Editor’s note: This article was first published in July 2013. It reports Don Mattrick replacing Mark Pincus as Zynga CEO and shares jumping over 20%; Mattrick left in 2015 and Zynga was acquired by Take-Two Interactive in 2022. Pablo Isla led Inditex then (he left in 2022), and Bezos stepped down as Amazon CEO in 2021.
Mark Pincus, founder of Zynga, has fired himself as CEO to make way for Don Mattrick, the former head of Microsoft’s Xbox division. Normally, when the CEO of a listed company resigns, its shares tend to collapse. In Zynga’s case, since it became known that its own creator would step down, the shares have soared more than 20% (NASDAQ: ZNGA).
Although we’ve been sold the idea that good entrepreneurs make excellent leaders and managers of their business, the reality is quite different. Jeff Bezos (Amazon) and Mark Zuckerberg (Facebook) are held up as proof that a company’s founder can be a good CEO of that company. The truth, though, according to the statistics, is that Bezos and Zuckerberg are two exceptions: what usually happens is that once a company reaches a certain size, the entrepreneur leaves the top job and looks for a right-hand person to run the company.
If Amancio Ortega had stayed at the helm of Inditex, Inditex probably wouldn’t be what it is today. Part of the company’s growth and development is down to Pablo Isla (its commander-in-chief). The fact that Pablo Isla is an excellent chairman and CEO doesn’t change the fact that Amancio Ortega is one of the greatest Spanish businesspeople of all time.
Numerous studies show that, when the time comes, it’s advisable for the founder to step away from the company. In some cases it’s the board itself that fires the founder; in others, investors agree to invest in a business only on condition that the original entrepreneur is not in charge.
Why does this happen?
Noam Wasserman, a professor at Harvard Business School, carried out a study spanning more than a decade on founder succession in companies, titled “Founder-CEO Succession and the Paradox of Entrepreneurial Success”, which explains in detail why a business’s founder can’t be the company’s chief executive.
To begin with, the entrepreneur doesn’t have to know about everything. The entrepreneur may have been a visionary who spotted a need, and even managed to shape it into a business idea. They knew how to hire capable people to join them in the venture, how to manage product development and even the first marketing strategies to get the word out. They knew how to negotiate with investors and earn credibility.
However, once the product is developed, sales grow and the business expands, the CEO’s job broadens and becomes much more complex. Marketing gets more complicated, and you have to deal with different kinds of customers and come up with new strategies.
This is where the first internal clash happens: the skills that were key to success in the early days no longer match the needs of the organization as it is now. If the founder is smart, they’ll look for someone far more competent than themselves to run the company. That doesn’t make you a better or worse businessperson, because you’ve already proven your worth as an entrepreneur and creator. Now different skills are needed.
Some media outlets say Mark Pincus isn’t up to the job and that he gives Zynga a bad name in Silicon Valley, when the truth is that Pincus is a clear example of what would happen to most business owners if they stayed on as CEOs of their own companies.
According to a study that analyzed every internet company since 1996, in 80% of cases the founders did not stay on as CEO.
Passion was the entrepreneur’s engine for getting the business off the ground, but that same passion is what can put it at risk once the business has grown large enough.
Further reading
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