Knowing When to Walk Away
How to know when to step down as a Founder-CEO
September 2023 marks three years since I started the search for my successor at the social enterprise I co-founded, and one year since starting my next full time job. It’s been a long transition from an entrepreneur to a senior manager at a large international non-profit. Since I still often get asked about this transition, I’m marking this anniversary with a 7-part series (I know, but bear with me) called “Back to the Ranks”, with each episode exploring the transition from a different perspective.
This edition, part 1, is about knowing when it’s time to leave the organization you founded and what to do once you’ve decided.
Something I’m Learning
This post is inspired by a talk I did for the Asia Society’s Asia 21 Next Generation Fellowship program (of which I’m an alum). Thanks to Diana Wu David for inviting me and for her tireless work as a thought leader and connector.
The session took place in a closed Zoom room, in a fireside chat with a social entrepreneur who is exploring how to successfully exit her organization (and so whom I can’t name). I began with the caveat that what I did suited the specific circumstances of my organization and personal life; it will be different for other founders and other organizations. What follows are some insights from things my co-founder and I did well when we decided to step down – and just as many from our failures and mistakes.
What makes for good timing for a founder to step down?
Only the lucky ones get to enjoy good timing. If you hand over in a time of plenty and success – rather than one of crisis – then you can count yourself fortunate (and kudos on the decisions and actions that enabled that luck). Another good moment to step down is if the organization is embarking on a new era or strategy and someone else with a different set of skills might be better positioned to succeed than you. Of course, you’d want a steady funding pipeline and/or a healthy cash reserve. And the best case is that there is a leader from within ready to step up.
Yet even then it can all go wrong. So there’s also an element of luck involved, with regard to your funding streams, external political/operating environment, or black swans like a once-in-a-century pandemic.
What questions do you need to ask yourself before you leave?
Why are you leaving? No, but really, why? (Ask yourself that several times to understand your deepest and darkest reasons, if only to be able to hold steady when you face resistance from any of the stakeholders mentioned below.) Why is now a good time for you personally? Assuming you have some runway, is there someone ready to take over or do you have time to search for and onboard a new leader?
Who needs to be told? And in what order?
Start with your immediate family – your partner/spouse, and anyone else you have caregiving responsibilities for (children, parents, etc) as they will be most affected. (It goes without saying this should not come as a surprise to your partner/spouse.) You then want to talk to your co-founder(s), your Board, and any other C-suite leaders. Then your funders and any other key strategic partners your work depends on. And only then should you share with your broader team – mostly because your team will want to know how each of the above groups reacted.
How involved should you be in the succession process for external candidates?
Some strongly believe that the Board should take charge of this and you should only be involved to provide input, but not have a vote in the final decision. Others believe that only someone who has sat in that chair knows what is really needed and so you must be a key decision maker. Use your best judgment and chart a middle course depending on what the organization needs and your Board’s capacity to be involved.
How do you build capacity in the next level of leadership?
This is not rocket science. You should identify them early and give them time and stretch assignments to prove their mettle. But also be ready to throw them into the deep end; many of the best people will never feel they are ready. Also, trust your gut on whether someone who is doing one job really well can rise to doing a higher-level job; as the Peter Principle reveals, not every high performer can step up.
What type of role should you play after you step down?
There are many strong opinions – and a ton of literature – on this. My experience from reading a lot of it and talking to my mentors was that it will differ for everyone based on the unique situation and needs of your organization. If stepping down means you leave the organization, it may make sense to stay on the Board (but don’t be the Chair) for a couple of years to help guide the transition. But you should work largely through the Board Chair and new CEO/ED rather than directly connect with your former colleagues. That said, a feedback mechanism for former colleagues to raise red flags about the new leadership should be put in place. Regardless of whether you leave or stay in the organization in another role, you must continue to be an evangelist for the organization, open doors to networks and funding/business opportunities, for at least a couple of years after your departure until the new set of funders and/or clients aren’t ones that came in for you.
And then the questions cut deeper…
How do you balance the needs of your family with that of your cause with regard to your tenure as CEO?
My interlocutor in this session was in the difficult position of knowing that her children needed to move to a different country to receive the best opportunities to thrive and develop. But she also knew that the community-based organization she was leading wasn’t ready for her to go. Substitute children for sick parents living in another city/country (as I’ve seen in other cases) and it’s the same question. While the only way to make this decision is on a case-by-case basis – as the interplay between every founder’s family and their organization’s level of development is different – my own learning from over 20 years of watching social entrepreneurs struggle with this is that you cannot neglect your loved ones for your cause for too long, because you will eventually regret it. When it comes to your venture, put on your own (family’s) oxygen mask first.
Is leaving a sign of failure?
No! While the corporate world is unsentimental when it comes to founder exits, the world of social entrepreneurship agonizes over founder-syndrome. But look around and you’ll see that those social entrepreneurs who have been at the helm for fifteen or twenty years are the exception, not the rule. When I realized this during my own decision-making process, it took the biggest weight off. You don’t have to be an exception. Run your race, pass the torch on, and move on to what’s best for you. Often, that might also be what’s best for your venture – and for the world.
Can you proactively decide you’re no longer the right person to lead, even if your team and Board disagrees? In other words, how will you know when you’re past your sell-by date?
Apply the Peter Principle to yourself. The social sector is littered with the carcasses and spluttering engines of organizations that once soared, only to crash when their founder or ED “reached the level of their incompetence”. But perhaps the Peter Principle isn’t the problem, perhaps you’re just bored because you’re a start-upper and not a manager, and shiny new ideas tend to draw your attention away from the nuts and bolts of institution-building. Or perhaps your own interests have shifted and what your organization does – while still valuable and powerful – no longer fuels your passion. If you can’t see yourself staying for at least the next five years, then proactively start planning your exit.
What if one day you wake up and deep in your bones you just know it’s time to go? Should you listen to that quiet voice in the back of your mind?
Yes.
Something to Consider
Speaking of founders who move on, just how powerful is Elon Musk? The Pentagon - and the Ukrainian army - found out the hard way: Elon Musk’s Shadow Rule.
Something to Quote
Feel unprotected against the elements or forces. Remind yourself how pointless it is to rage and fight and one-up those around you. Go and put yourself in touch with the infinite... Realize how much came before you and how only wisps of it remain. Let that feeling carry you as long as you can.
- Ryan Holiday, Ego is the Enemy