JOHANNESBURG - Jack Ma, co-founder of China's largest e-commerce firm, Alibaba Group, recently announced that he would be stepping down as chief executive in a year’s time.
While successful founders resign for various reasons - from them outgrowing the business to the business outgrowing them - it is important for them to remain open to the possibility of one-day handing over the reigns to new leadership.
For example, while entrepreneurs are characteristically creative, solutions-driven and detail-oriented, once a business grows, managerial and financial skills become more necessary. If these skills do not come naturally to the founder growth may suffer as a result.
However when a founder puts his or her heart and soul into the business, grows it from the ground up, it can be extremely difficult to step away. This poses the question: how does a founding chief executive know when it’s the right time to step aside?
There are two typical instances that could signal that it is time to step aside - if growth has stagnated or the business has scaled too fast.
A new leader will be able to breathe new life, offer fresh ideas and innovation and maybe even have skills that the founder may not have had time to develop.
Another sign is when the job is no longer fulfilling. As entrepreneurs are creators and the role has changed as the business grows - becoming more focused on business operations, financials and managerial tasks.
It may be time for the leader to take on a role that is better-suited to their entrepreneurial characteristics, such as heading up research and development.
It is important to note that a sudden change in leadership can be disruptive and can create uncertainty for other stakeholders. If the leader makes the decision themselves, it gives them time to prepare and groom the successor adequately. Ma’s decision to announce his decision a year in advance is a good example of how to step down without disrupting the business.
However, if the decision is sudden, it is advisable to stay on board in a different role within the business such as a director, chairman or advisor in order to ensure that the integrity stays intact. A study1 of S&P 500 companies revealed that businesses in which the founder is still deeply involved performed 3.1 times better than the rest due to the emotional connection with the company.
The decision to step down is never easy for any founder and demands a sense of bold leadership, free of emotional attachment. It is thus important to choose the right time to make the decision for the future success of the business, allowing adequate time for proper planning and a concise handover process.
Ben Bierman is the managing director at Business Partners Limited.
- BUSINESS REPORT