On Founders, Leadership and Tech Companies

The announcement this week regarding Terry Semel’s departure from Yahoo and planned replacement by Jerry Yang as CEO has me thinking about the subject of founders.  It’s a subject that is close to my heart and the leadership components of it are also layered in complexity.  

The events are well documented by now but to quickly recap, Yang, one of the founders of Yahoo, will be taking over the reigns again of the struggling technology company from Semel, a former big wig in Hollywood circles.  The company has performed well, at times, under Semel’s leadership over the past six years but, on the other hand, appears to have lost its way over the 18 months and is not performing anywhere near the level of principal competitor, Google.  Yang will receive day to day support from Sue Decker, who will become the company’s President having served in a variety of positions including CFO over the years.  This is a tall task of sorts for Yang, who has never run a company of the size of Yahoo ’07.  That said, the markets seem to think, thus far, that he has what it takes to get the ship turned around.   

As one review’s the history and current status of technology companies, a through-line emerges regarding the notion of founder’s often times, being the better person to run an organization then the “grey-haired” and more experienced “CEO-type.”  Yahoo is the latest example of a trend which can also include Apple, Google and Microsoft.  Recent performance and associated comments now even lump the Facebook in to the crowd, a much less established company today but one that is expected to make over $100M in revenues this year and is being run by a 22-year old founder. 

Jason Calacanis, a technology entreprenuer, reporter, publisher and essential jack of all trades in the tech biz, stated today in an e-newsletter the following:  “What this move shows is that–like Facebook, Apple and Google–the founders are often times the best folks to run the business.  Wall Street and investors are too caught up in the ‘professional CEO’ who knows how to ‘talk the to Wall Street’ and gets deals done.  The fact is, our business is about one thing:  product.” 

It’s certainly premature to lump Facebook in to the category described herein but the essence of the quote is solid.  One could also argue, as is being stated with Yang at Yahoo, that the founder not only better represents the product but is, often times, the heart and soul of an organization.  To draw that bloodline out of the organization and attempt to substitute it with a different source is an invariable recipe for struggle and, in the case of Apple mid-90s, near death.  Alan Meckler added today the following commentary:  “Early on, Yahoo brought in Tim Koogle to be CEO and then of course Terry Semel.  I always wondered what Jerry saw in these people.  Now its crunch time for Yahoo and the new captain is the founder of the company.  Perhaps Jerry will be able to pull a ‘Steve Jobs ala Apple’ and bring back the glamour and originality Yahoo had from 1994 until 2002 or so.”

A founder, often times, will not have the professional experience of the seasoned executive investors would like to see in place.  But, the founder has passion, juice and an indominatable will to see the company succeed.  In that sense, (as I eluded to in a piece a few weeks ago,) they are better positioned to take a company further than the hired hand.   

This subject matter had me thinking about Good to Great the past couple days, the highly regarded book by Jim Collins.  The Collins book discusses the subject of leadership first and foremost above all other subjects, spending extensive time analyzing what is referred to as ‘Level 5 leadership.’  In many senses, the lessons of the case studies from the book seem paradoxical to the subject matter of a single individual founder being able to successfully build a great company, or restore a struggling company to that state.  The ‘Level 5 Executive” in the book is described as a person of great humility and professional will who builds enduring greatness for their organization via their leadership.  Whereas people like Gates or Jobs will forever be etched in the business annals of the 20th and 21st centures, leaders of the businesses spotlighted in Collins book, which include organizations such as Fannie Mae, Gillette and Kimberly Clark, will not have anywhere near the same legacy.  Those companies, on the other hand, have succeeded far longer than more ‘recent’ successes like Apple and Microsoft of the past 25 years.       

The one consistent theme between my raw analysis of tech company leadership and Collins book Good to Great is the notion of internal versus external leadership.  In his book, Collins describes how ten of the 11 ‘good to great’ CEOs came from inside the company whereas the comparison companies tried outside CEOs six times more often. 

There is no final, Jack Handy-esque deep thought to conclude this rant other than stating that this is clearly a topic worthy of more study.  And, perhaps it can also be noted that, while folks like Gates or Jobs or Brin/Page, have been impactful to their companies and the world over the past few decades, and Yahoo hopes that Yang can return the ‘exclamation point’ to his organization, the reality is that all those companies still face the challenge of standing the test of time.  So, while one’s will can transform an organization in to greatness during their tenure with the company, it takes something even more to help it acheive ‘eternal greatness.’  I’d still venture a guess that, even there in most cases, the founder is better prepared to enable such success when compared to the hired hand.     

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