Art on Special Problems of Founder Bds

The Special Problems Faced by Founder Boards

Richard M. Biery, Olan Hendrix, 2005

Of course, not all boards begin as founder boards nor does every new organization necessarily have a founder; they may have boards that have done the founding. Nevertheless, the founder board, that board that is created by the founder who starts the organization and/or made it what it is, is extremely common and the dynamics described below repeatedly occur.

In creating the initial board the founder develops his or her board usually based on friendship and perceived usefulness of expertise, asking friends, often close friends, as well as acquaintances to serve on the initial board. Loyalty tends to trump expertise.

Practically speaking, the founder views the board primarily as an advisory board that supports his vision and mission and acts in support of founder requests including often financial support in nonprofit organizations. The founder becomes used to using the board mainly for advice, a “sounding board,” not a governing board. In this role the founder comes to see the board as there to help and support him or her, and the board sees itself the same way. The vision and direction come from the founder. This seems right. In this dynamic the board is fairly passive and governs by reacting.

Immense loyalty to the founder is present during this period. The founder is seen as the owner. If the organization becomes successful, the founder has been the key to that success. He or she is seen as a hero. But founders must beware; success subtly and silently breeds arrogance. The founder may even chair the board or the chair and founder are good friends. The founder uses his or her friendly chairperson to keep a little distance from the board, especially with the more troubling issues, depending on the chair to run interference on the board. He takes problems to the chair, not the board, and the board never learns of them or only after the fact and after they have, with the chair’s agreement, been dealt with. When the chair and the CEO have agreed to some course of action, board concern, or more accurately its willingness to express concern, is significantly stifled.

These dynamics eventually lead to essentially an ungoverned, even unaccountable CEO, (in spite of the fact that founders talk about how their board “holds them accountable.” How? The mental model present is one of governance accountability by asking questions, usually in this case, by asking questions of their friend, the founder. This is not accountability in the governance sense.) To avoid tough or embarrassing questions the founder begins to become more manipulative of the board.

This (too much and unaccountable) power can even, in some occasional cases, lead to gradual, silent, unrecognized abuse of power and corruption. The founder begins to abuse his power, even to the point of committing theft from the organization he founded, at first in little ways and then in greater ways, or other misbehaviors such as soliciting sexual favors from employees or verbally abusing employees.

More commonly, the founder, without following this path of outright corruption and dishonesty, yet begins to resent the tough, more probing questions of the newer board members (who may not be friends of the founder but rather acquaintances of other board members), becoming more defensive, not as forthcoming, and to “tailor” the information going to the board. (In fact, a well known Christian writer and teacher on leadership actually teaches CEOs to “lead” their board by this means, “managing” information going to the board. Some euphemistically term this “managing upward.”) The board senses this and pushes even a bit harder. The transparency that once existed (if it did) begins to disappear. They also begin to feel the first niggling hints of distrust.

Further, with time, the board has changed (as noted above) and is relationally becoming more distinct from the CEO.

The founder, not used to being challenged, may first focus on those on the board he sees as “opponents” and troublemakers and attempt to get them off the board or at least marginalized. This may work in the short run but will eventually be perceived for what it is and adds to the growing distrust and view of the CEO as manipulative. A vicious cycle has now begun. The board increasingly probes and tries to “help” the CEO, and the CEO/founder increasingly resents, resists and starts to game his board. A siege mentality develops and employees are recruited into it. The CEO’s perception becomes that of the organization, and a we-against-the board attitude develops. The line between honesty and dishonesty gets thinner, greyer and ever more blurry. Transparency is gone. This cycle often escalates until the board catches the CEO in outright dishonesty. At this point the end is near.

In addition to these dynamics, enters another vital and inevitable phenomenon. All organizations experience or go through the well recognized growth curve phenomenon. Their (i.e., the founder’s in this case) vision and energy result (after the initial startup challenge) in accelerating growth and success. But eventually, perhaps even two, three or more decades later, inevitable restraining counterforces (both internal and external) dampen that growth and turn what was acceleration into deceleration – increasing deceleration. Growth slows and stops, possibly seeming level for a while, but a tipping point is reached and decline begins and will accelerate if the organization does not change. It must adapt and change in a manner that addresses the new forces at work in order to at least create a balance and stabilizing dynamic, but best, develop breakthrough strategies and begin a new growth curve. This usually requires dramatic changes by management. But the founder has had a long history of success doing what he has been doing and now knows best (and what made him successful) and frequently will not recognize the threat or the need to change, or he even may simply be unable to change, hoping that by doing more of the same and harder, he will turn things around. They won’t. Nevertheless, he clings to his feelings of ownership and “this is my organization.” After all, he birthed it and worked very hard to grow it.

The board, however, begins to sense what is happening, which further fuels its need for information and increasing attempts to “help” the CEO. Since this feels like control and meddling, the CEO reacts with growing defensiveness, resentment, and resistance. The board becomes even more controlling, which is further resented and resisted. In the words of Olan Hendrix, “If a founder lives long enough, he runs the risk of becoming his organization's worse enemy.” In some cases CEO/founders are able to keep their board in the dark until the organization is in or on the brink of disaster. These kinds of boards rubber stamp themselves into the tank and never govern, wondering what happened.

Even with the passage of time and change, founder boards generally will retain a culture of immense loyalty and respect for the founder. The founder uses this capital to keep the board at bay. Consequently, these boards are in tension and torn by these emerging dynamics, some members pulling in one direction, feeling the founder must go, some in another, hanging in there and trying to continue to push and “help,” and some suffering such internal conflict they simply opt out and wait. Such a board is caught between loyalty and respect on one hand and now a very defensive and manipulative CEO and a deep sense that things do not look good. It may, in fact, be immobilized by these dynamics, unable to act, frozen like a deer in the headlights. Along with the organization, it will ride the accelerating decline into the ground while some board members and staff bail out. Often a race occurs between the founder’s declining health (or nearing retirement) when the board is able to finally step in and the impending death of the organization, a terrible position to be in for a board.

Worst and most sadly, these founder boards, whether rubber stamping or “helping,” probing and controlling, have never learned to govern and to recognize their true accountability and responsibilities, the one thing that would preserve the founder’s vision after all. By clinging too tightly to his dream the founder has, ironically, destroyed it. And when finally the board truly must step up to governing in now the worst case situation, they are without much governance experience, competence, (and knowledge) and resources.