How to ensure founder-led businesses don’t become toxic

It’s not easy being a business founder in 2018, evidenced by the fact a number of high-profile entrepreneurs have recently fallen on their swords as their personal brands have become too toxic for their companies.

Take John Schnatter, the founder of US pizza chain Papa John’s, who stepped down as chairman in July after being exposed using offensive racist terms on a conference call. He also blamed protests made by black NFL players during the recital of the American national anthem for the brand’s weak sales in 2017.

Schnatter, who still holds a 30% stake in the company, is now attempting to regain control by accusing current CEO Steve Ritchie’s “inner circle” of sexual misconduct. He made the allegations, which the current Papa John’s leadership denies, on his website savepapajohns.com.

Ritchie explained on an investor call in August that analysis clearly showed the need to move away from a “founder-centric marketing plan”. Schnatter’s image has since been removed from all Papa John’s marketing materials and the company has embarked on a social campaign tapping into customer concerns.

The saga at Papa John’s is a stark example of a bitter breakdown between a business and its founder having a damaging effect on the bottom line. The company’s sales fell by 6.1% in North America during the second quarter of 2018, with global revenues down 6.2%.

Tesla founder Elon Musk is similarly proving a volatile influence on his company’s finances. He has been forced to step down as chairman of the electric vehicle firm for three years and pay a $20m (£15m) fine after tweeting in August that he had the “funding secured” to take the publicly traded company into private ownership.

While he will remain as Tesla CEO, Musk has had to agree to comply with company communications procedures when tweeting about the firm.

I’m a founder, I’m not an MD and I had to act as an MD for a really long time, but I’m actually really rubbish at it.

Jim Cregan, Jimmy’s Iced Coffee

This comes after Musk was heavily criticised for calling one of the British divers who helped rescue boys trapped in a flooded cave in Thailand a “pedo” on Twitter.

Uber founder Travis Kalanick, meanwhile, resigned as chief executive in June 2017 amid allegations of creating a company culture rife with gender discrimination and sexual harassment.

So what can founder-led businesses do to ensure they are not tarnished by the bad choices of those in charge, and what can other brands learn from those that have flourished?

Creating a personality

The cases of Uber, Papa John’s and Tesla show that often the personality of the founder becomes an intrinsic part of the brand itself. This is why the product is so important – especially for new businesses. The brand has to be able to stand on its own two feet, according to Jim Creegan, co-founder of Jimmy’s Iced Coffee.

He explains that when he co-founded the business seven years ago with his sister Suze, he was very much front and centre as the face of the brand, but the reaction from consumers was “who is this Jim guy, what is he doing?”, with less focus on the product.

“As we’ve grown, I’ve tried to take a step back and it’s actually become a lot more about the product and the ingredients, as opposed to this bearded guy doing a rap video,” Cregan laughs, referring to ‘Keep your Chin Up’, Jimmy’s Iced Coffee’s signature rap track that to date has clocked up more than one million views on YouTube.

Cregan explains that while he is accessible if the brand needs him, it has been good for the product to take centre-stage. Appointing a managing director in February has been a crucial part of freeing Cregan up to focus on his passions.

“I’m a founder, I’m not an MD and I had to act as an MD for a really long time, but I’m actually really rubbish at it,” Cregan admits.

“Now people aren’t working for the founder, they’re actually working for a really interesting, fun business that’s a little bit more structured and a little bit more serious. I’m allergic to KPIs but our new MD has chucked in KPIs and it actually helps because it gives people structure and something to aim for.”

Stepping back from the MD role allowed Cregan to take some proper time off for the first time in six years and come back into the business with renewed energy to pour into the parts he excels at.

As a founder you probably only need to stay in the business about two or three years and then you need to hand it over to a marketing team.

Carli Wheatley, Protein Haus

His close friend and collaborator Ben Little, co-founder of innovation consultancy Fearlessly Frank, explains that having the founder’s personality in the mix can come with drawbacks, as well as advantages, as entrepreneurs tend to have a different mindset to the corporate world.

“Founders and entrepreneurs are big characters; they just are,” says Little. “When you have big characters involved of course anything can happen; it’s going to be a lot more volatile. The highs and the upsides are bigger, but the downsides are also bigger. So you sometimes have to balance that out.”

As founder of teen-focused natural cosmetics brand 31st State, Stephanie Capuano has had to navigate the shifting priorities of marketing to an end user who is typically not the purchaser.

While marketing for the Gen Z male customer is informed by Capuano’s sons and their friends, the parallel product story focuses on her public persona as a mother.

“I work really hard on keeping our life as private as we can, while at the same time trying to sell this idea to women that your life will be better if your kids are using better products,” explains Capuano.

“It’s very important for the founder’s persona to be part of the marketing for the company, but I think it has to be done so delicately because people can become exhausted by it and it can become toxic.”

When founding diet shake brand Protein Haus, Carli Wheatley deliberately created a brand character that allowed for separation between her own persona and the business. She describes it as almost like drawing a human on a blank sheet of paper and defines the Protein Haus personality as feisty and playful.

“Everyone becomes familiar with who that is and [everyone internally is] answerable to that character as opposed to answerable to me, and that separates me from the boss structure,” Wheatley explains. “We’ve got a personality to embody and that’s what we’re doing.”

Teamwork pays off

The failure of many founders can be in thinking they can do everything on their own, which ultimately holds the business back from scaling.

Capuano sees a fine balance between ego and humility. She argues that while having a bit of an ego can help drive competitiveness and success, the common pitfall for many toxic founders is being unable to put their ego aside.

Self-awareness, she says, is the key skill for any founder, as it helps you appreciate your weaknesses and then bring in new talent to offset them. This year, for example, Capuano appointed an operations director, who manages the back-end of the business from commercial retail relationships to ecommerce.

It’s very important for the founder’s persona to be part of the marketing for the company.

Stephanie Capuano, 31st State

“We are a great balance because I can talk to the media, talk to investors, sit on panels, talk to our end consumers, but I know somebody else is making sure nothing falls through the cracks and that it’s a commercially sound business. Because the reality is, as you grow you can’t do both,” she adds.

This opinion is shared by Constantin Eis, co-founder and global managing director of sleep brand Casper. He believes founders are only part of the equation and that it is more important to hire the right team of people who execute on the vision and can take a company to the next level. Trust is the most important element, regardless of size.

“There’s no difference between us and Facebook or Google,” Eis states. “They are multiple-billion dollar corporations, but everyone needs to trust their employees. There’s no world where a founder team could bring a business to a billion-dollar company without trusting people.”

READ MORE: Direct-to-consumer brand Casper on shaking up the retail experience

Founders should be looking to hire people who are better than them, because they tend to be all-rounders and while they have the vision for the direction of the company, they’re not necessarily the best at execution, says Little.

“A-team players hire A-team players, B-team players hire C-team players, but entrepreneurs are even higher up the list. You literally want to be surrounded by the best possible people,” he states.

Since founding direct-to-consumer contact lenses brand Waldo in 2017, Ashleigh Hinde has evolved the way she builds her team. She looks for people who challenge her and while it is essential that they buy into the vision, Hinde wants to find people who can stretch the business further than anyone would expect.

An approach that has worked well for Waldo is getting everyone together in a room and allowing them to share their ideas. This way they feel invested and like they are executing on their own vision, rather than following someone else’s plan.

“Waldo is not just mine anymore, so many of the ideas and the marketing campaigns, the look and feel of the brand, that’s come through from the ideas of the team,” Hinde explains.

“I think that from the outset you need to be really good at communicating your overarching vision, but then letting people voice their ideas, guiding them through that execution process and ultimately you’ve got to trust them.”

Transition period

As a business grows it might be the case that the founder outgrows the company and wants to pursue different projects.

The desire to leave the business comes down to the founder’s personality and whether they are the right person to take the company through all its different stages, says Hinde. She advises fellow founders to be authentic to where their passions lie and how far they want to go with the business.

“You have to still be passionate about what you’re building and if your heart and mind are starting to lean towards another project I think you’ll be doing the business a favour to say ‘look I still want to be involved, just not in my capacity as CEO’.”

Wheatley believes founders will always want to leave the business, because it is the natural progression for an entrepreneur who outgrows their company. Wheatley herself left her role as a director at Protein Haus five months ago, although she continues to be majority shareholder.

She explains that she wanted to add more growth by playing with the concept, but that once the business became a financial success some investors feared that new ideas could affect the money coming in.

“I realised that rather than moaning or causing issues within the business and making the staff unhappy it was better for me to move on, wish everyone well and take a back seat,” Wheatley explains.

“I think founders get a bad rap. They end up lingering around the business for far too long and everyone dislikes them because they’re trying to hold onto something that it isn’t there. As a founder you probably only need to stay in the business about two or three years and then you need to hand it over to a marketing team.”

She stresses that once a founder leaves, a marketing and PR team need to be brought in to take the vision forward, because operations people will not be able to understand the creative and brand side of the business.

Capuano, however, disagrees. She argues that the world’s most successful brands, from Virgin to Patagonia, are the ones where the founder is still in the business.

“If you’re trying to create a really iconic brand with longevity, that’s truly authentic and leaves its mark on this world, I don’t think the founder can ever leave the brand,” she states. “I think in some capacity they always have to stay involved.”

Jim Cregan ultimately believes that brands have life cycles and it’s better for founders to experience several really interesting projects, because life’s too short. Whether that means staying on in an operational capacity or moving into a different kind of role, the most important thing is to be true to yourself, your skills and do things at your own pace, he says.

“Really listen to yourself because if you fall down, the whole company falls down,” Cregan cautions. “You have to take time to listen to what you’re really thinking and feeling in order to adjust and make genuinely good decisions.”