Tonight I attended the SDForum Startup SIG, featuring Mark Lazar. Mark is a highly experienced chief executive with a proven record in successfully growing and managing companies in the software and telecommunication industries. Mark is usually attracted to opportunities where a company needs help in accelerating growth or turn around. Mark holds both a BA and an MBA from Stanford University.
From Mark’s talk I learned:
- Tips on how to avoid being replaced as CEO of your company
- What to do if you are replaced
- When VC’s make executive changes
The best way to avoid being replaced is by being completely honest with your investors. Do not try to hide anything from your investors. If bad news arises, the first person you should call is your investors and brief them on the incident. Another way to avoid being replaced is by talking to your co-founders, management team, and advisers. Ask for their feedback, they will tell you where you need to improve. You can also avoid being replaced by managing your board productivity. CEO’s often make the mistake of giving decisions back to the board. This is why you are the CEO, you make the decision and back it up with documented proof to substantiate your reasoning. Finally, if your investors hint that someone on your management team is not doing their job, you must fire them or vouch for that persons reliability. If they have to make the same hint more than once, they have already lost faith in your ability to take action.
If you are replaced, the best attitude to have is “how can I help and what can I learn.” Do not fight your investors decision because it is inevitable. Also, do not antagonize the new CEO otherwise you will be fired. In most situations you will still have a seat on the board and play a significant role in every decision. There is so much you can learn from your replacement. You know your strengths, so figure out your weakness and do everything you can to make the transition as smooth as possible for everyone. Remember you are building a company, something bigger than yourself, so don’t let pride and ego get in the way.
VC’s usually make executive changes too early or too late. Often the change is made when a name brand executive is available. A few signs of a struggling company that can indicate a CEO change includes: executives leaving, not growing fast enough, or investors have lost confidence. This is usually when Mark is asked to take over.
Mark divides startup business problems into three categories:
- Market: examples include market not big enough, lack of differentiating features.
- Strategy: e.g. not having a clear value proposition, is the product part of a solution or the whole solution.
- Execution: do you have a rationalized cost structure, team quality and mutual support, customer (dis)satisfaction, and lack of focus.
If it is a market problem, Mark informs the investors that a market does not exist for this product and that there is nothing he can do to solve the problem. If it is a strategy or execution problem and in a market that will materialize, Mark will take the offer.