Balancing the founder-CEO equation

Finally, it is happening. “Let go” is there. “Handover” is beginning. Start of Decentralization. Signals of Empowerment. The long-awaited, the long-recommended transition is on the way. Companies, especially owner-run ones, are finally hiring professional heads to run the companies.

This is a big break away from the owner run companies. The traditional way of the founders being the CEOs and other family members being directors is undergoing a design change. Previously, their children would then automatically take over. This founder/owner model continued till the company’s extinction.

The famous third-generation law of diminishing companies came into operation. A lot was written on it and a lot was debated and discussed. Information these days is not a highway but is in your face and nose. This has increased the boom and bang of discussions. With so much hammering on the founder-driven businesses, some businesses have redesigned their top structures.

As a coach, when I go around in the family-owned concerns, this movement is heartening. I see the realisation seeping in that the founder and family needs to evolve and wean away with time. The penny has dropped. To make more pennies, let professionals take over. That is an accepted mantra. Some companies are shifting to the Board model. Keep the running of the company in the hands of professionals and keep the family members part of the board.

Some of these companies have consulted Board design specialists and have worked on making family councils and constitutions. These are very healthy initiatives. They are good starters. They should be in place. However, they may not be enough. In many companies despite the structural changes, the organisation seems to be facing friction and resistance. The common POC, i.e., points of contention are:

POC No. 1 - The Founder FOMO - Imagine the founder in the early days of the company. The story is normally of starting small and then working your way up each step of growth. The founder is the superman who has put in tons of hours in getting the company in the shape it is. That deep attachment is natural. Also, the habit of the company being the total focus of his life is difficult to give up. When the founders are asked not to attend every meeting and not to be in the office 20 hours, it is tough. They stay away but feel uneasy due to the fear of missing out, i.e., FOMO. Decades of single tracked routines, when broken, almost create a feeling of withdrawal. That is why most founders keep on interfering with the working. They may get insecure by the fact that the company no longer needs them.

POC No. 2 - The detail addiction - Another problem is that when the founder is addicted to knowing every small thing, it becomes difficult to give up the micro-obsession. I was once meeting the owner of a very big company on a very serious topic. His room had glass walls with a view to the garden. Just when we were in the middle of the important segment, he got up and excused himself for a few minutes. I thought there was some emergency. Later I saw through the glass walls that he was out in the garden and instructing the gardener very animatedly. When he came back in the meeting, he very proudly proclaimed how he knew much more than the gardener about each plant in that huge garden. And this was the Chairman of the company.

POC No. 3 - The old timer’s revolt - The founder may go away, but his old clique may be still there. These are the people who feel insecure about the new way of working. They constantly report to the Chairman of what is happening. They are the spies who bring tales of the hard-earned money being wasted by the CEO and this new guy. In a very famous company, the Chairman had hired a professional CEO who transformed the company. They beat multinationals to become the market leader with huge profitability. The CEO rewarded his team with perks that included fancy cars. The oldies quickly took pictures of the fancy cars and fed the Chairman the story of the waste. The Chairman started an inquiry. The super performer CEO was so upset he resigned.

For these founder-CEO transitions to become really effective the following must be done:

Transition No. 1 - The founder role redefinition - The family, especially the younger members of the family, need to spend a great deal of time in discussing the new role for the founder, the directors, and the other family members. This should be done by a neutral but a founder-approved consultant. The role should be more prestigious but not just in paper. There should be training sessions to really impart clarity and build buy in. There should be a solution for the FOMO too. The founder should not feel idle and unwanted. In one successful transition the founder was made the head of the social foundation that made him so engaged that he had not time for the company.

Transition No. 2 - Clear demarcation of authorities - Another key factor in successful transitions is the written, documented, understood and followed demarcation of authority of the founder, CEO, and his team. The authority should be in terms of decision-making, financial authority, etc. Trust can only be mutual if both founder and CEO know their boundaries, respect them and abide by them.

Transition No. 3 - Mutual feedback meet-ups - In a nascent redesigning to facilitate the transition, the testing of how the design needs tweaking should be done on a regular basis. The company should hold regular meetings where both the family board and the leadership team has a structured talk on where all their roles are attracting frictions and what needs to be done to ensure smooth functioning.

Founders are legacy figures. They need to be those larger than company people who are the lighthouse for the company rather than livewires that keep the bulb burning. They have a role to play as an inspirational brand that nourishes the future of the company. The board and CEO need to elevate the role that makes them disengaged in the day-to-day affairs, and engaged in more meaningful contributions. Remember the company must progress. After, all if you do not let go, how will the company move forward?

Copyright Business Recorder, 2026.