Founder may not be best CEO

Starting a company may be the quickest route to becoming a CEO, but it’s not necessarily a path to a long tenure in the position.

According to a study by Harvard Business School professor Noam Wasserman, only about half of founders continue serving as CEOs after three years in business. By the time companies are ready for an initial public offering, founders are the CEOs in only 25 percent of cases.

Unfortunately, 4 of 5 founders don’t go willingly — their investors and boards of directors force them out.

Initially, founders do well as CEOs because they know the product best and have a strong commitment to making the company successful. But as the company grows, the role of the CEO changes, requiring a different set of skills related to organizing people and business processes.

While some entrepreneurs enjoy the new challenges of the position, others find they have neither the skills nor desire to serve as CEO once the company is established.

In many cases, both companies and their founders are more successful when they hire experienced CEOs and allow founders to take positions that best suit their strengths and desires, often while retaining their ownership share. For example, many founders prefer roles that enable them to focus on the types of projects that led them to start the company in the first place, such as chief creative officer or the head of research and development.

Ideally, companies should recognize the need for the founder to step aside as chief executive before the business and relationships begin to sour. A third-party business adviser or entrepreneurial development organizations can provide objective guidance to help companies recognize the need for a new CEO and develop a transition plan that enables both the company and founder to thrive.