How founders can navigate the challenges of stepping back

Jonathan Berman
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It can be hard to step back from the company you've founded (Source: Getty)

Entrepreneurs are control freaks; that’s what makes them successful.

Their business wouldn’t exist without their vision and determination to create it. But though a business demands this drive at the outset, as it grows this can become a limiting factor. To continue to thrive, the founders sometimes need to let go – either with a swift exit or transition to step back.

In a startup, everyone does a bit of everything and mucks in. But as more employees come on board, we start to see job differentiation – finance, sales, marketing, HR and business development functions develop. To make this process successful, external hires need to be integrated into the culture of the company, while internal hires require training and coaching so they’re able to step up. Business owners should want these hires to start acting as a collective, but there is a risk that they micromanage or become a safety net that restricts employees’ personal growth.

A common tension comes when bringing in a managing director. The risk is that the team doesn’t become familiar with the new hire, circumventing the new director and still reporting to the founder. This tends to undermine the managing director, which usually makes their role untenable. Ultimately, the management team needs to be responsible and be each other’s first port of call when there is a problem.

Another big shift also needs to take place. The founder should actively transition from the board being subservient to him or her to a situation where they are subservient to the board. The board and management team needs to work together: 10 minds are better than one. Once the business gets to a certain size and the culture and processes are institutionalised, one individual must necessarily get less important. For a large company, it can never be the case that if the founder leaves the company would be destroyed.

It’s tricky to let go when you own the majority of the business though. And if you step back with all the equity, that means nobody running the business has ownership. Stepping back is a means to an end, but the question entrepreneurs must then ask themselves is: what is that end? Most entrepreneurs want to step back so that they scale the business, prove it can run without them and so make the business saleable.

In many ways, stepping back can be harder than building the business and there is no fixed way to go about it. Some founders take on a mentoring role, giving the management team the necessary freedom to make decisions while remaining available to provide counsel if and when it is needed. Many founders also continue to act as a guardian of the company's culture and spirit, ensuring the principles on which they founded the business continue to thrive.

To make the most of the transition, founders must formulate a transition strategy. But this should not be done in isolation. A transition is more likely to be successful if a founder asks the management team how best they, as founder, can help. By supporting the management team in this way, founders will soon discover what the business really needs from them and which of their attributes are most valued, enabling the founder to focus their energy where it is really needed.

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