BUSINESS DEVELOPMENT - Founder's Syndrome

Founder’s Syndrome is defined as a situation that occurs when an organization operates according to the personality of a dominate person within the organization, usually the founder. This syndrome normally occurs when an organization begins to achieve revenue growth at a level that requires a change in management style and how things get done. This type of problem can be very difficult to deal with. Here’s why.

It is not uncommon for the founder of a company to surround himself or herself with friends and relatives to make up the management team, and all too often, the Board of Directors is composed of friends and relatives too! So what you end up with is a management team and/or Board of Directors that are simply yes men and yes women who are in place to approve whatever the founder wants approved.

On two occasions, I was brought in as the CEO to turn around two different companies that were suffering from Founder’s Syndrome. They were both acquisitions by private equity firms, and the former founders/CEOs were still with the company to act as consultants and help me ramp up as quickly as possible. Two immediate problems with this situation:

1. When you join a company, especially if the company is in distress, the new CEO must establish leadership and control very quickly. This is very difficult to do when the former founder/CEO remains in the building. All or most of the company’s people worked under the former founder/CEO and in many cases, were hired by this person. Hence, even with a new CEO on board, the loyalty of the people could still remain with the former CEO, at least for a period of time.

2. A company normally falls into a distressed condition due to bad decisions by the CEO and his or her management team. Company people can become confused and even fall into a personal distressed condition because they are being given direction by the new CEO, which often conflicts with the way the former CEO did things. With the former CEO remaining in the building, the dominate person tends to be the former CEO, not the new CEO.

Yes, people will follow your leadership and direction but not completely in this situation. So what can you do? The first thing that you must do is get the former CEO out of the building. This has to be accomplished quickly and with dignity and respect. People will closely watch how you do things, and this can make or break your leadership and control issues.

On the two occasions when I had to get the former CEO out of the building, I announced his departure at a Town Hall Meeting and had him/her speak at the meeting. I would also set up a dinner for this person to be attended by the management team as well as people from the private equity firm.

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John A. Bermingham is currently the Executive Vice President & COO of 1^st Light Energy & Conservation Lighting, Inc. He was previously Co-President and COO of AgraTech, a biotech enterprise. Previous to that, he was President & CEO of Cord Crafts, LLC, a leading manufacturer and marketer of permanent botanicals. More previously, he was President & CEO of Alco Consumer Products, Inc., Lang Holdings, Inc., and President, Chairman, and CEO of Ampad, all of which he turned around and successfully sold. With more than 20 years of turnaround experience, he also held the positions of Chairman, President, and CEO of Centis, Inc., Smith Corona, Corporation, and Rolodex Corporation as well as turning around several business units of AT&T Consumer Products Group and served as the EVP of the Electronics Group, and President of the Magnetic Products Group, Sony Corporation of America. Mr. Bermingham served 3 years in the US Army Signal Corps with responsibility for Top Secret Cryptographic Codes and Top Secret Nuclear Release Codes, earned his BA in Business Administration from Saint Leo University, and graduated from the Harvard University Graduate School of Business Advanced Management Program.