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.
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