Do founders make better CEOs?

37-FounderToCEOResearch-Pic#1-02MAY2016For me, the short answer is yes. But, don’t take my word. A growing amount of research supports this.

Here are some of the more relevant pieces.

1 – Founder-CEOs, Investment Decisions, and Stock Market Performance (Rüdiger Fahlenbrach) – published on August 8, 2009

  • “Eleven percent of the largest public U.S. firms are led by founder-CEOs.”
  • “Founder-CEO led firms not only have a higher firm valuation than non-founder-CEO firms, but also a higher stock market performance.

2 – Founding vs. Professional CEO Performance Analysis in the Software as a Service Industry (Yujin Chung, Professor David Wessels, Frank Chen) – published on April 28, 2010

  • “Based on full company tenure analysis, Founding CEO’s outperform Professional CEO’s on capital efficiency, exit time to exit, and exit valuation.”
  • “Based on full company tenure analysis, Founding CEO’s outperform Professional CEO’s on value created and return on investment.”
  • “Founding CEO’s outperform Professional CEO’s taking into account situation bias.”

3 – Founder CEOs and Innovation: Evidence from S&P 500 Firms (Joon Mahn Lee, Jongsoo Kim, Joonhyung Bae ) – published on February 17, 2016

  • “…founder CEOs are more effective and efficient innovators than professional CEOs.”
  • “…the innovations of founder CEO-managed firms create more financial value than the innovations of professional CEO-managed firms.”
  • “…recent studies on founder CEOs find that they enjoy both greater market and accounting performance than professional CEOs in large, established companies.”
  • “…founder CEO managed firms enjoy higher market performance than professional CEO-managed firms.”

4 – Founder-Led Companies Outperform the Rest – Here’s Why (Chris Zook) – published on March 24, 2016

  • “We found that the companies most successful at maintaining profitable growth over the long term were disproportionately companies where the founder was still running the business…”

In my opinion, the reason is fairly simple. If you want to build upon your idea and see it to fruition, there will never be anyone as motivated to do so as you. You bring the fire, energy, zeal, and the reason for your idea to exist. That energy is hard to replace.

You just have to decide to want to be a leader.

You have to decide to be a CEO.

Once you cross that threshold, my money is on you…and your company.

What do you think?



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