Study Defines When A Company's Founder Should Step Aside

Study Defines When A Company's Founder Should Step Aside

You may start your own company but that doesn't mean you get to keep it. All founders-- good or bad--must eventually turn over the reins, but some will need to turn them over sooner than others.

While some management experts believe it is important to replace the founder before a firm gets too big for one person to manage, entrepreneurs should not automatically be forced from their firms early, says George C. Rubenson, associate professor of management at Salisbury State University in Salisbury, MD.

Rubenson has completed several research studies on entrepreneurial succession. His work contradicts some long-held ideas and suggests that many entrepreneurs can be effective for a surprisingly long time. His most recent study, "The Initial Succession: A Contingency Model of Founder Tenure," has been accepted for publication in Entrepreneurship Theory and Practice, a professional journal.

One commonly held belief, Rubenson says, suggests that entrepreneurs often have difficulty developing the skills needed to become "professional managers" typified by a more decentralized leadership style.

Removing the entrepreneur who created the firm is a serious step. Research shows that after the starting difficulties have been overcome, the most likely causes of business failure are the problems encountered in the transition from a one-person, entrepreneurial style of management to a functionally organized, professional management team.

Rubenson notes that initial succession is a complex phenomenon that is contingent upon three critical questions: 1) Are changes occurring in the organization, 2) Is the founder able to adapt to those changes, and 3) Can the founder impede a needed early initial succession?

"This implies that we can expect the initial succession to be appropriate at very different times in different organizations. This is a significant departure from the notion that one can predict the need for the initial succession by determining what stage of development the organization is in," says Rubenson.

A 1992 study co-authored by Rubenson, "Replacing the Founder: Exploding the Myth of the Entrepreneur's Disease," used a sample of 54 Fortune 1000 companies founded between 1945 and 1983 to show that the tenure of founders in family dominated firms is significantly longer than in non-family firms, 27.6 years vs. 18.8 years. This same research also demonstrated that the tenure of founders in relatively slow growing firms is nearly twice as long as the tenure of founders in relatively fast growing firms, 23.8 years vs. 12.6 years.

"This research is noteworthy because it suggests that, if given enough time, some founders can adapt to the needs of organizations that are becoming very large, a sharp departure from existing literature," says Rubenson.

Editors: Feel Free to contact him at 410-543-6187 (office) or 410-548-2518 (home). Please contact Steve Infant of Dick Jones Communications at 814-867-1963 if you would like copies of his papers.