There’s Proof That Visionary Founders Make the Worst CEOsNovember 26, 2017
Society tends to lionize individuals who guide their companies from the idea stage to multibillion valuations. But the likes of Jeff Bezos, Bill Gates, Richard Branson, and other famous founder-CEOs is rare, and not only because of the scale of success their companies achieved.
New research from a team of professors at the business schools of Duke, Vanderbilt, and Harvard universities finds that founder-run companies to be less productive and more poorly managed than those whose chief executives didn’t start the firm.
The researchers looked through data collected by the World Management Survey, a detailed review of more than 13,000 mid-to large-sized companies in 32 countries. Firms led by the people who founded them were 9.4% less productive, on average, and on average had consistently lower management scores—which typically rose once the founder-CEO was replaced.
“Founder CEOs were by far the worst type of CEO,” said Victor Bennett, an assistant professor of strategy at Duke’s Fuqua School of Business and a co-author of the paper.
Few founder-CEOs even get to see their companies grow as large as the businesses Bennett’s team studied. When Noam Wasserman, a professor at the USC Marshall School of Business, looked at 212 US startups (paywall) launched in the late 1990s and early 2000s, he found that only 50% of founders still controlled their companies three years after founding. Four years later that number was down to 40%, and only 25% of founders were in charge at the time of the company’s IPO.