Office Hours: When Should a Founder CEO Step Down? The Myth of Balance, and Should I Join the Family Business?

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1:09Welcome to the Prop G Pod's Office Hours. This is the part of the show where we answer questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to officehours at propgmedia.com. Again, that's officehours at propgmedia.com. First question. Hi, Scott. My name is Melissa in Chapel Hill, North Carolina. I'm a four-time CMO in B2B SaaS with 30 years of experience and many startups. I saw your recent post about the probability a startup will be successful by the number of attempts. I've been part of startups that have been very successful and some that have been total flops.

1:49One thing I've noticed that is critical to success is the founder CEO. Many founder CEOs are not always strong business operators. They can be great ideators and innovators, but many don't seem self-aware of their shortcomings as operators. What are your thoughts about when a founder CEO needs to step aside to bring in an experienced team of business operators to drive the company's next level of growth? Thank you for considering my question. Love you and love the show. Well, Melissa from North Carolina, I love you. That's a really nice thing to say. Look, this is a tough one because you're exactly right.

2:32Entrepreneurs have role models, as they should, and they look at Steve Jobs and Bill Gates, who are unicorns. They're a rare species, and that is if you think of a company as an idea is letter A. And then the startup, getting the initial seed funding, hiring and firing a group of people, like hand-to-hand combat for the first 20, 30 people. And that's what you have to do with the first 20 or 30 people and working around the clock and sharing a vision and being just sort of irrationally passionate and a little bit crazy, if you will. That's kind of A to D or E. And then the company leans in or discovers something that is differentiated and is a real product that's generating more gross income or has positive gross margins.

3:11You don't need to be profitable. But when you sell a widget for a buck, it should be at least on a marginal basis, and that is the cost to deliver that incremental consulting engagement or that incremental piece of software or that incremental whatever it is widget that you have positive gross margin. You say, okay, if I hire enough people here, I can start to scale, and I can build an enterprise and maintain some culture and show that this is more than just a practice. So the ones that succeed oftentimes never get to scale, and that is their practice. Typically, a small group of people in the services industry are great at PR or great investment banking or great at a specific product or service.

3:49And the people who started the company are selfish and think that they're the real innovators and they don't want to share in the upside of people to scale the company. And so whenever I meet with people that have a great company, 20, 30, 50 people, and they're wondering why they can't scale, I'm like, it's usually because you are too fucking selfish and don't realize that people want to have a nice life like you and you need to give away large chunks of the company. If you want people to act like owners, which is the key early in a company, you have to make them owners. Anyways, back to your question.

4:16Most CEOs think they're Steve Jobs or Bill Gates and they can go A to Z. And key part of self-actualization and also success is recognizing, as I did fairly early, quite frankly, as a CEO, that about the time we get a CFO, about the time we have someone in HR, It is time for me to step down as CEO and become kind of the thought leader, the person that is responsible for driving new business. I really enjoy that. Play a big role in strategy. But somebody needs to be Mr. or Mrs. inside and basically run the company. And I was always a fan of giving them the CEO title. Why? As a founder, my objective was always to build shareholder value and get economic security for me and my family, which is Latin for get rich.

4:58And titles are inexpensive. So I was always up for giving away the CEO title. I've never been the CEO of a company when I've left. Typically, within three to five years, I find someone that is outstanding that I want to retain, and I give them 5%, 7%, 10%, 15 % of the company and say, congratulations, you're now the CEO. And this is kind of what I'm responsible for, and this is what you're responsible for. A lot of founders never come to that conclusion. Now, the question is, how do you nudge them to that realization? That's a tough one. A board, I don't know how you tell someone to be more self-actualized and that they have limits on their capabilities and we'd all be better off if you brought in someone to run this organization that isn't you.

5:41It's a difficult one. Typically, that's the kind of conversation a board should have with the founder CEO that used to be very common in the 90s, essentially it was thought there are absolutely no founders that are good enough to be CEOs. So what happened was a guy like Steve Jobs was immediately assumed to be crazy, and we need to bring in the gray-haired old guy from Pepsi, John Scully, and let him or her run it. Things have changed so dramatically. The pendulum has swung so far to the other side because of the return of Steve Jobs and people like Mark Benioff and Bill Gates that are able to build a company from A to Z and be outstanding CEOs.

6:16You should assume if you're the CEO, You are not Bill Gates. You should assume you are not Steve Jobs. I apologize. I don't have a direct answer for how to convince possibly your CEO to step down. But the fact you're thinking that way means you're going to be or you're probably successful and can kind of gauge whether or not this company has the right stuff to get to the next level. And again, CEOs out there, search your feelings. Are you really the person to get to the letter M? Cash in, cash in, recognize how awesome you are. And if you have the ability to bring in somebody who will be outstanding and compliment your skills, by all means, hit that bid.

6:52Thanks for the question. Question number two. Hey, Scott, big fan of the show and all of your books. I got married recently to my high school sweetheart and gave all my groomsmen the algebra of happiness. Your words of wisdom in this book and beyond truly have changed my life for the better. My question to you relates to your point regarding the myth of balance, specifically between my professional and personal life and how to achieve success in both domains. For some background, I'm a 25-year-old brand manager at one of the Death Star companies you've alluded to in the past, and life is truly great aboard the Death Star.

7:26I'm treated great by my employer, love working here as they're paying for me to also get my MBA at the Kelly School of Business, and I've found success at the company so far receiving three promotions in under four years. I have, however, begun to notice much of the senior leadership at my company have been divorced in the past or are actively getting divorced. As someone who sacrificed their first marriage while achieving professional success, what advice could you give me on setting boundaries at work or otherwise to avoid the fate that you and many senior leaders at my company have had with their romantic partners?

8:06I've come to the realization that I would prefer to forego professional success if it meant success in my personal relationships. Big fan of the show. Appreciate any advice. Wow, that's a very thoughtful question. And first off, let's bring this back to me, as we'll do several times during this question. I applied to Indiana to the Kelly School and got rejected. I got into Anderson, the business school, UCLA. I got into Haas, the business school, Berkeley. I applied to like nine schools. I got into two. I got rejected by the Kelly School. I saw the movie Breaking Away in the 80s and thought I would like to go to Indiana.

8:44I would like kind of a heartland experience. Anyways, I'm sure it was a great school to go to. And congratulations on your success. This is a tough one. This is a tough one. And you need to get a lot of advice from various viewpoints because there is no right way. I mean, I don't know if my way was the right way. It's just my way. The most important thing in your life, and you've identified this, is deep and meaningful relationships. And across those relationships, the most important one is the one with the person you decide to partner with to have children. That is, I have friends who are so successful on every metric.

9:20And quite frankly, their life is full of anxiety and disappointment because they don't have a partner in their spouse. Everything's an argument. They don't appreciate each other. They're just not partners. And then I have other friends who aren't nearly as successful, but they have a partner, a real partner in their spouse, and everything burns a little bit brighter. Now, having said that, I think the lubricant in America, unfortunately, to maintaining and fostering great relationships is money. I just think it's so important in today's ecosystem. You're going to want to buy a house. You're not going to want to have, you know, the number one source of divorce.

9:55By the way, more women, a lot more women file for divorce than men. And the atmospherics that create tension oftentimes that lead to divorce, people think it's infidelity or a lack of appreciation of each other. know. It's financial strain. Now, you might decide that you're not able, that your partner needs that time and attention and might not be on board with the requisite sacrifice to advance in the type of information economy job you have. Fine. But then collectively, the two of you need to decide that if you're going to get off the fast track, and maybe she's on the fast track too, and you both want off of it, you need to move to a lower cost environment and cut your burn.

10:34There is something about people who decide they are going to work to live, not live to work. And they move to a lower cost neighborhood and they coach Little League and they have good jobs, maybe not on the fast track, and they decide that's the life they want. There is nothing wrong with that. As a matter of fact, I think more younger people are making that decision now than people in my generation. I decided at a very early age that economic security was paramount to me. It caused me a lot of heartache or my mom a lot of heartache because we didn't have a lot of money. And then when my mom got sick and I couldn't take care of her, I decided I just in America to be rich is to be loved and I wanted to be loved.

11:07So I decided I was going to really make the requisite sacrifice and tradeoffs as it relates to divorce. You need to have a conversation with your spouse around what your expectations are. And if the expectation is that both of you are going to be able to spend more time with each other and at home, then you need to have an honest, sober conversation around the tradeoffs there. That's all. It's up to the two of you. So what I decided was that I was going to sacrifice a lot of my 20s and 30s. That included it involved a divorce. But quite frankly, it wasn't. I pin it a lot on my professional focus, and that was somewhat of an issue.

11:42But I think a lot of it was just I was selfish, and I wasn't a man. I was a boy. I mean, the reality is it was probably an opportunistic infection created by my selfishness, and I blame it on work. But there are a lot of very successful people who work their asses off, who have good marriages. And I don't think there's any reason should you come to some sort of agreement with your partner around the tradeoff and whether or not the tradeoff is worth it. But you need to have that honest and open conversation because you can have it all. You just can't have it all at once. And what is the most important thing in terms of a great partnership?

12:13Bringing love, generosity, and kindness to that relationship. And I can hear just by the fact you're thinking about that, that you've got most of that already in the bag. This is a great question. Thanks for the question. We have one quick break before our final question. Stay with us. I'm Christian McCaffrey, pro running back, and Abercrombie is an official fashion partner of the NFL. I'm not kidding when I say NFL by Abercrombie broke the internet last year, and I think this season's lineup is even cooler. And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals.

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13:53Planning Contractors. See Associate for details. Contiguous U.S. only. Welcome back. Question number three. Hey, Prof G. My name is Eli. I'm 19 and a college senior currently living in Manhattan. After growing up in a small community in the rural Midwest, I moved to Manhattan for college seeking to broaden my view of the world and to lead a more exciting life. And I've been blessed with wonderful friends and experiences here. During college, I've been working remotely as a third-generation member of my family's business, overseeing our marketing and graphic design with an active role in our business strategy and product development.

14:26This has been a tremendous responsibility that I have excelled in, and it has provided me with great real-world business and marketing experience. I'm now 11 months away from graduating and facing two different paths forward. First, my father has offered me an opportunity to join the family business full-time and eventually take over ownership of the company. And while I'm not particularly passionate about the business, this would give me instant financial security likely for the rest of my life. However, this would require me to leave New York and move back to the Midwest, and I don't feel much excitement in returning to a place that I feel I've outgrown in a lot of ways.

15:00The other option is to remain in New York and strike out on my own career path. This would allow me to stay near to my church and community of close friends, and I'm also excited about a job that better suits my passions, particularly in the product design and technology space. I have, however, struggled to find many potential opportunities yet, and networking has proven to be a difficult and so far unsuccessful task. There are a lot of trade-offs here, and I feel a pretty strong pull in both directions, but I'd love your input on what questions I need to think about as I consider the next phase of life looks like.

15:31Thanks. Thanks for the question. This is what you define as a good problem. And that is whether to stay in New York and pursue a career for a number of years or to move back and run or be involved in the family business. First off, take stock of your blessings. Secondly, take stock of just how impressive a young man you are. I wasn't thinking this way. When I was 19, my claim to fame, the only thing I had going for me was I had memorized every key line from Planet of the Apes, and I can make bongs out of household items. That was the beginning and end of my skill set when I was your age. That's how thoughtful I was.

16:13So the fact you've been thinking this way means you're an impressive young man. Look, the bottom line is, I think if you have the option to stick in Manhattan and work for a few years, that's what you should do. One, I got to imagine your family would appreciate and understand your desire to stick in Manhattan for a few years, I think you're going to be more successful in your family's company. If you have a few years at another company and you get to establish some chops and success at a company that isn't run by people who are relatives, I think you'll have more credibility with the co-workers at your family business.

16:47If you have a few years under your belt, instead of going straight into the family business, it sounds like you're really enjoying yourself in the city. And also keep in mind, it's a bit of a one-way street. And that is once you move home to the Midwest and join the family business, unless it really blows up, you're there for probably the rest of your career. So I think, brother, I think the optionality here dictates and the credibility you'll get and the life experience that you should, if you can, stick here. And I also, look, not having a lot of success finding a job, you know, that's called the marketplace.

17:23It's never easy, even despite the fact that supposedly, you know, unemployment's at an all-time low. To find a good job in a city as expensive as Manhattan and kind of the creative industry and what you're doing, I don't know if I'd call it the creative industry, but it's hard. It's really hard. And that difficulty and that ability to find that job and put up with the bullshit of bosses who don't have the same last name as you and the lack of financial security and trying to figure out a way to make a living in Manhattan, which is not easy for a young person and be able to afford to pay your ridiculous rent in some shoebox in Brooklyn.

17:57That shit is hard. But here's the thing. You come out of a battle test. Being the Marines is hard. But you come out and you're just a warrior. Thanks for the question. And best of luck to you. And again and again, well done. You are so far ahead of the game at 19 to even be thinking about these issues. That's all for this episode. Again, if you'd like to submit a question, please email a voice recording to officehours at propgmedia.com. Again, that's officehours at propgmedia.com.

18:34This episode was produced by Caroline Shagrin. Jennifer Sanchez is our associate producer, and Drew Burrows is our technical director. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn, and on Monday with our weekly market show.