Founders With Too Much Power

Often an uncommon amount of power gets concentrated in the hands of the founder, way beyond the reach of an ordinary chief executive. While without adequate power they'd never get their initiative off the ground, no less keep it there, all that power can cut back on itself. When that happens, founders defeat their own purpose.

Power‎ Sticks to Founders Like Glue

Ownership is one unique source of founder power. Ownership can encompass a special class of stock, as it does at places like Google and Facebook, which vests owners with ten or even twenty votes per ordinary share. In such cases, even a large minority stake can have a chilling effect. A founder or founders of a so-called controlled company can't be made to do anything by anybody, against their will. A start-up's board rendered itself "timid" in the face of the founder's 42.5 percent ownership.

A founder's extraordinary power can also be completely intangible. An aura, a mystique, even a god-like aspect, accrues to the founder of a venture that's up and running. I've often heard it said, reminiscent of Genesis: "Without so-and-so, this organization would not exist." That reverence 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.

Power can easily go to the founder's head. They come to feel they can do no wrong. "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

Financially, power corrupts when, for example, 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 then reneges. The founder's trustworthiness is shot and the people affected leave the organization 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; bad calls are the result. Or a founder is perpetually 30 minutes late; those kept waiting read it as disrespect and resent it. Or a founder 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.

Checks and balances

Founding an organization excites passion like nothing else, except a mother's primal attachment to her child or a lover's mad possessiveness. It's not hard to see how founders get carried away, sail way out of bounds. Many founders absolutely know the right way to act, but 'should' loses out to 'want.'

When founders become the organization's sole power, checks and balances go out the window. Many—most?—founders know the right way to act, but 'should' loses out to 'want.' They aren't able to make themselves do the right thing and there's no one, no other power center, to make them—make them stop or go. We all need help at times to do the right thing. Pity founders who are bereft of that help—in some cases through no fault of their own.

• Checks: there aren't any on the founder's bad behavior. If the founder mistreats people, there's no recourse. No one on the playing field to blow the whistle or the founder is deaf to its shrill cry.
• Balances—counterbalances, that is. Those are usually lacking too. As the organization scales, it needs process, systems, structure. If the founder resists, nothing can be done about it.

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

Successful despite themselves

On the other hand, many companies succeed 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, can throw off oodles of cash for years, even in the face of founder antics that waste time and energy and drive senior people crazy. But they and their organization pay a price. For one thing, some of the best and brightest of the bunch leave. For another, those who stay aren't able to contribute up to their full potential

Not all founders are alike

Those founders who make responsible use of power have their egos in check or their moral code keeps them in bounds. 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, and are able to do that constructively. 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. In sum, they don't put their needs ahead of the organization's. They're not egocentric and they're not destructive.