Founder Mode vs. Manager Mode: Striking the Right Balance

0:00When I think about the concept of founder mode versus manager mode, what struck me is this is not a problem to be solved. this is a tension that needs to be managed.

0:12Hey, everybody. Welcome to another episode of the Business Lunch Podcast with your host, Ryan Dice and myself, Roland Frazier. Ryan, how are you doing today? I'm doing so great. Excited about the event coming up in a week or so. Everything's getting prepped and ready. All the booths and stuff is arriving, all the swag. I think it's fun. Good times. How about you? I have a tremendous amount of stuff to talk with you about on that. So maybe after the podcast and a couple of meetings today, if you've got some time, let's chat about that. Because I had a lot of really good things, I think, to help.

0:46So that I'm very excited about. But you sent me some information on something that is kind of a hot topic right now. And you suggest it would be great to talk about. So why don't you introduce that and let's chat about it. Yeah. So it was this article by Paul Graham that was making the rounds a couple of, I don't know, a week or so ago. Basically, while you were being lazy in Mexico, the entrepreneurial community was losing their collective minds. It was on fire. Memes, I tell you. And we weren't there to talk about it. And so I thought it would be good to talk about it right now. And so the article, the post was called Founder Mode.

1:27And just to kind of give you the gist, so Brian Chesky, who I know you know is the founder CEO of Airbnb, he gave this talk at Y Combinator. And he was just encouraging, kind of the theme of his talk was encouraging the audience of founders to make sure that they stay in founder mode and to resist the urge to go into manager mode. And he kind of gave all these examples of how, and again, Brian Chesky's actual talk wasn't in the article, so it was more a summary of it. And so this is how Paul Graham summarized. He said, the theme of Brian's talk was that the conventional wisdom about how to run a larger company is mistaken.

2:09As Airbnb grew, well-meaning people advised him that he had to run the company in a certain way for it to scale. Their advice could be optimistically summarized as hire good people and give them room to do their jobs. He followed this advice and the results were disastrous. So he had to figure out a better way on his own, which he did partly by studying how Steve Jobs ran Apple. So far, it seems to be working. Airbnb's free cash flow margin is now among the best in Silicon Valley. So essentially, the gist was, you know, maybe crew, we swung the pendulum too far. We let the adults run the asylum for too long, and it's time for the inmates to step back in and run the asylum.

2:48So that was the gist of the article. And there were plenty of people kind of poking fun at like, well, what really is founder mode? Founder mode, frankly, has got us into some dark places before when you think about Uber and some of the scandals that it has. And so is this just an overreaction? So that's the setup. What do you say, Roland Frazier? Are you pro-founder mode or anti-founder mode? I am pro-balance because I think like in terms of being able to be, you know, innovative and agile in a company, having the person who started it stick with it. I'm a big advocate for when we have portfolio companies and the CEO or the founder CEO is talking about maybe bringing in a CEO.

3:35I'm generally against it. I don't like professional CEOs as much as I like founders that have great people that are working under them because I just generally think nobody cares as much about the company as the founder that created it. Now, you can easily get beyond the capabilities and competence of the founder as things change from a startup to a more advanced, more mature company. And so I think that you need to balance the two. So I'm not for either manager mode or founder mode. I'm for fanagement mode, which is kind of a combination of the two. So I think it's a hybrid thing, right? Or mounder mode.

4:20I think I like fanager better. But now it sounds like something we shouldn't Google. I agree. I agree. But in terms of scalability, you know, how scalable is having the founder do everything? It's not very scalable. And how how empowering is it for an employee to be micromanaged by a founder? you know, and this would easily be a, you know, a way for kind of over micromanaging type founders to really destroy the initiative of their employees. So I think there's a balance. I do think it's great. Hey, Ryan Dice here, co-host of Business Lunch. And before we get to the show, I have an exciting invitation for you.

5:06My business partner and Business Lunch co-host, Roland Frazier and I are hosting a live in-person event. And if you're a bootstrap business owner, who wants to build a 10 million and even$100 million business in the next three years, you need to be there. This event is called Get Scalable Live. And over the last four years, it has transformed from a small gathering of entrepreneurs into the largest bootstrapped entrepreneurship conference in North America. Now, I know what you might be thinking. You're probably thinking, Ryan, really another business event? Is that really what we need? But trust me, This isn't just any other event.

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7:05And since this opportunity only comes around once a year, you don't want to miss it. Again, the link is getscalabellive.com and don't forget to use promo code LUNCH at checkout to save up to 67 % off the full ticket price. That's all I got. I'll see you in Austin. All right, back to your regularly scheduled programming. In terms of if the founder has been responsible for a good culture in the company, it's a great way to maintain that so that it doesn't get diluted through third parties. But if you're thinking about a company that has, in our scalable model, transferable value, one of the things that can be crippling to that is an over-dependence on the founder.

7:45And the founder dependency paradox is that we need the founder to make the company go And a good founder will continue to provide great strategic vision and direction and innovation for a company to hit its full potential. But at the same time, they can hold the company back because the company is limited to the vision of one founder, one vision, one homogenous view of the world that doesn't provide all of the diverse things that studies have shown having good, diverse team members can bring to something. So it's, to me, it's just a balance. And also, you can't, you will have to have delegation, you will have to have managers as you grow a company.

8:35So what is the SOP for delegation? Because it could be very inconsistent if it's one person just kind of shooting from the hip and doing it. And I think it's very easy for a founder like that to either burn out or if you're thinking as the founder to sacrifice your personal relationships because you have to spend all of your time and then some in the company. So I believe there are goods and bads to it as there are with most things, but I would be an advocate for definitely do not over delegate and go 100 % manager mode, but also definitely don't hold on to the reins so tightly that you're in a 100 % founder mode either, because both have advantages and disadvantages.

9:24And I believe that a hybrid model could actually be the ideal that brings together the best of all those worlds. What are your thoughts? Very similar. When I think about the concept of founder mode versus manager mode, What struck me is this is not a problem to be solved. This is a tension that needs to be managed. And there are going to be seasons in the life of a business where what it really needs is that in the trenches, pirate ship captain to lead it through whatever it's going through. And then there are times when really you need to be able to shift into a little bit more of a strategic management type role.

10:00And this happens over the lifecycle of a business in the early days of a company. It needs that inventor person. And it needs that kind of wild, crazy harebrained scheme and inventor who's going to come up with the breakthrough ideas that a business can be built upon. And then what it needs is that hard charging driver that's going to take this idea and really run with it. But then it kind of needs somebody to pause a little bit and to build some systems. And then it kind of needs somebody to step away a little bit and kind of guide it, not necessarily from afar, but guide it with the help of other capable, competent professionals.

10:31And then there's almost certainly going to be seasons when things don't go very well. You're going to have to go back into one of those other modes. And so I think the ability to shift modes, and I don't think it's just founder and manager mode. I really do see it as being four very distinct roles. It's the inventor, it's the builder, I'm sorry, it's the inventor, it's the driver, it's the builder, and it's the guide. And I think great CEOs, great founder CEOs especially, know how to shift between context, shift between those different modes. And they also know how to determine what their business needs the most right now.

11:07So, again, I think it's attention to be managed. And the best way to look at this is when you're trying to decide, okay, is this something, is this a direction I need to go? Take it out to its extreme. If you flip it and you invert it and the opposite of it is also bad, that probably means the extreme of what you're doing is really, really bad, too. And so, I mean, I think it's very easy to say, oh, bureaucracy. Bureaucracies in startups and companies is a really bad thing. And everybody's nodding their head and saying, yeah, of course. OK, then should we do the opposite? Well, what's the opposite?

11:37Well, the opposite is a pirate ship. And you know what? They're also bad, too. You and I have been a part of many pirate ship organizations that totally imploded. So I just, I love, I wrote down Niels Bohr, who's the physicist. He said, I love what he said. He said, the opposite of a fact is a falsehood, but the opposite of an absolute truth may very well be another absolute profound truth. And I think that's the case here. It's absolutely you need to go into founder mode from time to time. Absolutely you need to go into manager mode from time to time. And the magic is in balancing that tension.

12:16It's not just deciding that one is better than the other. And it's funny to me. Sorry, go ahead. I liked that he said, but I want to hear what's funny to you first. So go ahead and finish that. Well, I also love when he said in there this idea that if you hire good people and just let them do what they do. But the example he gave is like, yeah, this company did that, but they ran it into the ground. Well, I submit to you that maybe those weren't good people. Yeah, there's a lot of assumptions in that. Similarly, to say that he switched to founders mode and then the companies had the highest profitability ever.

12:54Well, you know, how do we know that there's a correlation between, you know, the one caused the other? You know, just that there's a lot of. In the footnote, it's, you know, he says in here, I have another less optimistic prediction. As soon as the concept of founder mode becomes established, people will start misusing it. Founders who are unable to delegate, even things they should will use founder mode as the excuse. Ergo pirate ship. And that's where the pendulum swings. So I think seeing the value in both and understanding as the founder CEO, what do I need? But also, yeah, at scale, you have to build a team of smart people around you, but they're your lieutenants.

13:36Don't hand the reins over to them completely. Well, what Chesky said was not doing this with everything. It was really being more focused on being plugged into the culture and vision, the product and the marketing. And so for a founder who has those skills, that would make sense. But there's so many other areas of the business, finance, customer service, direct operations, recruiting, human resources, all of that kind of stuff that don't fall into the things that he's talking about. So those would all be areas that you would presume could be delegated relatively harmlessly without affecting the things that cause him to say, let's stay in founder's mode.

14:23So that's like right off the bat, you can carve out giant parts of the organization that you can delegate to and stay plugged in on. And I thought that was important. And then in terms of - Can I give you an example on that one real quick? Yeah. So this happened literally a couple of weeks ago, one of our companies where I'm not, you know, in the day to day. We've got we've got a president who's running it. And that president had a had a sales leader, you know, working, working for them. And it was clear, like, I got a sense. And this is this you kind of get this when you start working above the business.

15:03You get a perspective that people who are in the trenches don't have. And I just got a sense that not all was well, like that, that there was some real grumbling. And of course the sales leader was like, no, no, things are fine. We're just right over here. You know, numbers were looking okay, but I was like, I just got it kind of got a sense. And then there was one little piece, one of, one of our kind of top salespeople was like, Hey, I'm, I'm leaving, you know, I'm quitting. Now I knew that that's a canary in a coal mine. And so I got with the president leader and I said, I want to dive in on this area.

15:34And like, I don't want to, you know, Trump would everything that you're doing, but like, I want to take this on as a special project. and without saying it, essentially go into founder mode. And I want to dig in and be that driver who I have the power to kind of do whatever the heck I want to do, but I want to get to the bottom of it. We had that conversation on a Tuesday, had identified the problem by that afternoon, had begun taking massive action on Wednesday, had exited the sales leader and brought in another sales leader in by Friday. And had we not done that and gone into quote unquote founder mode, we would have probably lost the entire sales team.

16:06And instead, what we did is turned it around culturally and performance wise. there are times when you absolutely need to do that. But if that becomes the rule and not the exception, then either you're micromanaging and jumping in where you shouldn't, or you just don't have a very good company with very good leaders at all. So anyway, I just want to throw that out, but you're right. Like it was in that one narrow area. I didn't decide like, okay, I'm now in charge of everything. I want everybody direct reporting to me and I'm going to fire this whole, you know, level. Like, no, that's, that's not it.

16:36Yeah. And I think part of that is, is to me, and you and I have talked about this a lot with all the companies we consult with and the ones that we're involved in is that really a good CEO is a coach. A good founder is a coach to the people that they are mentoring. And they really should look at it as a mentor relationship. And they should not dictate from on high, but should ask questions to collaborate, to come up with answers. Because if you don't do that, then you're creating dependencies on you. You're stifling innovation and independent thought and initiative. And you're also creating a, you know, I think a culture of fear where there's a fear to make a decision because they're afraid it's going to get countermanded by or criticized by the micromanaging founder.

17:27So that's, you know, that's important. So I kind of was trying to think about a few things to like, what would a hybrid model look like? And so the first would be that you've got the founder led vision, and then you're delegating the execution of the vision. but you are also exactly what you just did, hit and run projects where you see an area, a good coach, when a coach sees an area that could be a challenge, an issue, or an opportunity for improvement or underperformance, then the coach is going to go in and help turn things around, right? And to collaborate with the people that are the stakeholders in those particular things to get them on the right path.

18:13So a good hybrid model has you as the visionary, as the delegator of execution, and then as the mentor monitor, which a good operating system, like our scalable operating system, can help you to see what are the areas that you need. How do we flag that? Now, it might be something like you talked about where a key person that you wouldn't expect to be leaving, who is having success suddenly leaves, that would be, you know, a flag for time to have communication, which would then go to the second thing, which would be that bi-directional communication and skip level meetings and skip level meetings, which I hadn't heard that as a term until I started diving into this.

18:58Had you? Yeah. Yeah. It's something that We've tried, we've implemented and it's, it's, it's kind of that double-edged sword. Like it's really, really good. But if you don't have a strong culture of trust, it, you really have to have that first because we'll explain what a skip level meeting is, I guess. Yeah. So, so basically, I mean, without the name, I do it, but had without the name, but it is, it is a slippery slope because if you do it too much, you can erode the authority of the organizational structure. So what is it? Can you explain? Yeah, generally you want people to communicate up and down the org chart with the people that they report to directly.

19:41And so if you're the CEO, you would generally not go to say a salesperson directly and have a conversation. You would go to maybe operations and maybe operations would go to revenue or chief revenue officer or director of sales. And then that person would go to the salesperson or to the sales team lead that was managing that group of salespeople. And that person would have the conversation and you'd expect the communication to go up and down. The danger is that you play the game of telephone and the messages get mixed along the way, or you never hear about critical things because there is some motivation that or unknown reasons, you know, unknown to you that cause a suppression of bad news.

20:32And you end up not getting the bad news because people are afraid that it will reflect badly on them. So this skip level idea, or at least the name of the skip level is we're going to skip the levels of reporting effectively and have the conversations directly. So I think you're right. it's good and bad. You just have to be careful. So if it's done to gather data, to me, then it's good. If it's done to coach, it's good. If it's done to resolve an issue, once the data is gathered, you've got to bring in the structure or you will destroy the structure of the company. That's kind of my thinking. What is yours?

21:13We've got a couple of rules around skip level. And that is that anybody can communicate with anybody at any time. Like the hierarchy has to do with who can task somebody else out. But if you need to ask somebody a question, you don't have to talk to your manager to talk to their manager to talk to them, right? Anybody can just go if you just generally have a question or looking for some insight. But if you are communicating skip leveling up, you should have gone to your manager first first to try to seek it out in your team first. Like there should be a reason that you're basically skipping that level if you're going up.

21:51And that could be because the manager's out of town, because they're really busy, they've given special permission, like all those things. There should be a reason because one of the first questions somebody's going to ask is, have you talked to your manager about this, right? Now, skip leveling down where the CEO is, you know, or other executives are communicating down, that should be used primarily for data gathering, you know, for insight. And it should always be prefaced with nothing I'm asking you about should in any way be seen as a reprioritization. So I'm asking questions of you because I value your insight and opinion.

22:24You've got the in the trenches knowledge that we don't have. Please don't take this as a mandate to change. And we say it at the beginning and we say it at the end because I can't tell you how many times I've asked somebody questions and they went away from it being like, yeah, I talked to Ryan and, you know, he wants me to do this now. No, I didn't. So we have that rule ahead of time. And if you're going to have a skip level and you're talking about somebody in between, you should have already talked to that person first. That is another, if it's an interpersonal matter, then really my thing is always, unless it's somebody you're, you know, you feel like threatened in a very real way.

23:02But like, if you're just having an interpersonal issue with, you know, with a manager or something like that, you should bring that to their attention before you bring somebody else again. Have you talked to your manager about this yet? I want to bring them in. So we found that those rules help. But yeah, I think I agree with you. Every business should aspire to have open communication, skip level as the default, but it does require a culture of trust. So then a lot of people will ask, and I'll get back to our list of kind of how to do the hybrid model. But a lot of people will ask, how do I know when to have a skip level meeting?

23:36How do I do that? And so some guidelines would be if you've identified a performance gap. So if the results that are being generated are significantly different than the results that would be expected, and that could be in a team member, it could be in a department, that would be a good time to think about gathering insights. Again, not, as Ryan said, not reprioritize, not going in and say, then we need to do this, this, this, and this, but to actually just gather the insights so that you can talk to the people who are in the right chain of command to have the conversations. The other would be just generally to get a feel for the pulse of the company.

24:14Good consultants go in and ask questions. So when you pay a whole bunch of money to hire McKinsey to come in, they're going to start by talking to everybody. And most of the time they're going to have all these insights that you never got because you don't talk to your people. And so one way to save yourself the big McKinsey fees and also stay out of trouble and also kind of keep your finger on the pulse of the culture of the organization is to periodically just talk to people and say, one of the questions that Ryan and I ask when we go in and consult right off the bat is, so what are you doing right now?

24:48What have you tried before that went well that you're not doing anymore? And what are you still doing now that you say, why the heck are we still doing that? Or why do we do that here? And those three questions are very, very powerful for unearthing big needle moving changes. And that's all about just talking to the actual people that do it. Another third time to do that would be whenever you've got a new initiative that you have launched in your organization or a department, or if there's been a major organizational change, like you've acquired a company or are going through a process of integration or your company has been sold or you're rebranding or changing product lines or something like that, that would be another good time to do it.

25:32The fourth time would be if it's a period of very high growth because high growth breaks companies. We know because we've consulted multiple times and one of the first things that we ask after we ask those three questions is if you get two, five, or 10 times the business that you've got right now, can the business support that with the infrastructure that it's got right now? Almost always people say, oh, absolutely. Because the fantasy is more business means less problems and more profit. But sometimes more business means the whole company blows up in a bad way because it just can't handle that.