Should a Founder be the CEO?

Daniel and I have received a lot of view points, comments, and beliefs concerning one of the age old questions with startups: should a Founder be a CEO? So Daniel and I had our own little debate, and we believe this to be the best answer to this question:

Yes.

But there are several variables and conditions here for a founder and ceo, and I’m going to give you some great examples for our reasoning. Let me start by saying, we both agreed a founder makes a great CEO.  Founders are very customer oriented, and someone who understands the customer needs to have the ability to innovate, and make changes to the company.

Why a Founder Should Be a CEO

It’s no secret I am the Founder and CEO of my own company, so I could possibly be a little biased.  But I am here to advocate and back up my claim with real life scenarios for you non-believers :) .

Customer Oriented Businesses Survive

One word here: customer. The founder that created the product was usually very customer oriented, or had a unique insight into the customer to develop a product for them.  For example, Charles Swab Investment Firm was sold to Bank of America in 1984 for $55 million.  Naturally Founder and CEO, Charles Swab, was replaced.  20 years later, in 2004, BOA’s in house research team for the Investment Firm saw the banking crisis coming.  What was their solution?  Recruit the original Founder as CEO, Charles Swab.  BOA actually released a public statement calling it a “desperate need to refocus on the customer”.  They’re now the 4th largest investment firm, one of the few that has survived the economic crisis.

Big Picture Oriented

Hmm…the founder is usually big picture oriented.  The founder usually absorbs a tremendous amount of stress.  The CEO is big picture oriented.  He also absorbs a tremendous amount of stress for his team.  The founder keeps the product & startup team moving forward at all times, the CEO keeps the business and team moving forward at all times.  Both jobs require the same skills.

What a Founder and CEO Should NOT Be Doing

You’re Not There to Control Everything

This is one of the biggest things we wanted to point out as well.  Being a CEO does not mean taking control over everything.  WHY DO YOU WANT TO?  Did you forget about the life you dreamed about before starting this?  A life of freedom?  Basically, control RESTRICTS YOUR FREEDOM.  Control requires maintence, and Founders weren’t built for mainetence.  You were built for the large vision.  So focus on putting a trusted team in place to handle that maintence.  Your only job is to provide the big vision, and brake it down into milestones for them.

Founder and CEO Should Take a LOW Salary

Let’s look at Amazon.com’s Founder and CEO.  He does not collect a 6 figure salary for his role as CEO.  In fact, his management team makes 5x as much as he does with his salary.  But he’s the founder too, so he owns a quarter of the company stock.  And guess what?  He still on Forbes billionaire list of the top 50 wealthiest people.  Who wants to work for a Founder and CEO who rakes in a 6 figure salary and controls the majority of the company stock?  We call that greedy.

Imagine how good his management team feels…they can proudly say “I make more money than our CEO”.

If you’re trying to figure out what is a good startup CEO salary, we asked VCs their thoughts in this article here on “What’s a Good Startup CEO Salary?”

A Well Paid Management Team Allows Founders to Focus on Something Bigger

The Founder and CEO of Kinko’s doesn’t worry about controlling the management or operations either.  So what does he do with his spare time?  Well he started by visiting his stores, talking to his customers.  Seeing what no one is saying.  He talked to them as a friend, and came back to the company with a new set of products that netted Kinko’s an extra 10.5 billion dollars.

Imagine if you could talk to the CEO of Google?  Or the CEO of your bank?  What would you say?  What if you made a recommendation, and expressed how something needs to change?  Imagine that CEO took your information back to the company, and changed it.  We believe the more corporations that put their CEO’s focus on the customer, we would see better and more customer focused businesses.

So maybe instead of telling founders they shouldn’t be the CEO, maybe we should start by redefining what it is a CEO does?

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