The Founder’s Dilemma

From PR nightmare Dov Charney to disgraced biker Lance Armstrong to politically controversial Nancy Brinker (founder of the Susan G. Komen foundation), there is ample evidence that sometimes the most dangerous thing to an organization is the person who created it. So what happens when it’s time for a founder to step away? In my work as a consultant and as the head of the New School’s Tenenbaum Leadership Initiative, I’ve deeply explored the so-called founder’s dilemma both in my research and in my personal experiences. This is the toxic dynamic that emerges when founders don’t move on from the organization they created when there is every indication that they should. Absent a clean break, they invariably create an ambiguous path of succession and decision-making that will hobble even the most talented leaders who follow in their wake. I have seen how pernicious this can become. Predictable organizational problems emerge: internal warfare among colleagues, conflicting decision protocols, hamstrung board members (who often are responsible for allowing this dynamic to occur in the first place). In addition, we see cultural degradation, wariness among funders/investors, and false starts on strategic imperatives. It can harm the long-term viability of the organization and damage its reputation and legacy beyond repair.

Part of the difficulty stems from the ways in which organizations and their founders can develop a fused identity, both from their own perspective and that of the public, creating a vicious cycle. The problem emerges when the needs of the organization and the needs of the founder diverge, such as was the case with Nancy Brinker’s wildly unpopular decision to pull support from Planned Parenthood, a move from which the nonprofit’s reputation has never recovered. Founders must wrestle with how to reshape their identity if they depart, but the anxiety or fear that often keeps founders in place, preventing this identity-reshaping process, is rooted in the assumption that no one will be able to see them as separate from the organization they created, and vice versa.

While my research has focused on founders in nonprofit settings, Noam Wasserman of Harvard Business School looks at their for-profit counterparts. Wasserman believes there are two main motivations that drive founders: wealth and control, and you get one choice since it’s exceedingly rare to achieve and maintain both. It helps to know which camp you’re in, since your motives will help you clarify decisions about new hires, boards, and when you will need to exit the start-up. For example, Bill Gates landed in that rarified space where both were simultaneously possible, but Steve Jobs did not (remember: he was fired by his board the first time around).

The nonprofit sector doesn’t provide the option for wealth, so control is all there is to grab on to, and many founders keep a white-knuckle hold on it for as long as they can. Even those founders who are able to accept that it’s time for them to step down may become anxious as the reality of leaving sets in. Their self-worth can become so enmeshed with their role in the organization that they can’t imagine who they’d be without it. They may agree to leave, only to panic and do anything necessary to get their power back—as Dov Charney has done with American Apparel. Most founders have devoted their lives to building up their companies, and the challenge of how to let go of power over what they’ve created is deeply uncomfortable.

Founders preparing to leave their companies face big questions: “What am I going to do with my life now?” “Who am I now that I no longer have the job I’ve defined myself by?”

Another internal dilemma founders often struggle mightily with—often in isolation—is based on their close psychological attachment to the organization. In their minds, they are the organization, and the reverse, in their minds, is also true. They wonder, “Can my organization survive without me? Will it potentially collapse or encounter a rough patch after I leave?” Or, counterintuitively, they may fear the opposite outcome: “Will I be humiliated if the organization flourishes without me?”

In the most severe cases, when founders cannot resolve the intrapsychic dilemma of whether the company is sustainable without them, I’ve seen them find ways to sabotage the success of their replacements, even if it means putting the organization at risk.

It’s not only the founders who face a dilemma when they choose to move on. Boards of the organizations they govern often have their own. They may fall into a loyalty trap, resisting the idea of acting independently, regardless of their responsibilities. Legacy board members close to the founder often struggle with removing them from strategic and operational influence, even when they know it’s right for the company. The dilemma becomes doing right for the organization versus “right” for their friend and colleague, the founder.

Founders essentially “conceive” of a way to change some part of the world—in Brinker and Armstrong’s case, curing cancer, in Charney’s case, creating fairly operated garment factories. They “give birth” to the organization that will bring this closer to reality, then shepherd it through “adolescent growth.” Often, however, they cannot make a clean break even as their “child” matures and truly no longer needs them. It doesn’t take a Freudian to see why so many founders struggle with attachment issues. But just as a parent must let a child grow up, so must founders often step away from the organizations they created in order for them to thrive, no matter how painful their empty nest syndrome is.