A ‘Sundar moment’: Why you should step down as chief executive of your business
Founders stepping down from the role of chief executive can be all but necessary for a startup’s success, but when’s the right time to do it?
Last week news from the US revealed Facebook employees were far from content with the company’s upper management, calling on the troubled company to have a “Sundar or Dara moment” and kick Zuckerberg from the top job.
A ‘Sundar or Dara moment’ refers to the chief executives of Google and Uber — Sundar Pichai and Dara Khosrowshahi — both brought on to revitalise the respective businesses and change their culture, with Dara taking over directly from Uber’s founder Travis Kalanick.
Both cases have been viewed as a success in startupland, with Google and Uber developing at both a fundamental business level and on the culture front since the new chiefs were employed. And while Kalanick may not have gone entirely willingly, these examples are prime case studies of when founders stepping down as chief executive is all but necessary for a startup’s success.
In Australia, we have it on both sides of the coin. On one hand, companies such as Atlassian and Canva have seen significant success off the back of a founding team of executives, and on the other, companies such as 99Designs and Redbubble have replaced their founders with fresh faces.
“The company and its mission is greater than any individual, including the founder,” said former Redbubble chief executive Martin Hosking at the time of his stepping down in June.
So what are the pros and cons of having a ‘Sundar moment’?
For Barbara Hyman, the chief executive of hiring and recruitment startup PredictiveHire, bringing in an external chief to run the show can be essential to help some businesses scale beyond that $1-million-revenue sweet spot.
In Hyman’s case, she’s the chief who was brought in, taking over from PredictiveHire’s founder Paul Burley earlier this year to help the company kickstart its next phase of growth.
PredictiveHire’s product is an online platform which takes a data-first approach to help businesses hire the right people. Hyman describes it as the “couture house” for hiring, and while it’s largely successful, she says it’s also inherently difficult to scale.
Hyman, who formerly held roles at REA and the Boston Consulting Group, believes Burley’s role as a founder who built the product was “invaluable”, but someone with her experience was needed to see the business succeed.
“The business got to about a million in ARR and the product felt like it had traction, but we needed to do things differently if we were to scale it from $1 million to $3 million,” she tells SmartCompany.
“Paul is a very creative and courageous thinker, which is hugely valuable at the product-building stage when you need to go to market and sell your story,” she says.
“But to inflate that into something with long-term value to customers, we needed a complement of his brilliance on the product side and my own experience in how to build businesses.”
Finding fresh eyes
Dan Flemming is quick to admit he isn’t the person who should be running his business. From a corporate background and in his early-50s, the co-founder started network deployment business Render Networks in 2013 with Joe Forbes, and passed the baton onto an external chief executive this year.
Speaking to SmartCompany, Flemming says he has no doubts he was the right person to found Render Networks and prove its product in the market. The business offers a solution to help engineers better roll out fibre networks, and Flemming says his experience working at the NBN coupled with his co-founder’s business experience was the perfect pairing to launch the business.
But a few years down the track, despite the business turning a healthy profit, Flemming felt like it wasn’t really going anywhere.
“We quickly realised if we wanted to grow the business we’d need to get someone in to run the company and grow it. I knew it was not in my expertise to grow a small business into a large business. It’s not what I’ve done in my career, and it’s not what I’m good at,” he says.
“So we decided it was worth the investment to find the right person and pay them to do it.”
The two kicked off their search last year and went through what they thought was the right process, enlisting a recruiter to find them a prime candidate. However, after hiring the candidate, they found themselves looking again a few months later after things didn’t work out.
On the second attempt, Flemming said they decided to go out to their own contacts to find recommendations, and landed on Sam Pratt, the former general manager at recently collapsed startup Unlockd.
“Would we have done it differently the first time? Probably not, but hindsight is 20-20. We followed a good process and it didn’t work out,” Flemming says.
“This time we’re very pleased with the result, and we’re hoping Sam does work out.”
When should you put in a new chief?
As a founder you can get away with “mad crazy” things you can’t as a chief executive, Hyman says, which is one of the advantages she sees for businesses keeping their founder at the helm. However, she believes eventually founders need to step aside, or at least get someone with an aptitude for growth at the table.
She points to the example of Facebook, saying the business’ chief operations officer Sheryl Sandberg was considered the “only adult in the room” on the day she was appointed to the board.
“If you look at the Facebook scenario, as a founder you need to have the self-awareness to know when you need another set of skills at the table. You can have all the cult-like following you want, but without the experience, it will never work,” she says.
“Steve Jobs always said a great idea means nothing unless you can execute on it.”
For Flemming, he says he’s not sad about giving up control of his company, mainly because he’s still involved in advising and contributing to its growth, but says it’s a tough decision to make from both a personal point of view and a financial one.
“It’s a lot of risk, and it’s very expensive as you have to pay them an appropriate salary. But my co-founder always spoke about founder-constrained growth, and that’s not what we wanted to see at our business,” he says.
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