Published in UT San Diego, April 2, 2013
“You’re fired.” The Donald made that a famous phrase on The Apprentice, but the harder question, particularly for chief executives, is why wait to hear that when you could have just as easily stepped down graciously, privately and with dignity.
A case in point is Andrew Mason, now the former CEO of Groupon, who was recently, and unceremoniously, dumped 15 months after taking the company public at a valuation of $12 billion and an opening share price of $20. The company has only had one profitable quarter since then, and the share price today is about $6.
Why is it so hard to step down? The financial and business world is littered with firings of senior people. And it is often accompanied by a public sense of schadenfreude, which means getting pleasure from the misfortunes of others, including the feeling that “he had it coming.”
This combination of arrogance and blindness is fascinating. When we talk about venture investing, we always focus on the team, and by extension on the founder, and the VC is always thinking, “Can he/she take us all the way to the end?”
There are two schools of thought. One says, I will back the founder, knowing that he is the right guy for the first year or so, with the full intention of replacing him at the appropriate time. The other model is only back a team and CEO who can go the distance.
Personally, I am of the first model. And it comes from knowing my own limitations. I am willing to give a letter of resignation to the board the day I begin, and they can take it out of the drawer whenever they want.
The issue of when or why to step down is deeply informed by self-awareness — and in particular the desire to put the interests of the company and its employees ahead of your own ego. This is a delicate balance because the CEO needs to lead, needs to inspire confidence, needs to make decisions, without always having enough information and finally needs to cross the chasm to the mainland all the while demonstrating a blend of skills from George S. Patton to Quentin Tarantino, with a soupçon of Billy Crystal tossed in as well.
How many of us fit that bill? And that is why it is so hard to take your vision to a complete realization. How many people like Irwin Mark Jacobs, Bill Gates and Larry Ellison are there?
A true leader knows when to step aside. It takes greater courage to do that than to hang on, fight a losing battle and ultimately be publicly humiliated and fired.
In a similar vein, Barbara and I recently hosted a webinar for chemical scientists, and one question haunted us: “When is it time to quit and give up on your startup?”
Wow. We have heard that question many times, and the answer is tied to the stepping down question. For sure there is one place you want to avoid, and that is the “point of no return” where you don’t have enough gas to get across the ocean and you don’t have enough to get back home. In that case, the decision is made for you.
It seems that the time to “give up” is right before you get to that point. It is always nice to have options. Flying home on fumes can be pretty stressful.