Making the Move: CEO to Chairman
http://osakabentures.com/2011/08/from-ceo-to-executive-chairman-sgn/
Making the Move: CEO to Chairman
Posted by OsakaSaul on August 20, 2011 in English | Leave a comment
Shervin Pishevar, responds, in Quora, in his answer to “Is it true that Shervin Pishevar is out as CEO of SGN.”
Damage Control
I loved Shervin’s answer, voted him up, and then garnered his permission to use the answer as a guest-blog – on recruiting a CEO and moving to the Executive Chairman role, Social Gaming Network. Considering the tone and imaginable intentions of the questioner, while I found his answer informative, it is also far more important as reputation damage control. Shervin explain why “out” is not what happened:
A Moving Story of Executive Recruitment
“I thought I would share my experience recruiting a CEO and moving to the Executive Chairman role for other founders/entrepreneurs to learn from. I spent a year searching for an amazing CEO for SGN to help take it to the next level. I met Randy Breen in March 2009 and spent the rest of the year forging a great relationship with him.
Randy was highly recommended to me by a number of my trusted mentors. Randy had joined EA when it was less than 100 people and pre-IPO and spent 15 years there helping build EA. He then joined Lucas Arts and spent 5 years helping build the gaming business. Prior to EA Randy spent 4 years in the Navy in a nuclear submarine. That background plus racing Ducati’s thoroughly impressed me.
I reached out to mentors and friends like Reid Hoffman, as well as other unnamed mentors in very large companies, to learn how how they handled recruiting a top CEO to their start ups. I learned a lot from those interactions. Some of the takeaways were:
Bring the ideal candidate into the company in an interim title like COO but give them a CEO’s package in terms of equity and pay.
Internally announce that the person you are bringing in is effectively running the company as CEO and that you (the founder) are Executive Chairman.
Give the interim candidate the room to run the company without too much interference so that you can watch their performance.
If things are working well don’t wait longer than 6 months to promote the interim candidate officially to CEO.
I feel very lucky to have had such sage advice about this process. I have heard about a lot of nightmare scenarios where the wrong candidate, the wrong process or a combination of both wrecked or permanently debilitated a company, a culture and/or a team. Mistakes in leadership transitions such as this are very difficult to recover from especially in a fast moving start up and/or space.
I find that, often times, founders are married to the CEO position for the wrong reasons. You should only remain CEO if you truly believe there is no one in the world better than you as CEO to help grow the company. If you find that person and you decide not to recruit them then you have done yourself, your team and your shareholders a huge disservice. I have found that there is a lot of surprising confusion from founders about the difference between a Chairman and Executive Chairman of a company. Chairman is not active and heads the Board of Directors. Executive Chairman is active and works at the company day-to-day (with the focus and role something that can be defined to suit the specific company).
There is a small ratio of founder CEO’s who are in the right evolutionary and developmental time and space in their careers as entrepreneurs and business leaders to successfully transition from very fast moving founders in a small start up to a larger company with hundreds if not thousands of employees. Bill Gates and now Mark Zuckerberg are the exceptional outliers at the far end of the spectrum of this example.
Sergey Brin and Larry Page are examples of exceptional outliers in the other end of the spectrum who successfully recruited an incredible CEO in Eric Schmidt at exactly the right inflection point in Google’s history. They created a unique management and leadership structure perfectly aligned for Google’s culture and future growth. It is easy to forget that when Larry and Sergey recruited Eric Schmidt in the summer of 2001 the Google business was only a $70 million business. The timing of this transition was, in hindsight, immaculate.
There are examples in between this spectrum littered with horror stories where Board members and/or entrepreneurs misjudged the timing, either too early or late, or the candidates fit, which led to unrecoverable dents in the businesses growth.
In my case, after observing Randy’s performance from September 2009 to late December 2009 I grew certain that I had made the right choice. After seeing him hit every single milestone and deadline, especially during the crucial Christmas holiday season for iPhone apps, I decided to pull the trigger and promote him officially to CEO. First, however, I assembled my key leadership team (without Randy) and asked each of them if they would give their vote of confidence in Randy as CEO. To a person, they all voted for him with absolute confidence.
Randy was getting married in Australia the last week of December. I waited for him to come back right at new years and invited him and his wife to a home cooked Persian meal that my wife made. After the dinner, I took Randy for a walk and walked over a few blocks away to Steve Jobs’ house for inspiration. It was there that I told him that I wanted to promote him to CEO of SGN right at the cusp of a new year. I knew the timing was perfect and that there would be no better time to start a new year and a new beginning both professionally and personally for him. Everything was aligned perfectly. To my joy he accepted wholeheartedly and we both hugged. We looked at Steve Jobs’ house and we thanked him for the incredible opportunity he had opened for so many new companies like ours in the mobile space.
That night I went home inspired and wrote this email to my Board and investors:
“Dear Board,
As you know, in September when we hired Randy I followed David Sze’s advice about how Reid Hoffman handled the hiring of Jeff Weiner: give him a CEO’s package, give him an interim period to run the company as if he is a CEO and when you are sure that he is the right guy promote him without hesitation.
I have been blessed with mentors who I can count on and learn from. This was a important process for me and I couldn’t have done it without them. In the preceding months, I reached out to various entrepreneurial friends and mentors like Eric Schmidt, Reid Hoffman, Bobby Yazdani and Jack Dorsey to seek their advice. What was fascinating was that almost all of them agreed on the main meta and micro issues. One of my mentors hit it out of the park with this gem:
“The other piece of advice I would have is to embrace it enthusiastically. People will instinctively smell your hesitation or hacks to the purity of the change. And it only backfires. It hurts your reputation, makes you look weak/insecure, and hampers the chances to have the company succeed, not to mention Randy. Own it, act as it is your initiative [which it is], give Randy all the support and rope to climb or fall, and then monitor closely.”
Last week, I went to dinner with Reid Hoffman and the key takeaways from my discussion with him was that he felt like he could and should have done the switch over to Jeff sooner. The risk in not calibrating the timing is losing someone like Randy’s interest and impacting our 2010 goals. I have been watching Randy closely and giving him room to lead and I am convinced he is ready.
I invited Randy and his wife to dinner at our home tonight. I took Randy on a walk by Steve Jobs house for inspiration and brought this up and he enthusiastically embraced it and hugged me. He has been waiting for this moment his whole career and is ready to hit the ground running.
I would like your support and we can do an official vote on at the Board call on Tuesday. I will separately bring my executive leadership together and will announce it. Randy is very popular in the company and I am sure they will all embrace it. I will become an operational Executive Chairman and Randy would be the CEO reporting to the Board. All reports in the company would be under Randy. We will then make an announcement later in the month publicly.
I want to thank also deeply thank David Sze and Justin Fishner Wolfson for their advice throughout this process. I look forward to growing SGN with you all and Randy to become the number one Mobile Social Gaming company in 2010 and beyond. These are exciting times. Look forward to our call on Tuesday.
Cheers,
Shervin”
