Typically, there are three reasons why founders pass the baton by hiring an external CEO. Business Doctors’ SME consultant, Andy Mee, told us that when a company gains success, its creators tend to step back and enjoy the fruits of hard work.

“Founders may also have lost motivation and as a consequence, the company is underperforming,” Mee explained. “They are thus hiring an external CEO to get business back on track. The third reason is when the founder realises they do not have the right skills to scale the company.”

In all three cases the decision is a difficult one. While it might be the right thing to do, Mee claimed, trusting the business to someone else brings with it many emotions. Our talk brought to light the complexity of letting go of top position, so we canvassed the corporate landscape to find out more about hiring an external CEO.

Alistair Shepherd is an aerospace engineer turned entrepreneur

For Alistair Shepherd, founder and president of people analytics company Saberr, the decision of hiring an external CEO was rooted in the need for a certain skill set – as well as to appease clientele.

“We were a highly technical and young founding team of four,” Shepherd said. “We were looking to add industry knowledge to the commercial side of the business. Our customers include large enterprises, which want to know that while the tech is coming from the young guns, business is being done with someone who has experience. It’s all about trust.”

Talking about the recruitment side of things, Shepherd explained the team hadn’t been in a rush, so they had plenty of time to figure out the process. “But the key for us was making sure we were aligned in terms of the company’s vision – shared enthusiasm for some initial new tech should never be used as a substitute for a singular long term vision,” he said.

While trying to speak to influential people in the HR tech space, they were introduced to Tom Marsden through an investor. They worked together for six months before formalising Marsden’s position as CEO.

Marsden, who is also director of Y Analytics, provided us with a different point of view. Having started his career in a large global bank, he developed an entrepreneurial itch, found a problem – team dynamics – and consequently sought a company to help him create a solution. That’s where Saberr came in. Through what Marsden described as science and art, both founder and CEO to be thought he was a perfect match.

Tom Marsden has worked at McKinsey & Co, Alexander Mann and Credit Agricole Indosuez

“I took the Saberr profile tool before I joined the team,” he said. “This provided evidence for both the team and myself that we were aligned on key dimensions. We also spent a significant amount of time discussing goals and our vision of the future for Saberr.”

He further pinpointed which areas he had been an agent of change in: “The first focus was on raising finance. After joining Saberr we undertook financial rounds with a pre-seed and seed round.

“I also added a different perspective when it comes to the vision of the company. The team was driven by a passion to use data to make better decisions, but I’m more aware from experience what is required to make data insights translate into behaviour change. The third area was in embedding a good business process that worked for us as a team.”

Read on for advice on when you should go about hiring an external CEO.

By Shané Schutte

Much like Marsden, Lance Neuhauser provided intriguing insight into being handed the reigns of a technology company – data science business 4C. Founder Alok Choudary and the current CEO met on a flight they had boarded in separate classes. Neuhauser, in economy, was bumped up to business class and found himself sat next to Choudary in seat 4C.

It seemed like fate, especially given his love of social media – 4C looks for consumer behaviour trends, and it proved to be the deciding factor why Neuhauser chose to work there. “I’ve always believed social media had the potential to change the world. Now as you look at what’s happening with politics in various countries, it’s clear social media is playing a very big role.”

Lance Neuhauser has 17 years of marketing, strategy, account management and sales experience

Neuhauser also explained to Real Business the relationship between founder and CEO in terms of running a company – and whether there was a division of labour.

“We sit on the world’s largest set of anthropological data in social media. Combining that data with TV monitoring gives us a full view of how people consume media and engage with each other around it. These insights are invaluable to marketers and we’ve built a whole set of technology solutions on top of them.

“Along the same lines, when it comes to decision-making we tend to let the data lead. Whether it’s deciding what features to prioritise in the product or what location to procure for an office, we leverage all the available data to tell us what the best option would be. Of course, sometimes I have to go with my gut but I always turn back to the data to see if I got it right.”

Vaughan Rowsell, founder of electronic point of sale app Vend, on the other hand, admitted that whilst he was good at driving the creative direction of the company, there was someone better suited out there to manage the company. This led to the hiring of an external CEO – and to Rowsell reverting to chief product officer.

While still being part of Vend, Vaughan Rowsell co-founded OMGTech

Of this change, he said: “I’ve been the guy who helped develop the product and was the CEO. I call them hats, and I was juggling these two. But the CEO has to consider everyone’s hat fit, even their own. I didn’t have enough time to wear these hats and do the best job in all of them.

“I also realised my true passion was with the product and I wanted to get back to that product visionary space. This meant passing on my CEO hat.”

But how can entrepreneurs know when to take a step back? When does it go from ‘I’m struggling’ to ‘would it be better if someone else was involved’? We put the question of when to go about hiring an external CEO to Rowsell. He explained that part of CEO life was the daily trade-offs. Remember the hat reference? You start on day one with many hats. Then as your business grows, you find others who fit those hats better.

“As soon as you start struggling with a role, that’s when someone else will do it better than you. Because if your company is in growth mode, then there will never be more time or energy for you to put towards it, it will continue to get bigger and more demanding. But that’s progress. There’s no failure in tapping into that bank of talented people and hiring an external CEO.”

By Shané Schutte