Last week, two notable public company CEOs stepped down from the top jobs at their well-known companies, effectively getting “promoted to Chairman”.
One was Matt Salzberg, Blue Apron’s CEO. The other? Steve Ells, CEO at Chipotle.
Though Salzberg and Ells both worked in the food industry, that’s not the most important thing they had in common. They were both Founders at their respective companies and were, understandably, at the heart of the companies they created.
Though these CEOs stepping down is definitely newsworthy, you may be less aware of the current state of affairs at Blue Apron and Chipotle.
For Blue Apron, CEO Matt Salzberg received the nail in his coffin when Amazon announced their own meal-kits and their Whole Foods acquisition just days after his Initial Public Offering (IPO). Though it has yet to be fully integrated, it’s easy to anticipate how Amazon will use its customer base and well-earned trust to nudge Blue Apron out of the market.
Since its IPO, Blue Apron has also been plagued with problems that include an unfathomable customer acquisition cost and poor customer retention. Perhaps accepting their fate, they recently laid off 5% off their workforce. Expect more. Soon.
Here’s how APRN stock is trading after the news of Salzberg’s departure, compared to its IPO earlier this year (down to $3 per share from $10):
While Salzberg’s descent from CEO happened quickly, it was far slower for Chipotle’s CEO, Steve Ells.
Chipotle has been in turmoil for years: most recently because of its failed queso launch (and subsequent denial internally, evidenced by memos that assured employees that most consumers actually liked the new offering).
As if that weren’t enough, Chipotle has been the subject of multiple outbreaks of food poisoning and missing earnings targets quarter after quarter.
CMG’s share price has been burrito’ed in half from its peak of $496 in May 2017:
“Stepping Down” is the oft-used Wall Street slang that allows an about-to-be-terminated executive to save face. In early-stage companies, this is often referred to as “being promoted to Chairman.”
These two cases beg the question: Why did the CEO’s remain in place at their respective companies for so long? Being a Founder and a CEO requires two largely different sets of competencies. I’ve been both and have recruited hundreds of both, and the two roles often have little in common.
While it’s impossible to know for sure, I’ll bet the issues outlined above could have been avoided if these individuals had stepped down long ago, not overstaying their welcome.
As a recruiter and Founder myself, I also wonder: Why didn’t Chipotle have an internal successor in place? Isn’t that a key responsibility for the CEO? And for the Board of Directors? (I also wonder why Chipotle feels compelled to add so much salt, but that’s for another post…)
Instead, Chipotle named an interim leader while they conduct an expensive and time-consuming search for their next CEO. This could have so easily been avoided. And shareholders will now play the waiting game (or more likely, sell the stock).
Jeff Bezos is a rare exception when it comes to scaling from Founder to CEO. He’s truly a visionary who was able to evolve to become a brilliant operator. He’s surrounded himself with a team of remarkable & seasoned executors from a host of industries (although, too few are women).
As a company, Coinbase represents a different approach to the Founder → CEO dilemma. To address the scaling issue upfront, it recently hired a strong Chief Operating Officer who I predict will succeed the CEO (before it’s too late).
You may recall a similar same situation at Apple. Steve Jobs’ #2 was Tim Cook, who worked with Jobs as his Chief Operating Officer. After Jobs passed, Cook seamlessly transitioned to CEO. It’s hard to think of someone better suited to fill these big shoes.
The Bottom Line.
Being a Great Founder means not just having a great business concept, but being a great recruiter. Surround yourself (your staff, your partner COO, your Board) with people who complement you (not compliment you!) and fill your gaps.
Here are four books to help you do exactly this in 2018 (and avoid being promoted to Chairman):
- The Founder’s Dilemmas: I recently interviewed Noam Wasserman on my podcast if you’d like a preview of the book. He’s been quoted as saying, “People like Bill Gates and Larry Ellison, who are able to lead their companies for quite a while, get all the attention because they are rare, not because they are typical.” Also, “The person who took that company from nothing to $5 million has done a daunting job, but that person, in the view of the VC, is very often not the person that will take them from $5 million to $100 million.”
- Burning Entrepreneur by Brad Feld: World-class VC shares advice from his own experience regarding everything you need to know to build a successful startup.
- The Hard Thing About Hard Things by Ben Horowitz: Business school doesn’t hold all the answers for startups and Horowitz does a great job of answering the tough questions.
- Recruit Rockstars: Yes, it’s shameless self-promotion, but I recently published this book based on my 25 years of experience recruiting executives.
Now for some harsh truths.
The fish stinks from the head down. Not only didn’t these two CEO’s fail to identify their own limitations, their Boards also waited too long—putting Blue Apron and Chipotle in jeopardy. Mansour Salame, CEO of FrontSpin, calls out bad Boards as a common problem when it comes to the founder/CEO debacle.
According to Business Insider, most startups fail to maintain the Founding CEO as the company grows (assuming the company grows beyond $20 million in revenue).
In other words? Most founders get fired.
Here’s what you can do as a Founder to avoid being promoted to Chairman:
Replace yourself early, versus overstaying your welcome and being replaced. You pick the timing, the successor, and all the other little details to ensure that your baby ends up in the best possible hands.
It’s up to you to make sure that your company continues to prosper and that likely means giving up control in the process. Plus, stepping aside on your own timing frees you up to think of your next huge startup idea!
And of course, always recruit Rockstars so that the Founder never has to be promoted to Chairman!