Leaders Letter 204 - Founder Mode The Risks Vs Benefits
Be Wary Of Embracing Founder Mode
Dear leaders, every five or so years what a leader looks and acts changes.
We have a set image and then it is rewritten by a few factors - (i) wider cultural shifts, (ii) accepted working styles, (iii) big company performances and (iv) tech changes.
2020 — 2024 was a unique phase for all businesses, we have seen a big swing through, from high EQ to policing work IQ — making mass layoffs, returning to the office mandates and becoming more financially efficient, which has been rewarded and made the latest vision of what a leader is.
Today’s “Accepted” Leadership Style
For around a decade, we have followed the model that has led many to believe that a values-based leader is the leader we must emulate.
The other attributes that we have all aspired to follow are:
Leverage High Work IQ - when the company needs to know they have a smart and switched-on leader
Modern-day EQ - not just showing emotional empathy but knowing when to blend in tough love
Applying PQ - a way to switch up the leadership and management teams, knowing how to rally the troops, address the wrong metrics and update cadence within the business. Adding in the ability to nail inspirational talks when performance drops, adapting to the big shifts in the market and reconnecting cross-functional teams and leaders.
Modern-day leadership does not stop and there is a move to bring back this 247 always-on leadership style from over a decade ago.
Enter In The New Leadership Manual? Founder Mode?
Last week I referred back to founder mode being explained by Airbnb CEO to Professor Scott Galloway. It was light-hearted, guided but direct and shows how it has been thought through.
Until…
Is Founder Mode Broken? Unfortunately, another video was released at a conference interview. It is an uncomfortable watch, a deeper look inside Brian Chesky's inner workings of Airbnb and the way he shaped Airbnb with his core leadership team.
I am going to call it out, he is in a unique position, he is the co-founder, and the CEO and the system appears to be more for his system and operates the way that works for him.
How Founder Mode Was Explained:
“founder mode at its core though is about the single principle to be in the details great leadership is presence not absence so to go back to my lesson it is not good for you to hire great people and trust them to do their job how do you know that they're doing a good job if you're not in the details”
Or here’s a quick video explainer
Brian’s System — Not The Company's System
Something clear, this system is Brian’s system and it’s turned into the company system (includes the one product roadmap, everyone working on the one roadmap at the same time under one leadership), this system will not work in the majority of businesses and even new startups looking to emulate it.
Below I break down the risks and benefits of Brian Chesky’s operating principles and offer ways you can embrace his version of founders mode and, in other words, see them as real risks to your organisation.
» FWIW Founder mode could be adopted and adapted by many different companies and organisational types it doesn’t always need a founder in play to embrace founder top-down decision mode.
Risks ⚠️
Too Many Directs - despite what Jensen Huang (the NVIDIA CEO) suggested & now Brian, it is not normal and sustainable for most CEOs to have too many direct reports and going over 12 is a challenge, this is the same at Airbnb. Yes, as a leader you want to be connected but being across so many people directs or “directs of directs” means you never stop and the buck likely is always escalated up to you.
Orgs Shifts = Staff Turnover - You cannot set up and shift organisations quickly, it can take well over a year to repurpose the current set-up. You will lose good people along the shift
HR Nightmares - All operating system has issues, but this has many big nightmares baked in. Moving toward founder mode becomes an HR nightmare, for team members, for managers, for the HR department and places crosshairs on everyone. A shift to cross-functional teams is a huge change let alone a complete reshaping. Be fully aware that a huge shift like this will be a nightmare from day 0 of the proposed change
Long Reporting Line Pains - Shifting reporting lines is a messy business - moving a department like Design (which is Brian’s fundamental skill and love) out of Product, for the example used, will take 6 months and much alignment and many will look to leave or push for a political reshuffle within their orgs. The ripple effects of reorgs and re-shifting departments into a standalone department with new reporting lines take 2-3 years to fully work out. If you hire a new CPO or CGO the step change can be huge, let alone moving two execs and realigning teams and the exec team.
Thinkers & Deliverers Doing Both - in most businesses there is a requirement to split out those who operate at the 10000ft view and those on the ground to deliver. The trick is to have the right blend and allow everyone to understand the feet they operating in and between. Yes, those with the 10000ft view should help with the doing when required and understanding the heartbeat of their departments, however, there is a need to be more disconnected and be able to step in when needed and know when you should step out and step up again.
(Lack Of) Trust For Managers - In this system, employees know their manager will ultimately have to run everything up the chain and this puts managers in awkward positions. High PQ employees will exploit this time and time again. Often making managers vulnerable. Managers need some space and time in this system it is likely you will be flattening out organisations but also creating unhealthy tension between department leads, their peers and their team members
Direct With My Directs Direct Reports - Knowing your team and their directs is a must, (I highly recommend regular skips and leadership teams interacting with level below management as frequently as possible) knowing what they are working on and how they are operating is often a competitive advantage. By having so many meetings and updates you are requiring a whole new set of updates and interactions and alignment is critical without an elite operational practice these will spiral. On many occasions senior leaders will allow their team heads more space and time than others, there is a chance here that everyone has to be treated the same and removes the personal leadership that is vital to giving everyone a fair chance for success
Big Losses In Bad Times - You may struggle to see that the company loses when the CEO goes on annual leave, becomes ill or something major happens to create distance. The company is well looked after/controlled = great but if controlling without contingencies and clear backup plans the company will struggle greatly.
The CEO loses whenever a link in comms breaks, a negative event happens in the chain of directs or your health declines and without a number 2 and 3 and a way of connecting these across everything the company will struggle to adapt. In smaller businesses or underperforming businesses this is common, however, the same applies and is well worth considering as a leaderThe Best Talent Won’t Want To Join - A major red flag for great talent is the level of management and the chance to get on and do great work, in this setup there will be many great employees who will struggle and feel micro/overmanaged and will leave the business. Your business doesn’t have to be for every employee but employees have to be set up for success and to acquire great talent you have to understand how you are ever going to be successful
Steve Jobs Was A Brilliant Mind But A Complete A-Hole - Not everyone can be Steve Jobs (Job’s is a clear inspiration for Brian - he mentions Jobs and Apple numerous times) and it wouldn’t suit the majority of modern-day work.
Apple and Apple’s setup was mentioned many times - we can all be inspired, but replicating old ways of working at different times will lead to issues
Benefits ✅
Being Closer To Performance - “CEO reviews” can be something you leverage and ensure you are closer to the performance and understand motivations and decisions. Good communication can reduce the amount of reviews that are needed and the large rounds of reviews
Better Org Design - Something Brian touches upon is org design and many managers hiring more and more staff to complete work in their teams versus working cross-functionally or functional org. There is a trend to hire more and analyse what you need and how to get the most from an operating model. Better org design and cross-functional leadership will reduce empire-building and managers looking to solve problems with more people (often bringing more ways of working and problems than actually solving and innovating on said issues) Brian explains divisional vs functional org design & micro-manager vs founder mode in this Decode Podcast far better than in previous podcasts.
Clear Decision Making - In top-down organisations, most employees know big decisions will be top-down and their recommendations will be heard but ultimately the buck stops with the leadership team to say yay or nay.
High-performing companies often have D-teams (decision team) who lead and then drive the teams to execute.Better Comms - Being on exec teams and leadership teams you develop your own language, as does your teams, in this set-up the language should be more aligned and less time spent on translating terms and phrases. Culture is often shaped by how communications flow through businesses and the reduction of miscommunication is vitally important
Increase Quality Density - Fewer steps to management enable the best ideas to be discussed and high-quality staff members will have the chance to bypass the “you’re only as good as your manager game” that plays out in many larger orgs. Increased talent density is proven to work, and improved and deliberate comms also improve businesses, if you can leverage this, definitely do so
Better External Storytelling - Moving to bigger external stories to tell and fewer Product feature launches is how Airbnb sells its release process. This can work with great Product Marketing and good PR, the issue is most brands need more stories to tell their industry to gain cut-through and become an essential tool. If you look to shift to 2 releases per year, be mindful that you will need to package up tremendously well
Macro Vs Micro - Having highly hands-on and functional level Department leads removes the disconnect (but also ramps up micro-management) - this potentially leads to richer campaigns (it does however make every decision a discussion)
Better Interview Processes - I am on the fence if this is a benefit or a big risk but interviewing and senior hires going through and up to Brian and CEOs is a surefire way to vet “great candidates”. The risk is time, being held up by schedules and if you need a specific profile and the CEO disagrees it will instantly prevent that hire. Having over 20 direct reports and hiring in the growth stage is brutal, let alone at the scale and size Airbnb operates.
There are many benefits to operating in founder mode, but there are just as many risks, if not more in today’s work world.
If you are looking to change the way you operate you could adopt a number of these operating principles and have some positive change, but please remember small shifts all compound without great leadership and everyone being brought into the same journey, especially at the executive level and their departmental leads.
Founder mode is not for everyone and it likely wouldn’t be for me to excel in but would it be a year in change for your business?
Have a great week!
Danny Denhard
If you are struggling to make cross-functional work…work here is my breakdown.