When Should Founders Hand Over to Managers?

Founders of successful start-ups often face a critical juncture where they must decide whether to hand over responsibilities to professional managers.

They will get pressure from many quarters telling them that this transition is pivotal for scaling the company beyond its initial success. Founders typically possess visionary zeal and hands-on expertise in all operational areas, but as the business grows, their intense activities might become a bottleneck as nearly all major decisions come to their desk. It is claimed that professional managers will bring structured leadership, experience in scaling operations, and expertise in specialized areas like finance and human resources, which are crucial for sustained growth.

Conventional wisdom is that the ideal time to make this transition is when the start-up reaches a stage where its operational complexities surpass the founder’s skill set or bandwidth. This is often characterized by rapid growth, increased competition, or the need for sophisticated strategic planning. Founders are advised to hand over responsibilities when they recognize that their presence could hinder efficiency and when professional managers can bring the necessary expertise to lead the company to its next growth phase.

A recent article by tech investor Paul Graham sheds new light on this issue. He argues that many founders of successful start-ups make the switch from ‘founder mode’ to ‘manager mode’ too soon. He quotes from a talk given by Brian Chesky, co-founder and CEO of Airbnb. As his start-up grew, well-meaning people advised him that for the company to scale he had to “hire good people and give them room to do their jobs.” He followed this advice and the results were disastrous. Graham goes on to say, “The audience at this event included a lot of the most successful founders we’ve funded, and one after another said that the same thing had happened to them. They’d been given the same advice about how to run their companies as they grew, but instead of helping their companies, it had damaged them.”

It seems that the advice to hire good people and then leave them to get on with it does not work well. Why this might be so is not clear. Maybe the newcomers just don’t understand the real nature of the start-up and try to apply the methods that worked for them in established companies. Maybe the drive, deeper understanding and attention to detail that the founder displayed continue to be needed as the company grows.

There are many self-serving books and anecdotes about successful start-ups but every founder is different and every start-up is different. There is little research identifying what exactly makes for success and when the skills that achieve lift-off need to be supplemented by conventional managerial skills. Successful founders have wildly different strengths and weaknesses but they share evidence that what they have done so far works. Maybe they should ignore the advice of well-meaning advisors and keep doing what they are good at for a while longer.