“Hire great executives and get out of their way”

This is what countless business gurus have been telling young founders and CEOs for decades. But this advice always sat wrong with me. And years later, when I was scaling Classy into the hundreds of people, I followed this advice and it blew up in my face.

Turns out the same thing happened to Brian Chesky as he was scaling airbnb. He followed conventional wisdom, hired a bunch of executives and let them run the company. Slowly but surely things started to deteriorate. The product suffered. The culture got bland. The secret sauce started drying up. In other words, it got way too corporate. And the results were disastrous. So he had to figure out a better way to do things, as did I.

Chesky’s path was to model after the legendary founder & CEO of Apple, Steve Jobs. But for me, I studied two very different operators: Andy Grove, the long-time CEO of Intel (and pretty much a co-founder), and Yvon Chouinard, the contrarian founder of Patagonia. Ironically, both Chesky and I landed on a very similar style of leadership, even though we studied three very different CEOs.

But this was no coincidence. I later learned that most of the founder/CEOs I admired were running their companies this way – from Reed Hastings at Netflix, to Brian Halligan at Hubspot, to Daniel Ek at Spotify. I could never put a name on it, but luckily the founder of Y-Combinator, Paul Graham, did it for all of us. He called it “Founder Mode”.

Founder Mode vs. Manager Mode 

Chesky was so charged about the issue he gave an electric three hour talk to a group of founders at the Y-Combinator headquarters. The next day Paul Graham penned this reflection essay, which describes two ways to run a company: Founder Mode and Manager Mode.

In Manager Mode, the founder hands control to “experienced” executives and then takes a back seat. They don’t get involved in the details of what the executives do. They fully trust and hope for the best. But this never works out. Inevitably, the corporate executives steer the company towards average and it loses its competitive edge. Or as Paul Graham put it, Manager Mode is “hiring professional fakers and letting them drive the company into the ground”.

In Founder Mode however, the founder stays involved at scale, leveraging their unique talents to create even more differentiation in the market over time. It’s a liberating concept and founders rejoiced. But Paul Graham’s essay lacked detail, so people started inventing their own definitions for Founder Mode. Here are just a few of the themes I started to see online (paraphrased of course):

• Executives are bad
• Micromanagement is good
• Act however you want (it worked for Steve Jobs, didn’t it?)

But let’s be clear up front – this is NOT what Chesky was talking about, or how he actually operates airbnb. Chesky still has an executive team, still delegates tasks and still treats people well. Founder Mode is not a blanket excuse to be an asshole, or abandon management practices altogether. As legendary product leader and author, Marty Cagan put it:

“Empowered organizations don’t require less management, they require better management.”

What Founder Mode actually is

Long before Paul Graham dubbed the phrase ‘Founder Mode’, I had been teaching my own community of founders (Highland) how to make the transition from startup founder to scaleup CEO. These are two distinct roles, and many founders get lost in the transition. They become the bottleneck of their own business and the company stagnates at a couple million in revenue. Without support, the founder will either give up, or the Board and investors insist on bringing in a “professional CEO” to take over.

But my belief (and why I started Highland in the first place) is that more founders have it in them to become great CEOs. They just need to be taught how. What I realized after reading Paul Graham’s essay is that I was actually teaching founders how to scale their companies in Founder Mode. In other words, going from builder to scaler, without losing the founding principles that got them there in the first place.

Going from Builder to Scaler

First and foremost, running a company in Founder Mode means becoming a real CEO that can operate at scale. You can’t be all principle and no execution – you must be both. Brian Chesky has developed into a highly effective CEO while also protecting the founding principles that makes airbnb special.

But the harsh reality is that most founders are terrible operators and people managers to start – I sure was. I had strong instincts for product design, and some innate leadership skills, but that’s not the same thing as leading a company with hundreds or thousands of people. You need to intentionally develop these skills, or risk becoming the weak link and succumbing to Manager Mode. 

So what does this transition look like? The way I describe it to Highland members is this: You must go from working on ALL the details ALL the time, to working on the RIGHT details at the RIGHT time. There is a massive difference here. This means spending your time on two new things: guardrails and checkpoints. Guardrails ensure alignment across the team. Checkpoints ensure excellence. You need both to avoid Manager Mode.

Creating Guardrails 

Guardrails are all about alignment. But to create the right type, you need to understand the concept of managerial leverage. Andy Grove, in his classic book “High Output Management” talks about the importance of focusing on high leverage activities (HLA) as the leader. These are projects that create a big impact across many people, yet can be completed in a reasonable amount of time. HLA’s tend to be upstream activities, like defining the company’s vision, working on the product roadmap or creating a quality standard. HLAs provide the operating instructions – or guardrails – for the company to follow. They also de-risk delegation because now each person has a map to help guide them. This is critical as you go from 10 people, to 100 people, to 1,000+.

But many founders struggle to identify the right HLAs to work on. Here’s a frame that really helped me find high leverage projects. For each area of the company I think to myself: what tools, information or instruction does the team need to find success without me there? Then I work on providing those things, and thus, building the guardrails for the future. One common example is going from founder-led sales to a legit sales team. An HLA might be creating the initial sales deck for the team, then incorporating everything you’ve learned into the notes section for guidance. This sets the guardrails and increases the likelihood of success for each new rep that joins the team. That’s high leverage. 

This same line of thinking applies to managing executives as well. No executive should be allowed to take the company in their own direction. They need to operate within the company’s guardrails just like everyone else. This is best communicated through a company-wide operating system and must include the following: mission, values, vision, goals and outcomes of the organization. This information is a prerequisite to their success. When these foundational elements are missing, or ill defined, executives have too much latitude to do whatever they want. This isn’t their fault, it’s your fault as the CEO. You’re giving a non-founding executive permission to define the company’s operating instructions for you. That’s not just poor leadership, it’s a fast track to Manager Mode.

Creating Checkpoints 

With the right guardrails in place, delegation becomes less risky. But you still need to set up the right checkpoints to monitor progress and inspect quality. As Andy Grove said, “delegation without follow-through is abdication”. Manager Mode, by default, means very little follow through. You’re handing both the task and the QA to the executive alone. Self-policing leads to less accountability and deteriorating results over time. Multiply that across the entire executive team and you’re really in trouble.

Checkpoints (and Founder Mode in general) is sometimes confused with micromanaging – but this couldn’t be further from the truth. 80% of a person’s time should be spent operating autonomously within the pre-defined guardrails. Only 20% of their time should be spent in some form of a checkpoint. This could be a 1×1 meeting, a working session, or a more formal business review. The ultimate goal of a checkpoint is to help dial the quality up from good to great. To keep the bar high across the organization. But checkpoints also serve as an early warning system if the person is struggling to produce even average results. In these cases, catching things early provides an opportunity to coach the person up before it gets worse. 

“Skip levels” are also an important form of a checkpoint in Founder Mode. This is a meeting between the CEO and an employee (or employees) lower down on the org chart. The point of a skip level is to gather information about your business directly from the source. For example, you might meet with an individual sales rep (rather than the head of sales) to understand how prospects are reacting to a new pitch. I also like to create skip level “situations” through already-established team meetings. For example, inviting individual contributors to a senior meeting, based on their expertise. This creates an excellent dynamic for problem solving, while also keeping the room honest.

Skip levels also have a secondary benefit – spotting gaps between what your executive is telling you, and what their team really thinks. Executives are fantastic at “managing up” (aka. telling you what you want to hear). But this form of sugar coating is detrimental to your understanding of the business itself. It distorts reality and slows decision making. My Chief Revenue Officer once told me: “You live in a bubble as CEO, and my job is to pop it for you”. This is the type of executive relationship you should seek out – bubble poppers, not bubble creators.

Protecting the Founding Principles

One of the things I loved about studying Yvon Chouinard, the founder of Patagonia, was his uncanny ability to articulate the company’s belief system across each area of its business – Product, Distribution, Management, Corporate Responsibility, etc. He calls them “philosophies” in his amazing book, “Let My People Go Surfing”. Patagonia wouldn’t be the company we know today without Yvon’s ability to uphold these philosophies over time – long after he left his role as CEO.

Fast forward almost twenty years and I’ve now been exposed to hundreds of successful founders. And guess what? Their success, in large part, was predicated on their ability to uphold their own belief system as the company grew. This belief system birthed their “secret sauce”, which became their unfair advantage in the market.

I came to call this the ‘founding principles’. And while each company translates them differently to each area of their business (like Patagonia did), the core characteristics are eerily similar across every great founder:

1) Mission Centric – A deeply intense, almost obsessive commitment to the company’s core purpose (mission & values). This usually comes with a personal experience, making it even more powerful. All decisions are then weighed against the company’s mission and values. If they’re out of alignment, then it’s a “no”.  

2) Beginner’s Mindset – The confidence and the vision to put something brand new into the world, but the humility to adapt, learn and grow based on new learnings. This is closely related to the concept of ‘Zero-to-One’ thinking that entrepreneur and investor, Peter Thiel, describes in his book by the same name.

3) Unquestionable Quality – Holding the company to such a high standard of excellence that you might seem crazy to an outsider. This is especially true with any product or service that touches customers. No detail is too small when it comes to the customer experience.

So, scaling a company in Founder Mode is largely about finding ways to keep the founding principles alive and well at every phase of growth. How do you weave these principles into your guardrails and checkpoints? How do you instill them into the very fabric of the organization as you scale to 100, 1,000 or even 10,000 people?

It starts by understanding how to combat the two biggest threats to the founding principles – bureaucracy and short term syndrome. 

Threat #1 – Bureaucracy

In the early days, protecting the founding principles is easy – you find them in abundance all over the organization. The founders’ proximity to other team members lets the principles spread easily through osmosis. The bar gets set high, really high. Soon you have a small team of highly aligned people, all working on the same problem, in very unique ways. If you’ve ever been on a team like this, you know how magical it feels. Anything is possible.

But as the organization grows, things get more complex. There’s more people, more layers, and more rules. This added bureaucracy makes it harder for the founding principles to stay strong as you grow. You’ll start finding weak spots across the company – kind of like a fading signal. For example, you might find a team that’s making decisions without a focus on your mission. Or a team that’s really letting their quality slip. Or a team that’s become a slave to incrementalism. Your job is to identify and strengthen these weak spots before Manager Mode fully sets in.    

It’s also important to understand how your executives can help or hurt this issue. As your company gets larger (especially 150+), you’ll rely more heavily on your executive team to uphold the founding principles across their own teams. In the best case, the executive is fully aligned and amplifies your core message. But in the worst case, the executive will ignore, or even contradict your message with their team. This behavior blocks the founding signal and creates misaligned subcultures. This is not a good place to be as a company. 

But why would an executive contradict your message in the first place? Sometimes it’s just arrogance. The executive thinks they know better and does things their own way. This needs to be stomped out immediately. But more commonly (and less nefarious), the executive doesn’t understand the importance of the founding principles, and therefore doesn’t enforce them. This is on the CEO. The founding principles should be deeply understood across the executive team, almost to the point of annoyance. Then each executive should be expected to integrate them consistently across their teams. This is where a company-wide operating system, once again, becomes very helpful. 

Threat #2 – Short-term syndrome

Short-term syndrome is the second major threat to the founding principles – an over-obsession with short term financial results at the expense of things like mission alignment, product quality and longer range vision. 

This innovation-killer typically starts with well-intentioned requests from influential people within your company, like senior executives, the Board of Directors, or even investors. They’ll see fires burning – a churned customer, an employee resignation, a missed sales target – and pressure leadership to focus all their energy on these issues in the name of hitting quarterly numbers. Put this on repeat and it’s like an endless game of whack-a-mole. 

Don’t get me wrong, creating discipline around annual and quarterly targets is an important part of going from builder to scaler. But running a company in Founder Mode requires a balance of short term execution and a medium-to-long term vision that’s rooted in the founding principles. The CEO needs to define the 3-year, 5-year, 10-year and 20-year vision for the company. Then connect the long term vision to the annual goals and quarterly outcomes. This gives the team the space and permission to plan for the future, while drawing a straight line between short term execution and long term ambition. Also remember: your vision will evolve over time as the company matures and new information comes in. I refresh mine annually. Maybe 80% is the same, 20% gets refined. This is a good thing and why a beginner’s mindset is so important. If you’re not evolving, you’re already dead. 

Short term syndrome reminds me of a Classy story. We had this private equity investor that put so much pressure on short-term financial results that we started making poor decisions and compromising the founding principles. Not surprisingly, the culture started to tank, and results got worse. It was like we had a sickness we couldn’t get rid of. But Founder Mode CEOs fight back against short-term syndrome, and that’s exactly what we did. We raised enough money to buy this investor out of the company and returned to our founding principles immediately after. Within 24 months we had 5x’d our valuation. This was no coincidence. 

Founder Mode isn’t just for founders

A non-founding CEO can operate in Founder Mode too. If this is you, I’ll assume you have the operations piece down. So the key is to adopt your own form of the founding principles and instill them into the organization. 

One tactic is to weave the founding principles into the core values of the organization itself. This gives every employee their own individual beacon, regardless of the management structure or communication strength. For example, one of Classy’s core values was “Always Be Learning”. This value reinforced a beginner’s mindset across the company and instilled a humility that was essential to our ultimate success. Another core value was “Dream Big, Execute Smart” – which quite literally speaks to the ying yang of Founder Mode: become great operators, but don’t lose the founding principles that got you there in the first place.

Succession Planning 

At some point the founder will hand the reins to a successor. It’s imperative that the incoming CEO doesn’t dismiss the founding principles and inadvertently steer the organization into Manager Mode.

It’s tempting to over-rotate in these situations because the organization likely needs to mature operationally. Just remember to bring both into harmony as you take things to the next level. Your future self will thank you 🙏

---

This is part one of a two article series on Founder Mode. Stay tuned for part 2 where I’ll unpack specific leadership techniques for scaling in Founder Mode.