Can founders let go?

When you love something, you notice in details. In a relationship, that might be a partner's laugh or particular way of moving. For Howard Schultz, who grew Starbucks from a local Seattle coffee shop into a globe-spanning giant, love was in the details of the coffee-making process — the hiss of the machines and the smell of the beans.

So in 2008, eight years after Schultz resigned as CEO, when the company's new management replaced hand-operated espresso machines with automated ones that took the theatre and romance out of coffee — basically everything the Starbucks Schultz had built was about — he noticed. And he cared.

How much? First, he wrote an email to the then CEO Jim Donald mentioning the “watering down of the Starbucks brand”. When it was leaked and its recommendations ignored, Schultz returned as CEO. In his own words: “When you love something as much as I love Starbucks, there is a huge responsibility that goes with it.”

Exchanging bootstraps for CVs

Love might sound a flaky topic for hard-nosed business leaders, but there are many similar stories of founders returning to their companies for love — those of Michael Dell and, of course, Steve Jobs, for example. And, on a much, much smaller scale, my own story.

I started Coffee Republic with my brother Bobby in 1995 (before Starbucks hit our shores). I had seen the new-style coffee bars in New York and wanted to have skinny lattes and the muffins I had there in London. We had no experience in coffee or retail, but we went for it and learnt along the way. Our guiding light was looking at everything from the customer's point of view.

Which was easy because we were customers ourselves. So instead of paying for market research, for every question we asked: “If I was a customer, would I like this?”

With this attitude we built Coffee Republic to 100 stores and were recognised by the Financial Times as one of the brands of New Britain.

But by 2001 we felt the pressures most founders experience. The company was getting big. We had thousands of employees and a market cap of £30 million. In a way, the baby we had brought into the world had become an adult, and the sense we got from the board and the new, more experienced management (with the proper CVs who we couldn’t attract at the beginning) was that we, as founders, had reached our sell-by date. The entrepreneurial phase was over — the time for dreaming and passion was over. It was time to hand over reins to ‘proper’ management.

And so we did. We found a professional, polished blue-chip CEO with a great CV and plenty of experience in retail, and we handed over the reins. It seemed like the wise thing to do — we had got the message from the experienced managers we’d brought in that we were not equipped to run a big company. It felt like a pat on the head and being told: “Good job so far. Just give it to the big boys to run.” We kept our shares and resigned from most positions.

Packing founders away

Rather naively I kept my desk there, knowing I was so connected with the marketing and brand. Surely I can be of use to the new manager, I thought. I was willing to do the position for free. Why? Because, like Schultz, I loved the brand.

So it was quite a shock when on my first Monday morning after leaving the doorbell rang and I found a courier at my door — with all the contents of my desk packed up. Clearly the new CEO didn't want any trace of me there. I knew that professionals feel threatened by founders, but to this level, I had no idea.

I was forced to watch from the side-lines as the company my brother and I had founded declined. The new CEO, despite his CV, had no idea how to run an agile, fast-growing company. The share price started to drop and, as customers, we watched the brand we so loved be neglected.

A particular moment will stick with us forever. My brother and I were sitting in the window of one of our coffee bars one Sunday morning looking out when the newly appointed CEO stopped to buy papers from a nearby newsagent. To our amazement he didn’t even crank his neck to look at the Coffee Republic next door. It clicked that, of course, for him Coffee Republic was work, and this was his Sunday.

Passion has no sell-by date

This brings me back to the story of the second acts of the founders like Shultz and Jobs. On paper, entrepreneurs may not have the experience or qualifications to run big companies.

But, time and again, perfect CVs fail where passion succeeds.

I remember reading about the rise of eBay and how the CEO, Meg Whitman, took over from the founder, Pierre Omidyar. She said to him, in spirit, “I will run the company if you stay by my side.” I was so moved. From a personal perspective, leaving a company you founded can be a real bereavement.

But staying close to your company after “the professionals” take over isn’t just about the emotions of the person who founded the company. It’s also good business. Whitman didn’t let ego take over. She didn’t drive out the very person that built the business in the first place. She was aware that, as a professional manager excelling at processes of management, she missed the creativity and passion of the founder and wanted to take advantage of the intuitive connection founders so often have with their companies. Omidyar stayed involved, and Whitman grew eBay to a billion-dollar company.

It’s certainly not easy to manage the relationship between founders and professional managers given that they approach business so differently, so why is the involvement of a founder worth the hassle? Saying too many cooks spoil the broth and packing away the founder may seem tidy, but founders have been immersed in every tiny detail of the business and, many times, are themselves the prototypical customer. Even the best-credentialed managers armed with the best spread-sheets can’t duplicate their passion and intimate knowledge of the customer and brand.

In today’s fast-changing business environment, where success often hinges on agility and innovation, that sort of love isn’t flaky. It’s essential.

London Business School - Strategy Review