NANDINI VAIDYANATHAN examines the causes behind the downfall of founders and their organisations
Sticks and stones may break my bones
But words will never harm me!
I’m sure this refrain is the suprabatham (wake-up prayer) of many an entrepreneur in India today. Yesterday’s unicorns are not even worth their signage today; yesterday’s poster-boys are today’s fallen heroes. Everyone is consoling himself saying this is just a course-correction and it had to happen. That’s just the stuff of denial that the entrepreneurial community is so well known for. So how did the Byjus, Paytms, and countless others (including The Body Shop) happen? Who orchestrated their fall from pedestal? Was it the founders themselves? Was it the customers? Was it the investors? Was it the media trial?
Let’s look at each of the possibilities.
Founders causing their own downfall:
There is so much of a glamour quotient associated with the founder of a company that therein itself the downfall is scripted. How does it all start? Of course it starts with an idea that someone thinks will solve an existing problem or a potential problem, or before anyone even realised there was a problem. The ideator then begins to build an organisation around his idea which includes product, customer, team, branding, operations, and money management. Whilst he is building the organisation, even as he is hiring subject-matter experts in his team, he has the hubris that since the idea was his, he knows best. HE KNOWS ALL BEST. So the discord was built into the warp and woof of the organization even at the Bhoomi pooja (ground breaking ceremony) stage! This hubris manifests in many different forms and at different stages in the life of the organisation. Sometimes, it even becomes strength and helps lay the foundation for strong and lasting values. A good example is Jack Welch of GE who was called ‘Neutron Jack” (he was not a founder but when he was brought in to drive the wave of growth aggressively, like a hungry entrepreneur, it was because of his hubris). And he did. But when hubris wins against logic and general consensus, the organisation begins to stall. It is a tragic fact that everyone puts the organisation under a microscope in the event of failure but when the organisation is delivering the dream topline and bottom line, everyone chooses to not question and to even overlook the red flags. One day there are only red flags everywhere, but the bull has run out of steam. Who should be blamed? The owner of the bull of course! The eerie chorus asking for the head of the founder of the company echoes from every chamber and it is only a matter of time before the hubris-laden gentleman (or lady) is shown the door.
Customers contributing to the exit of founders:
This is the most straight-forward one, as in there are no hidden agendas. Usually it is the loyal customers who are emotionally invested in the product who have the power to dethrone the founder. It’s a simple love story. Customer meets product, product is on its Sunday-best behavior, customer is seduced at every moment of truth and
bingo everybody is a winner. Till the first time customer notices the bitter taste of dissatisfaction; and then it grows and grows. The loyal customer that he is, he complains hoping someone will make the bad taste go away. Nobody does. So customer goes away. But before he goes, he makes sure the world knows that a good organisation was brought to its heel by a bad founder. What’s more, it’s not too late, kick him out and all be well again. The war cry for scalping has begun in right earnest!
Investors clamoring for the exit of the entrepreneur:
This is the nastiest cut of them all. I often tell entrepreneurs that the moment they bring investors on board; one inexorable writing on the wall is, capital trumps labour! In other words, when the investor will bay for your blood is only a matter of opportune time, but bay he certainly will. If you seriously read the recent case studies of ignominious exits of founders, you will see that in every single one of them, the acts of omission from the founder did not happen overnight. There is long history of procrastination, deliberate lapses, oversights, malpractices, ignorance and above all, arrogance, yet the investors either condoned all of it or chose to not be aware. I had the opportunity of meeting several classmates of Jeffrey Skilling, the CEO who sold a non-existent growth story to everyone – customers, regulators, investors, industry professionals. All of them told me that Skilling in college was a man who was brought up by a strict mother of deep faith and he never allowed himself to be swayed by evil. In one of the interviews Skilling himself admitted that the first time he perpetrated fraud, he wished he had got caught, the fact that he went scot-free emboldened him to repeat it again and again. So it begs the question: why didn’t someone catch him the first time around?
Founders’ exits on account of media trial:
This one is simply based on decibel levels. No one wants to know, but the media that shouts the loudest that the nation wants to know will successfully annihilate the founder, his reputation and eventually his company. The shouting is not evidencebased; it seems more like: I made you the poster boy, now I will show the world your feet of clay!
Conclusion:
This brings us to the most important question: is it right to ask founders exit the companies built by them? The answer is simple. At every stage of the organisation there has to be stock-taking of what is happening within the organisation and where it plans to head. It is this that will drive the decision of what kind of a leader is required to drive the organisation towards its vision. If the founder does not fit the bill, he goes, sans merci. This can happen in three ways. One is change of role. If he is the CEO, he is stripped of it and given another role where he can do least harm. The second is if he is found to be dangerous for the vision of the organisation (toxic work culture, dubious record-keeping, sloppy customer engagement), he can he completely removed from the rolls of the organisation. The third is if he is merely incompetent in this role, but generally a good and well-meaning guy, put him in charge of building a start-up in an adjacency. Much ado is made of entrepreneurs and their ideas and their companies. Like I said, it is the glamour quotient associated with entrepreneurship; Stripped off it, it is business as usual. The survivors are those who know not just to innovate within the organisation but who know how to reinvent themselves all the time.
The columnist is a published author, entrepreneur, business consultant and mentor to startups.
Email: nandini@carmaconnect.in
