How to Amplify the Advantages of Working at a Founder-Led Company

Can founders run their companies better than hired managers by challenging management conventions? That perennial question has been buzzing especially loudly around the startup world in recent months. In September, Paul Graham, investor and cofounder of the San Francisco startup investment firm Y Combinator, wrote that a hands-on “founder mode” approach to management is far superior to the more traditional delegation approach, which he termed “manager mode.” The latter option, Graham argued, often leads businesses to “hire professional fakers and let them drive the company into the ground.”

Not surprisingly, Graham’s essay ignited fierce debate online: Those who agreed saw founder mode as crucial to building great companies, while critics warned that it could excuse founder overreach, citing counterexamples of professional managers who have been exemplary leaders.

Founders possess three key advantages over professional managers. 

1. Domain Expertise.  Founders often possess a “unique depth of knowledge” around their companies and markets that transcends traditional credentials. 
2. Earned Legitimacy.  Founders carry unique earned legitimacy due to their extended tenure, early risks, and personal sacrifices; Airbnb’s Chesky has likened it to being “the biological parent” of the company. In a study conducted by researchers at leadership advisory firm ghSmart, 86% of founders “possessed an ability to inspire through passion, charisma, and loyalty,” whereas two-thirds of nonfounder CEOs struggled to do so. Researchers have also determined that founder CEOs are more likely to take a longer-term view of managing their companies than do nonfounder CEOs, which contributes to their authority. 
3. Stakeholder Forgiveness.  As a consequence of their earned legitimacy, founders also have extraordinary leeway with stakeholders when it comes to controversial decisions and missteps, including instances of lying, that are typically not afforded professional managers. 

For professional managers joining founder-led companies, adapting to these unique dynamics might feel like a step back from traditional corporate roles — but it shouldn’t. By joining a startup or early-stage company, managers have already placed a massive bet on the founder’s long-term vision and capabilities.

The most successful executives lean into this bet, using their experiences to amplify founder strengths in a few ways.   First, they act as translators between the founder’s intuitive leaps and the rest of the organization by breaking down unorthodox decisions into actionable steps, testing and validating those intuitions with data and feedback loops, and scaling the founder’s domain knowledge across the organization without requiring their direct involvement. Next, they position themselves as extensions of the founder’s vision and establish complementary credibility in areas where the founder is less involved. Finally, they help the founder pick and fight their battles — advising them on which controversial moves are worth sacrificing some goodwill, managing stakeholder relationships, and creating guardrails and contingency plans around the founder’s risky bets.

To be clear, the unique advantages of founder leadership can be a double-edged sword.  The key is recognizing when founder leadership serves the company’s needs and when different approaches might be required.

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