Last week, I mentioned a chat I had with my old friend Bethany Mayer, the CEO of Ixia, about a
Scrum development process
that substantially reduces time to market and improves quality. We also
chatted about another subject: How to keep a founding CEO engaged post
IPO once the firm moves beyond either their management skill set or
interest. Ixia has implemented an interesting process here as well, and
the end result has clearly been incredibly successful for the firm.
The problem with a startup founder
I get that companies go public, so the initial investors can
get a big return on their investment immediately, but for the founding
CEO this process sucks. You see when someone creates a company they’re
often successful because they have passion about the problem they are
solving and like to roll up their sleeves and work hard at fixing it.
They like working with the engineers and focusing on the product. They
like the nuances of product development and technical problem solving.
They like going home at night after working hard to get the bugs out of
an offering or addressing new unique technology with a feeling of
accomplishment. And they like the idea of something created that has
their unique personal stamp on it.
While they are creating the product for someone else, like a
craftsman, they take pride in both the product and their personal
influence on it. Pretty much all of this fun stuff goes away for them
once the company goes public.
After an IPO, suddenly you have tons of regulations you have
to comply with, you have a whole bunch of new investors who want even
faster returns on their investment, and you have to keep them happy or
they’ll throw you out. You have to regularly meet with a class of
investors we call activists who doesn’t care about you or your
company, but rather only how creative you can be in popping the stock
price knowing that if you do this they’ll likely either sell the stock
or ask you to do it.
You have less and less time for the product and the opportunity to get sued goes up massively. It was litigation that made
Bill Gates realize he hated being CEO.
It turned him off of the entire industry. So what typically happens is
they step up to being chairman of the board, which is a hands-off job,
and they hire someone else to run the company and this amazing resource
is effectively lost to the company.
Ixia’s better alternative
Ixia founder Errol Ginsberg did become the chairman of the
board, but he also became the chief innovation officer and stepped over
to run Ixia’s lab. In effect, he gave up the parts of running a public
company that founders typically hate and focused on the parts of the job
he loved back when he was creating Ixia. The Lab is typically far
removed from the day-to-day financial operation of the company and the
responsibility for keeping the investors happy rests with Bethany Mayer.
In effect he gets the playground and she gets to pay the bills. While
that doesn’t sound like a ton of fun to me, it is part and parcel to
being CEO, a role that Bethany trained for at HP, but likely would have
never achieved there because it has been a long time since HP hired a
CEO from the inside.
This effectively allowed Ginsberg to have his cake and eat
it too. As chairman he still has oversight over the company he
created, but he can focus on the part of the job he loves. Ixia gets to
retain the talent that built the company and Bethany gets her shot at
CEO.
What this also speaks to is one of the strange practices in
companies where if you get promoted from a job you did very well into
one you either don’t do well or hate. Your next step isn’t a step back
to where you performed very well, but rather it is a step out. Recalling
the book the
Peter Principle,
this would suggest we have put in place an institutionalized process
that assures virtually everyone eventually reaches a job they neither
like nor do well.
At least in this case Ixia took what is arguably their best
human resource and rather than kicking or forcing him out, it found a
job he loves and they would love for him to have. Shame this kind of
thing isn’t more common.
Why you should hold on to founders
Of course the best example of a founder who got booted is
Steve Jobs. When he initially got fired from Apple the firm almost went
under. In hindsight that was a horrid decision, but it was also the one
proscribed by policy.
Given how valuable this class of person is I think it might
be better to look at Ixia’s process (one that it appears Oracle has also
implemented) to suggest there is a better way to treat folks of this
class that better benefits them and the firm. It also suggests that
maybe instead of firing or forcing out someone who rose beyond their
skill level or interest, we find a new opportunity that better matches
both so a wonderful asset isn’t lost.
I’ll close with a story I watched develop back when I worked
at IBM. We had a female sales rep who set sales records and got
promoted to sales manager, a job she was not good at. But apparently
management didn’t want to fire her so it had facilities dump, I kid you
not, the buildings full air conditioning output into her office. While
it was in the 90s outside it had to be in the 40s in her office. They
did this until she quit voluntarily. Decisions like this destroyed
nearly three quarters of our revenue. A far better way to address this
could have and should have been found that would have corrected the
problem and allowed her to go back to being a sales rep and incredibly
productive for the firm.
Something to noodle on this weekend, particularly if you have suddenly found your office suddenly feeling like Alaska.
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