The tipping point of a CEO

Do CEOs have an expiration time? When is time for them to step down?

It’s a fascinating question that doesn’t have a simple answer.

I have been having a lot of conversations with scale-up founder-CEOs who have shared with me their concern about their ability to lead the organization to the next growth stage, in particular after a new investment round.

As this is an interesting area for my line of work, I started to look for data that could either support or dismantle the thesis that founders are not always good CEOs in the long run.

A few weeks ago, I came across a very interesting article written recently by researchers Bradley Hendricks, Travis Howell, and Christopher Bingham who have found a direct correlation between the tenure of the founder-CEOs and their performance.

The researchers have found that there is a tipping point for founder-CEO’s performance. The IPO.

In particular, what the research shows is that founder-CEOs have the advantage to:

  • drive almost 10% higher company valuation at IPO
  • increase firm value before and during IPO
  • build a better relationship with VCs and PEs

However, their impact rapidly deteriorates after the IPO:

  • their value-added decreases to zero three years after firms go public, and they then start detracting from the value of the company in the longer term
  • post-IPO business performance is lower compared to non-founder-CEOs firms

It becomes clear that going public is the real turning point for those founders who have the ambition to keep leading the organization at the maturity level.

This is also an important lesson for any leader. In fact, I believe everyone can become highly-successful CEOs in the long run if you learn how to:

  • change your mindset & stop thinking about the startup, your business, or your role as “your baby”
  • develop new leadership skills that allow you to be ready for the next growth stage
  • build a strong team that challenges you and brings skills that you don’t have
  • delegate intentionally and extensively without stepping into operations
  • set specific KPIs to make others accountable for the results

It does sound easy but it’s not. If you had your role for many years, you’re naturally and emotionally attached to it.

At some point, you have to make these changes. Maxwell said: What brought you, won’t bring you there”.

Here’s the good news. Everyone can make it.

At the end of the day, nobody is born knowing how to be a CEO.

But everyone can learn how to become a good one.

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