When founder-CEOs might need to pass on the torch (2024)

Succession in the C-suite is a sensitive subject. A founder who came up with the original idea for a business will often, understandably, feel attached to it. But as a company evolves and alongside changing consumer trends and different economic contexts, they may not always be the best person to take itforward.

Whether the torch at the top of a business is passed or taken will depend on the circ*mstances. A new CEO who replaces a popular and successful founder can do so cordially as the company benefits from a fresh perspective or expertise. When a CEO is parachuted in to take over from a founder who was facing problems, the succession process might be more complicated. Sometimes, founder-CEOs can stay on in some capacity “upstairs”, but this option comes with conditions orcaveats.

Outside insight can behelpful

Until last year, Ottolenghi, the delicatessen and restaurant group, was headed by its founder, the chef Yotam Ottolenghi. Ottolenghi opened his first food venue in Notting Hill in 2002, and the business has grown into a high-profile franchise with seven London restaurants, a best-selling cookbook and a retail and cateringarm.

Recognising this diversification, Ottolenghi, who had served as de facto CEO, decided to appoint someone into the role formally. Emilio Foa, who was previously CEO of furniture retailer OKA and former CFO of fashion brand Burberry, became the first CEO of Ottolenghi Group inApril.

The move, Foa claims, allows Ottolenghi to focus on the creative side of the business, while he works on operational logistics, brand growth and marketing strategy. They meet and speak regularly, he explains, but are clear on their remits to ensure as little encroachment as possible. “I’m not much involved in food,” Foa says. “That magic is allYotam.”

Foa thinks that his outside perspective and background in finance are useful for cost-effective decision-making. “It’s about making sure we grow sustainably.”

Disagreements are part of a healthy discourse

Sometimes, according to Gautam Sahgal, who took over as CEO of HR technology platform Perkbox from its founder Saurav Chopra in 2020, conflict in the C-suite can be healthy. Chopra is now executive chairman of Perkbox and although the pair “share core values”, he acknowledges that they have different personalities.

“Saurav is more of a classic entrepreneur than I am but a diversity of ideas is a crucial asset in building and growing a successful business. Disagreements have a role to play. They end up providing important clarity of direction and emphasise the need for clear communication around how we are moving forward and the decisions we’re taking for thecompany.”

Clare Montagu, who took over as CEO in 2021 of funeral company Poppy’s from founder Poppy Mardall, agrees that founders should not look to hire successors necessarily “in their own image”. Montagu meets with Mardell, who now occupies an executive position, several times a week. Crucially, she says, Mardell “doesn’t have the final say on everything. I don’t think I could be an effective CEO if that were thecase.”

Montagu, who joined Poppy’s after working as COO of the Royal Trinity Hospice, service director for the Terrence Higgins Trust and an adviser to Tony Blair’s Labour government, believes that diverse backgrounds and insights are essential for business growth. “A single voice in the shape of a powerful founder can risk blind spots in decision-making, unless that founder seeks input from a range of advisers. It doesn’t necessarily require a CEO on the payroll. Still, we’ve found that the entrepreneurial skills and the hustle that propel a founder in the start-up phase won’t necessarily be sufficient when you scale the organisation and have more peopleinvolved.”

The key aim, suggests Montagu, should be to “bring the right people in who will work alongside the founder and keep the vision and values alive, even if their implementation is different [from what the founder is usedto].”

Knowing when to moveon

Lisa Jacobs is CEO of commercial lending company Funding Circle and was an internal hire. Previously the firm’s managing director and chief strategy officer, she took over the top role from founder Samir Desai in 2021. Desai is now a non-executive director and no longer involved in the day-to-day operations of thecompany.

“If a founder builds a business to last,” she reflects, “then they will have to hand over the reins at some point. Determining the right time to do so is one of the hardest questions that any founder faces. In our case, Samir had done a phenomenal job and put the business in a strongposition.”

Khyati Sundaram is CEO of ethical hiring software company Applied, succeeding its founder Kate Glazebrook in 2020. Glazebrook has since progressed to a non-executive role on the board. “In order to grow, a company must evolve and adapt in line with customer needs, new technologies and markets,” Sundaram says. “There’s no reason why this can’t happen with a founder in situ but if they’re ready to try something new or simply believe they’ve taken the business as far as they can, then it might be time for someone else to step in. I think it’s a mature and selfless thing to step back and make room for a new CEO… it’s a sign that the founder genuinely wants the best for thecompany.”

Ultimately, there is no clear formula to set out when a founder-CEO should step aside or seek external influence. But regularly self-auditing one’s position and performance, Emilio Foa says, is good practice. “The founder is the founder and no one can take their idea away. It is good to know your strengths but also where you could have more help. Good, healthy debate, different opinions… different perspectives from different angles from different backgrounds – it’s all good forbusiness.”