Handing over the reins of your company to a new CEO

After founding Geonetric in 1999, I had held the President & CEO title for seventeen years. It’s been an exhilarating ride with rapid growth from $0 to about $10 million in annual revenue, 100 or so amazing clients, and an astoundingly talented team of 80 people.

That is, until last month, when I handed over the CEO reins to my colleague and friend, Linda Barnes, previously the company’s COO.

As an entrepreneur and founder, being the leader of the company is your identity. You get celebrated as an entrepreneur in society. You get to bask in the glow of newspaper articles when big things happen at your company. You get the opportunity to mentor and guide other people on a daily basis — probably the most rewarding part of any leadership role. And, you live with the mistakes you make, hiring the wrong person, making the wrong call, failing to live up to the standards you set. You lie awake at night with the knowledge that you’ll have to fire people in the morning because your big plan didn’t quite work like you had hoped.

Even with that volatility, once I wore the CEO hat, it was hard to imagine not having it. It’s who I was.

But about three years ago, I had to start coming to terms with the fact that the CEO role had outgrown my passion (and perhaps my skills), and it was time for someone else to take the reins.

How to know it’s time to turn it over to someone else

There were a couple of key signs it was time for me to step aside.

• Losing passion for the role: I’m an entrepreneur. I like to make new things. I found that I was more interested and passionate about creating new things: new products in different industries, new companies and entrepreneurs, new ideas that were well outside the focus of Geonetric. That was hard to discern, because I wasn’t unhappy about my job or my role. I enjoyed working there, I liked the business, I loved the people. But I wasn’t passionate about it anymore. I didn’t stay up late at night thinking about crazy ideas to make Geonetric better like I had when the company was younger.
• Recognizing where your true skills really are: I found that I’m also better working in smaller, tighter, scrappier teams building something new, from the ground up than in optimizing and leading existing teams for long periods of time. I think I was a good CEO at Geonetric. But it needed more than I could give it. The skills needed to run a high performance company certainly has some overlap with entrepreneurial skills, but they’re not identical. The gap started to get larger as the company grew.
• Recognizing that others can be better than you at CEO-ing your own company: There’s a certain arrogance that comes with being the CEO. It may or may not manifest publicly, but even with a flat company hierarchy, you’re still looked to as the person who must have the answer to every question, to be “the decider” when necessary. But realistically, you know deep down that you’re hiring people with skills you don’t have, and skills you do have but those hires are even better than you at them. Somewhere along the way, it dawns on you that there might be other people in the company better suited than you to lead it. The arrogance becomes humility.

How to start the transition

The transition will be different for every founder. In my case, I had a very strong executive team, no external board or investors to deal with, and strong financial performance. In that scenario, we had options. Lots of options.

• Figure out what you want to do: As the CEO, once you decide you want to do something else, you need to figure out what that is. As they say, if you don’t know where you’re going, it doesn’t much matter which road you take. For me, I knew I wanted to work with entrepreneurs, so I, along with a small group of friends, founded Iowa Startup Accelerator, which became the non-profit NewBoCo. I couldn’t have possibly known that this project would become the next passion in my life, but I knew that was the direction I wanted to go.
• Identifying the skills and key roles you provide today, and figure out who’s going to do them after you leave: Knowing where I wanted to go, I worked with my executive leadership team to understand what role I was playing that would need to be filled in some other way. Linda, Chris and Ben took on the majority of those roles. Some of the roles were minimized when we cleverly switched to a flat hierarchy, which distributes some of the leadership tasks throughout the organization.
• Design a transition plan: Once we had the skills identified, we built a transition plan, determining how we’d grow needed skills, practice them and get feedback. Linda, in particular, took on a lot of the responsibility, so a lot of the transition planning was around which roles she’d play and when. She took to those new roles with gusto. We started the transition planning in late 2015.

How to identify your successor

There are generally two options for succession: hire someone from the outside, or promote someone from the inside. My business partner Ben and I talked about both options. In fact, the entire executive team openly talked about the pros and cons. It pretty quickly became clear that, in our case, a CEO from our existing team would be best, for several reasons:

• We have a very unique culture. It would be astoundingly difficult to find someone who already has familiarity with this kind of culture, since it’s exceedingly rare. The executive team decided that we really wanted to keep the core aspects of the current culture in place, improving it over time, but that a wholesale change wasn’t in any sort of near term plan. This would require a CEO comfortable with a massive diffusion of leadership skills throughout the company and an unusual level of autonomy for self-organizing teams. I can count on one hand the number of people I’ve met in my life who could likely thrive in such a role.
• The leadership team at Geonetric has been remarkably stable. Linda has been there a decade, Chris Hartman, a little less than a decade, and Ben had been there since 2001. To overlook that experience seemed unnecessary.

So we started to talk about which of them was interested in the role, and what skills the company needed. I think it’s perhaps fascinating to think that this happened at all. The Geonetric executive team (Ben, Linda, Chris and I) had (and still have) a strong, trusted relationship, where having a conversation about “hey, who should be CEO?” didn’t cause conflict or dissent or drama. We’d worked together long enough, knew each other well enough, and had the kind of strong relationship that we could bring up just about anything. Looking back, I suspect that situation might be unusual for most companies.

So we talked it through. Linda was the obvious choice, given that her role was broadest (as COO, she had worked in every part of the business) and she was the primary architect of our agile cultural transformation. So she had most closely lived and breathed the company values.

In addition, Linda wanted it. I wasn’t interested in foisting the responsibility upon someone. Being CEO is a tremendous responsibility. The CEO role is something you come to terms with. You have to live with the ups and downs in a very personal way. You have to want that kind of personal leadership role.

This decision still took a while, though. I needed a team that could work well together after the new CEO was in place. We talked about the pros and cons for more than a year, and during that time, the team (Ben, Chris and Linda) led as an executive committee. The downside of that was that decisions were slowed down, but the upside was there was a consensus before any major decisions were made. Putting any one of them in as CEO would mean the team might have to adjust to some new ways of working, as well as rearrange roles and responsibilities — the CEO has an important external role to play that’s different from a COO.

In the end, it was largely my decision. I’m the majority shareholder in the company, and I was ultimately choosing my own successor. The trial run over the past year confirmed that the exec team is strong and that Linda is a capable and respected leader, ready for the additional responsibility. It became clear this summer that it was time to work through the details and get to the finish line.

What exactly does it mean to be CEO?

Part of the arrangement we made is that I’ll be the Chairman of the Board. So in a roundabout way, I guess I’m still her boss. But we talked about the implications of the change in title: it was more than just printing her the business cards that I used to have. It meant:

• She’d have the ability to change things, anything, even things that I had created and held dear. Even if it implied that I had once made the wrong decision.
• That the buck would stop with her: she’d take responsibility for the overall performance and direction of the company.
• That she’ll guide and build the company on new trajectories, probably in ways I’d never contemplated.
• I’d be out of every single day-to-day decision. No more need for “what would Eric think” in executive team meetings. No more living in my shadow. She’s free to do what she thinks is best.

With that on the table, and everyone clear on what it meant to switch these titles around, last month we made it official. Linda was the new CEO of Geonetric.

Some things I’d do differently

Looking back now, there are definitely some things I’d have done differently.

• I wish we’d done it sooner. We talked about it for a long time. And I admit some of it was that I was chicken to pull the trigger: what would happen if something went wrong? I had never handed over a company to someone else to run before. I doubted myself, more than usual. Looking back now, we probably could have done this six or twelve months ago. There were several times that I think the company’s progress was impeded because I was only partly there. A committee was, in effect making the day-to-day decisions, and it didn’t feel like any one person truly owned those decisions. In addition, there were some more strategic decisions that were undoubtedly delayed because of my absence. My fear probably cost the company, in real terms, some serious money.
• We should have been more open about it. Despite having a radically transparent culture — we share financial data freely within the company in a way that’s practically open book — we didn’t talk about the transition very clearly or openly outside of the exec team. I wish we had. And while we were fairly consistent in using the same process we use for other promotions (discussions and a vote within her team), we could have done it in a more visible way. Having never done this before, I probably let my fear of letting go interfere with my pride in leading transparently.

Still, even with those foibles, the end decision is the right one. The company and the team have incredible potential.

Last week, I put my Geonetric business cards away for the last time. I admit, I had a moment of sadness when I did. But I couldn’t be more proud of where Geonetric is today, and of Linda. She’ll do an amazing job, and I have every confidence in her and the rest of the team. I’m proud that I played my CEO role for seventeen years, and I’m pleased to hand the reins over to Linda to take Geonetric into the future.