneges. The founder's trustworthiness is shot and the people affected leave sooner than they otherwise would. Then of course there's self-dealing. Or a founder lends himself money at little or no interest or, worse yet, embezzles. 

Managerially, power corrupts when a founder hires a COO, a crony, without consulting anyone; it goes badly. Or a founder monopolizes decision-making; avoidable bad calls are the result. Or is perpetually 30 minutes late; those kept waiting read it as disrespect and resent it. Or is weak on process and builds an organization just as weak on being organized; it's chaos.

‎It's so easy for founders to take liberties. It's so easy to make unilateral decisions. It's so easy to interfere. It's so easy to slough off the usual managerial obligations‎. It's so easy to help yourself to something that doesn't belong to you.

It's said that there is no good way to get rid of a bad leader. When founders detract more than they add or outlive their usefulness, they are notoriously difficult to dislodge. It can take a board years, by which time the damage is done. Then again, boards hesitate to kill the goose that lays the golden eggs.

When founders become the organization's sole power, the mon-arch as it were, then checks (curbs against sins of commission) and balances (counterweights against sins of omission) are, by definition, weak. A venture capital firm can pressure the start-up for growth but its oversight and control don't necessarily extend to the founder's day-to-day use of power.

Worst case, the venture goes down in flames.‎ Almost as bad, it succeeds for a time but the harm done by the founder's failings and limitations catch up with it. Sole reliance is untenable, and success isn't sustainable.

Yet organizations succeed all the time despite the out-of-line founder. For instance, a roll-up built upon well-chosen acquisitions that are then adequately managed and not over-managed. It throws off oodles of cash for years despite founder antics that waste time and energy and drive senior people crazy. But a few senior people, strong characters as well as big contributors with their own power base, are able to act as counterweights.

Founding an organization arouses passion—raw ambition laced with anxiety—like nothing else except a mother's primal attachment to her child or a lover's mad possessiveness. So it's not hard to see how founders get carried away, but that's no excuse for sailing way out of bounds. Many founders absolutely know the right way to act, but should loses out to want. And there is no one on the playing field to blow the whistle or the founder is deaf to its shrill cry.

Some founders actually go the other way. Out of a distaste for power or discomfort with it, they shy away—they're not direct or demanding enough—and don't fill their role.

Those who make responsible use of power have their egos in check or their moral code keeps them in bounds, yet they are comfortable with power and not inhibited about using it. They have no problem telling a staff member what to do and holding his or her feet to the fire—yet they are usually constructive. They have no trouble holding their ground yet can, within reason, be moved off their spot. Their thinking can soar but they are described as "grounded," "down-to-earth." Importantly, they're not overly impressed with themselves. Crucially, they accept offsets.

At their core, founders who hold themselves in check put the good of the organization above their personal needs. Nothing defines founder power used responsibly better than that, just as the inability or unwillingness to subordinate one's needs to the larger good is the very definition of founder power gone awry.