Avoiding the Founder’s trap
The founder's trap arises where a business founder becomes so deeply involved in every aspect of the business that they have trouble letting go, preventing the business from flourishing and reaching its full potential.
A family business founder is often a focused and hands-on visionary who controls many aspects of the business, often working around the clock. While this intense involvement and risk-taking spirit are critical in the early stages, they can hinder long-term sustainability if not balanced with delegation and strategic planning. Without clear direction or a longer-term growth strategy, founders may become bogged down in detail and lose sight of the bigger picture.
Founders who insist on making decisions alone, excluding family or management input, risk stifling innovation and starving the business of fresh ideas. In worst cases, this reluctance to relinquish control may unintentionally sabotage the very business they built.
To avoid over-reliance on the founder and ensure long-term growth, it may be necessary to slow down in the short term in order to go further and faster in the future.
Professionalising the business structure
One effective way to mitigate founder dependency is to separate ownership and management. That may require the founder to delegate decision making and hire a management team, establishing a transparent business and governance structure. An explicit business framework can help to ensure that everyone is on the same page, avoiding confusion and misunderstandings. Decisions can be made more objectively for the health of the business rather than determined by a founder’s myopic focus.
To effectively separate ownership and leadership, a clear organisational structure is paramount. This involves:
Formalising a Board of Directors or Advisory Board: Accessing independent and experienced views brings objective oversight and strategic guidance. This separates strategic decision-making (governance) from operational execution (management).
Defining Executive roles: Clearly delineate roles such as CEO, COO, CFO, etc., with defined responsibilities and accountability. These roles should be filled by the most capable individuals, irrespective of family ties.
Implementing a Family Council/Assembly: This provides a forum for family members (owners) to discuss shared values, long-term vision, and stewardship of the family's assets, distinct from the day-to-day operations of the business.
Professionalising may come at the cost of lower short-term returns or missed opportunities, but it enables scale, resilience, next generation involvement and innovation. Bringing in specialists across finance, operations, tax, marketing and HR injects expertise and diverse perspectives, encouraging collaboration and long-term value creation.
Moving beyond loyalty in staffing
Growth often demands a shift from loyalty-based staffing to capability-based staffing. While valuable, loyalty alone can hinder progress if skills aren't evolving. This means:
Objective performance reviews: Implement regular, objective performance reviews for all employees, including long-serving ones, tied to current business needs and future growth.
Skills gap analysis and development: Identify where existing staff capabilities fall short of strategic objectives. Invest in training and development, or, if necessary, seek external talent.
Strategic succession planning for key roles: Develop clear criteria for leadership roles based on expertise and proven performance, not just tenure or family connection. This may mean bringing in external, non-family executives to lead key functions.
Managing transitions with respect: When roles need to change or individuals need to transition out due to capability gaps, handle these situations with respect and fairness, acknowledging past contributions while prioritising the business's future. This might involve creating new roles that leverage their experience but aren't in critical growth areas, or offering dignified exit packages.
Succession planning, bridging generations
If a founder is considering transitioning out of a businesses, another level of complexity arises. Whether the founder is transitioning positively or reluctantly, they will need to hand over to others who they may feel are less passionate, committed or capable. Incoming generations will certainly have different capabilities and objectives for the family business, and might not have the founder’s passion and appetite for growth and risk-taking. This is where communication is key. These differences need to be identified and normalised to be able to move forward.
Lineage are aware of the generational perspectives and the impact this has on decision-making within a family business. The founder (generation 1) has been there from the beginning, to serve the business, and now the incoming generation (generation 2 or 3) want to balance this out, spending time with family and require the business to serve the family. This shift can create tension if not openly acknowledged and managed.
Redefining the Founder’s role
We understand that for many founders, their business is far more than just an enterprise; it's a profound passion, often born from a deep-seated need for independence and the desire to create something truly their own. While this personal connection is a powerful early driver, sustainable scaling eventually requires a shift in leadership to support growth beyond the founder’s hands-on role.
This crucial step involves seeing the business as a dynamic system designed to solve problems and create value for customers, thereby generating sustained value for its owners. At some stage, the business will require a different leadership style to formalise operations by integrating people and systems. This often means the founder must pause their visionary, action-oriented leadership until foundational systems are in place and the business is ready for its next phase of growth.
By integrating new leadership into the family business, such as a CEO, COO, board, or external experts, the founder can free up time and remain engaged through new ventures, investments, or advisory roles. While it may be tempting to continue relying on long-time advisors such as accountants or lawyers, their guidance may not reflect the evolving needs of a scaling business. Independent consultants can offer the objectivity and specialised insight required to support continued growth.
Letting go
Letting go is often the hardest part of growing a family business. At Lineage, we understand the tensions that arise when entrepreneurial founders and their children have different visions for the business. Many founders resist hearing what needs to change, especially from their own children, or grandchildren.
With the right external guidance, families can navigate these transitions empathetically and strategically, preserving both legacy and future opportunity. Overcoming the founder’s trap is not just possible, it’s a pathway to long-term success for all generations.
Dominic Pelligana, Partner at Lineage Group
For nearly three decades, Dominic has been providing advice to private and family-owned businesses and family offices across numerous industries. More than an adviser on strategy, governance, succession, tax and accounting, he helps business owners and their families get to where they want to go.
If you are looking for guidance or support, get in touch.