From founder to CEO: what are the main differences?

It is very common in the business world for the leadership roles of the founder and the CEO to be confused and considered synonymous. Therefore, it is not uncommon to hear people referring to a CEO as if they were the founder of the company, and at the same time, considering the founder as the CEO.

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However, we must clarify that these terms are not synonymous because they serve different functions within an organization. While the role of the CEO is linked to executive management and strategic decision-making that drives the company forward, the founder is the person who creates the company because they had the personal motivation to do so and wanted to turn the idea into reality.

Sometimes, the same founder of a company becomes the CEO, but in other cases, a different person must assume that executive leadership position. The objective of this article is to establish the differences between the founder and the CEO, and whether a successful transition from founder to CEO is possible.

What does it mean to be the founder of a company?

Unlike a CEO, who acts as the head of an existing company, a founder is the person who initiated or launched the business in the first place.

Founders are usually the ones who come up with the idea for a company, set it in motion, and drive the broader vision and goals of the company. They often oversee the big picture, are responsible for establishing the core team, and set up the necessary resources for success.

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While some founders may also become CEOs, the skills required to be a CEO or a founder are often quite different. An example of a revolutionary founder turned CEO is Amazon's Jeff Bezos.

Like most founders, Bezos secured funding, found resources, and aggressively marketed his brand to get to where he is today. Although he recently stepped down as CEO, he remains the founder of Amazon and will continue to operate on that basis within the company, ensuring overall business while the CEO focuses on day-to-day operations.

What is a CEO?

A Chief Executive Officer (CEO) is the highest-ranking executive in an organization. They work with the founder to carry out the company's long-term objectives. To do this, the CEO oversees the strategic management of the company and has supervisory authority over all other employees.

The organization may have a board of directors. If so, the CEO reports to this board. In this sense, the board provides strategic advice to the company, but the day-to-day operations are left in the hands of the CEO. Non-profit organizations use the title of CEO for their highest-ranking official instead of Executive Director.

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What are the differences between founder and CEO?

While all companies have a founder, not all founders become CEOs.

The founder may choose to become the CEO or may delegate that responsibility to someone else. Although many founders are the first CEOs of their organizations, two completely different skill sets are needed to start a company and manage a business.

Founders are visionaries who came up with the original idea, focus more on their product than managing the company, and are future-oriented.

A CEO is an integrator who thrives on transforming chaos into order, turning a rough diamond into a precious gem. To do this, they slowly build the company while paying attention to the details of organizational operations.

Suppose the company has plans for large-scale expansion. In that case, they might want to bring in a more experienced CEO to realize their ambitious dreams.

However, professional CEOs can sometimes have a biased vision and focus on short-term goals, rather than the compelling vision that made the company a resounding success in the first place.

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How to make the transition from founder to CEO?

Finding the answer to this question will depend on the industry sector to which the company belongs, its business model, and its corporate culture because, just as for many companies, the best possible scenario is for the founder to become the CEO of their company, being the one who created it and saw it grow. For others, it is advisable to hire a professional executive from outside the company to provide a more objective vision.

So, what steps should the founder of a company take? Should they continue their entrepreneurial career to also take on the role of CEO and be the one to lead the company to success, in addition to being its creator? Or should they delegate the leadership to someone else?

Conventional wisdom dictates that a startup or growing company hires a professional CEO once the company matures. However, some venture capital firms prefer that the new companies they invest in have a founder as CEO. Because founders channel their entrepreneurial energy to start their company, they embody the soul of a business.

That is just one of the many reasons why some venture capitalists choose to work with organizations that are still led by their founder instead of a professional CEO. It is also the reason why so many companies ask their founders to return when the business faces difficulties.

Another reason for this preference is that founder CEOs consistently outperform professional CEOs in various metrics. These include capital efficiency (amount of funds raised), exit time, exit valuations, and return on investment.

During the early stages of a company, leading it to its full potential can be incredibly exciting for a founder, as they are connected to a small and passionate team with whom they witnessed the birth of the company. Due to the amount of energy an owner invests in building their company, they often develop an emotional attachment to everything it represents.

All of this is very positive and can motivate achieving great results, but over time, this healthy attachment can become unhealthy if a well-planned transition from founder to CEO is not carried out. However, a founder can remain on board if they learn to be as passionate about the essential details of managing a company as they were about getting it off the ground.

This means becoming knowledgeable in essential responsibilities such as organizational processes, leadership, and managing a team of talented professionals as collaborators. Of course, it is not just about founding a company to consider oneself a business person. If you cannot learn to enjoy business management, you will not be able to scale the business properly.

On the other hand, founder CEOs can also be more involved in the company because they have knowledge of what it needs and the decisions that must be made to stay on the path set in its origins. Although, of course, over time, a founder may decide to hire an external CEO to help take the company to another level.

In summary, achieving the transition from founder to CEO is not as simple as it may seem since it requires business training based on leadership, which is the key element for any management seeking growth. Having a business vision is positive and brings great value to any company founder, but without the knowledge and statistical experience of management professionals, it can become an unstable journey.

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For this reason, it is important for the founder to train themselves to become a CEO if they want to gain control of the business processes, or alternatively, delegate to someone who will exclusively take on that executive role.