Founder vs. Manager Mode
Originally posted to: chenmark.com/weekly-thoughts
Well, this week certain circles were up in a tizzy debating the merits of so-called Founder Mode.? For those late to the party,?Paul Graham, co-founder of the influential startup incubator Y Combinator,?wrote an essay?outlining positive attributes of running a company in “Founder Mode” (i.e., hands-on management) in contrast to the negative aspects of a “Manager Mode” approach (i.e., delegation).? From the essay:?
“At a YC event last week Brian Chesky [founder of of Airbnb] gave a talk that everyone who was there will remember. Most founders I talked to afterward said it was the best they’d ever heard… The theme of Brian’s talk was that the conventional wisdom about how to run larger companies is mistaken. As 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.”
Graham concluded that the conventional wisdom that founders must step aside and hire “seasoned” outside expert managers in order to scale a business is misguided.? He didn’t mince words:?
“The way managers are taught to run companies seems to be like modular design in the sense that you treat subtrees of the org chart as black boxes. You tell your direct reports what to do, and it’s up to them to figure out how. But you don’t get involved in the details of what they do. That would be micromanaging them, which is bad. Hire good people and give them room to do their jobs. Sounds great when it’s described that way, doesn’t it? Except in practice, judging from the report of founder after founder, what this often turns out to mean is: hire professional fakers and let them drive the company into the ground.”
Graham outlined Founder Mode activities that apparently are not the norm for professional fakers…ahem, managers.? One such activity is having “skip-level” meetings where CEOs engage with employees who are not their direct reports (quelle horreur!).??The Wall Street Journal summarizes:?
To some, Founder Mode might sound a lot like micromanaging—the sort of thing?cautioned against?by business professors and management consultants. They warn such practices won’t scale as a business grows, can stifle grass-roots innovation and risk staff burnout and turnover.??But the case for Founder Mode is more than that: It challenges conventional wisdom in Silicon Valley that once a kid creates something great, that adults then need to be brought in to make it big. Instead, this principle argues that founders, by their very nature, can do things that professional managers can’t.?
So how does this concept apply to the world of SMB?? The Chenmark business model is to acquire companies from retiring owners/founders, so by definition, we are in the business of transitioning companies from Founder Mode to Manager Mode.? We do, however, think there are some important distinctions.? Sometimes, after decades of running a successful business, a founder can become disengaged.? The herculean task of building something from nothing is tiring; a transition brings new energy and can add?value.? Furthermore,?while some founders possess a special combination of strategic vision and leadership skills which allows them to simultaneously build something incredible while jumping into the weeds,?micromanagement without a corresponding talent for inspiring and motivating can disempower the workforce and stall progress.? The reality is that a good SMB leader constantly switches between Founder Mode and Manager Mode; one moment she must dive into the details on a health care renewal; the next she delegates a contract negotiation to her senior leadership team.??
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From a Chenmark perspective, we honestly couldn’t care less if the leader of a company is a founder, an expert manager with 17 advanced degrees, or a person somewhere in between.? We’re not sure why this is positioned as a binary issue since there are clearly positive and negative examples on both sides of the debate.? Manager Eric Schmidt?did a great job helping Google scale and professionalize.? WeWork’s Founder Andrew Neuman could have used some management advice when signing uneconomic leases.? We figure we should just get the best people on the team who want to build something incredible.? The titles are just a distraction.?
Have a great week,
Your Chenmark Team