Founders and Organizational Development

The Etiology and Theory of Founder's Syndrome

Stephen Block, Katrina Miller-Stevens

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000399462
• Edition: 1
• Topic: Business
• Subtopic: Organisational Behaviour
• Index: Business

Founders and Organizational Development: The Etiology and Theory of Founder's Syndrome is designed to help today's researchers, faculty, students and practitioners become familiar with the etiology and dynamics of Founder's Syndrome as an organizational condition challenging nonprofit/nongovernmental, social enterprise, and for-profit and publicly traded organizations. The book uses applied social and psychological theories and concepts to peel away the layers of an organizational enigma, revealing three causes of Founder's Syndrome and insight into the power and privileges assumed by founders who engage in undesirable and self-destructive behaviors leading to their termination; going from hero status to antihero.

Researchers, instructors, students, and practitioners will find thought-provoking case studies from the real world of organization development practice. Segments from interviews during interventions reveal the type of emotional turmoil experienced in organizations where founder's syndrome is present. Insight is provided into accounts of well-known founders who were terminated or forced to resign. The unique features of this book include: integrating theory into practice, describing a new theory about the psychological reaction of founder's syndrome victims, prevention ideas when designing new organizations, strategies for intervention, using content based on research and organization development consultation experiences, and, integrating feedback from students who have launched organizations.

1 Starting an Organization: The Underlying Basis of Founder’s Syndrome

Chapter Objectives

When you finish studying this chapter, you should be able to:

• Define the term Founder’s Syndrome

• Discuss sociological or psychological concepts that help to explain founder’s syndrome

• Discuss how historical changes in management philosophy have contributed to the construct of founder’s syndrome

• Explain individual motivations to establish a company

• Identify the different stages of founder’s syndrome

• Discuss some of the 16 sociological or psychological concepts that help to explain founder’s syndrome

Introduction

The inherent challenge in communicating about any complex subject is to reach a common understanding of the relevant concepts that are used for the purpose of explanation, teaching, learning, or engaging in a dialogue. We embark on our challenging exploration of the subject of founder’s syndrome by conveying our understanding of the key concepts associated with this topic and ask each reader to examine the subject and concepts through the same lens.

Most descriptions of founder’s syndrome generally start and end with a narrative about the founder’s use of abusive power and control. Indeed, power and control are important to understanding the founder’s syndrome. However, the exercise of power and control can be personality driven or understood as a relational construct triggering a cause and effect reaction. To fully appreciate how power and control work with founder’s syndrome, we need to first comprehend the role, character, and intrinsic motivators of the founder or the organizational stakeholders. As we will explore in Chapter 3, founder’s syndrome also requires an encounter by stakeholders that the founder interprets as threatening his or her sense of ownership.

There might be other descriptors used about the founder such as being heavy-handed, a micro-manager, and a self-centered narcissist. This is also where the narrators often find it appropriate to insert a quote from Machiavelli to inform their audience that some founders have evil intentions. If we were to follow with this familiar interpretation, we would be defining founder’s syndrome as the reaction of organizational leaders to rid the organization’s founder who has blundered, mismanaged, and ill-treated his or her staff who also lost confidence and respect in their founding CEO.

We believe that describing and defining founder’s syndrome from this vantage point has been the most common and simplistic approach taken for explanations found online or passed along as anecdotal tales. However, such explanations and definitions do not begin to scratch the surface of the meaning and condition of founder’s syndrome. Although we will not take that easy and, perhaps, expected route, we will take some liberties in the conveyance of our ideas and definitional distinctions of founders and founder’s syndrome that are presented as a gestalt; our intellectual argument with many parts that are necessary to fully examine the etiology, theory, and processes of founder’s syndrome. These parts include several social and psychological concepts that help us gain that essential insight and they include the following:

1. Belongingness

2. Competence

3. Entrepreneurialism

4. Effectance motivation/psychological reactance

5. Internalization

6. Language

7. Management

8. Ownership/psychological wnership

9. Persistence

10. Privilege

11. Resistance

12. Self-efficacy

13. Social identity

14. Stewardship

15. Syndrome

16. Territoriality

After familiarizing ourselves with these foundational concepts, we will be able to discuss the issues of power and control in Chapter 2.

The Founder

It all starts with an individual who has a vision of a type of organization that he or she wishes to create and manage. This individual has taken the additional step of filing Articles of Incorporation to the appropriate state government agency and paying the application fees to create a legal organizational entity and declaring it as either a nonprofit or for-profit corporation. Founders take these steps to create their organization that aside from being legally recognized is no more than a construct of the founder’s mind. Organizations are after all based on ideas and concepts but do not exist in tangible formats. Organizations cannot be seen or touched because they do not have physical properties. They exist representatively in written form as having a purpose and can succeed by attracting competent individuals who agree with the founder’s intentions. The organization may be initially housed in someone’s basement, a church, an office, or a stand-alone building. Its physical home is not the organization; it is merely a place that is used for conducting business. Should the founder and/or board choose a different geographical location, the vacated space will remain and could become available for use by a different organization.

Although our interest is in corporate organizations that assemble individuals to take on the purpose of a nonprofit mission or the development of a service or product that is intended to generate profits for its owners, we do acknowledge the existence of other organizational types not constructed for corporate purposes that have founders. For example, some founders have created organizations for the purpose of being a neighborhood book club, or social groups to play softball or volleyball. Some founders have created organizations to bring people together to go on hikes, morning walks, bicycles, or runs. Some individuals gather at someone’s home, a restaurant, or a coffee shop to discuss politics or other current events. In each instance, these organizations share commonalities with most other organizations. The participants, for example, know when to meet, where to meet, and how long they are likely to assemble. Additionally, they may have established rules of conduct, collect membership dues, or have instructions on how outsiders can join their organization. Each of these groups depend on the participation of individuals and were founded by someone with a decided vision. These types of organizations are excluded from our investigation of organizational founders.

For this book, we are only interested in founders who have taken the step to create a legal corporate entity. Once created, they are required to adhere to government rules and regulations in addition to any self-imposed bylaws or rules outlined in their governing documents. Once incorporated, the incorporators must follow their State’s laws that regulate corporate governance and shareholder rights. Although the Articles of Incorporation are public, a company’s bylaws are internal documents. However, a newly formed corporation may not commence their activities without first creating corporate bylaws and affirming who will serve as the initial board of directors, often at the invitation of the founder.

Definition: Syndrome

The use of the word syndrome in the context of describing a founder has a pejorative intent. Almost all medical dictionaries share a common definition for the word ‘syndrome.’ The general meaning is a display of symptoms that help to define a certain condition or associated symptoms that are common enough to describe a disease. However, founder’s syndrome is not a medical anomaly. Whoever first coined the term ‘founder’s syndrome’ was clever to borrow the medical term that conveys the seriousness of ill behaviors and applies it to the behaviors that have an adverse impact on organizations. Applying the word ‘syndrome’ provides another part of the definitional puzzle, that is, the conditions that are problematic to the organization’s health that can or has negatively impacted the culture of the organization.

The group of symptoms that comprise the syndrome can include staff morale problems, higher levels of staff turnover, loss of funding, board member conflict, drop in stock price, and unwelcomed media attention inimical to the interests of the organization. The most common traits of a founder who is responsible for founder’s syndrome, whether real or perceived, includes actions that are cunning, deceitful, authoritarian, secretive, underhanded, devious, opportunist, unscrupulous, and amoral.

Most writings about founder’s syndrome are based on anecdotal evidence and almost always attributed to the behaviors of one person, the founder. Interestingly, one commonality shared in cases of founder’s syndrome is that the founder is initially honored for his or her leadership and his or her vision and commitment to society. They may be considered community heroes who deserve special recognition because they have demonstrated a remarkable feat to translate their visionary ideas into an organizational reality that can address a societal issue with a nonprofit organization or create a for-profit company that fulfills the needs of consumers and creates jobs in the community. Accolades are warranted, but they are time limited.

Some founders are criticized because of their leadership style and propensity to use their position of privilege to influence the course of direction of board decisions or the work of management and line staff. According to BoardSource (2016), the term founder’s syndrome is a term used to describe a founder’s resistance to change. They also maintain that founder’s syndrome evidences the founder’s ‘misunderstanding’ of his or her role (McLaughlin & Backlund, 2008). We do not readily accept the notion that the cause of founder’s syndrome is the founder’s resistance to change because the notion of resistance to change is such a widespread phenomenon. Kotter and Schlesinger’s (1979) Harvard Business Review impactful article stated,

all people who are affected by change experience some emotional turmoil. Even changes that appear to be ‘positive’ or ‘rational’ involve loss and uncertainty. Nevertheless, for a number of different reasons, individuals or groups can react very differently to change—from passively resisting it, to aggressively trying to undermine it, to sincerely embracing it. (p. 3)

Kotter and Schlesinger’s (1979) Harvard Business Review article proposed four reasons for resistance to change in organizations, which are as follows:

1. Parochial Self-Interest: People focus on their own interests that conflict with proposed changes.

2. Misunderstanding and Lack of Trust: This occurs when staff are unaware of the implications for change or simply do not trust the initiator of the change.

3. Different Assessments: Here, staff assess the need for change differently from the initiator.

4. Low Tolerance for Change: People have fears; they will not have the skills necessary to perform their work following an organizational change.

The founder may dismiss ideas for organizational change that is put forward by the board or department directors because the ideas are not consistent with the founder’s vision. Muriithi and Wachira (2016) similarly assert,

The main reasons associated with resistance of both internal and external forces are the fact that the organizations are seen as vehicles to fulfilling the founders’ dreams. To this end, the founders invest too much time and effort, in terms of time, energy and resources to make their dreams become reality. (p. 3)

In our opinion, it is more likely that the board, department directors, and other managers are resistive to changes because of the founder’s exercise of his or her assumed privileges to make unilateral decisions that represent his or her preferences for organizational direction and planned change. The late management guru, Peter Drucker (2006) claimed that organizational resistance was a result of key staff’s limited tolerance for change even when they intellectually are aware that it would be beneficial for the organization.

We are also hesitant to accept the notion that when founder’s syndrome surfaces, it is a result of the founder’s misunderstanding of his or her role. If the founder is indeed the major contributor to founder’s syndrome, it is more likely a result of not having an appropriate level of management knowledge and skills. Although some may find the founder’s influential or brash behaviors distasteful, it should not come as a surprise because it is motivated by predictable human behavior. It is normal for founders to want to control the destiny of the organization they created. Given their emotional energy and often financial investment, founders start an organization with an aim to accomplish some specific mission, and they have a personal stake to accomplish their organizational goals and vision.

Founder’s syndrome is a transformational process that starts from a neutral state when an organization is in the idea phase. After the organization is launched, there are several dynamics that can take place as a result of the founder’s personality and extent of management skills, in addition to the internal forces and influential ideas of other key management staff or board members. As the organization evolves with the stressors and pressures on the founder from numerous internal and external forces, it is possible that the founder finds himself or herself incapable of processing all of the input and reacts or overreacts in a way that appears illogical or irrational. The troublesome behavior can be obstructive and inappropriate in the way the founder speaks to the staff, his or her department directors, or even board members. At that point, it could be concluded that founder’s syndrome reared its proverbial ugly head. If it gets to that point, the organization will be under siege for control by the founder versus organizational stakeholders, such as the board of directors, department directors, and other key managers. Given these conditions, we prefer to apply Block and Rosenberg’s (2002) definition of founder’s sy...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Contents
• Preface
• Acknowledgments
• About the Authors
• 1 Starting an Organization: The Underlying Basis of Founder’s Syndrome
• 2 Power and Control
• 3 Founder’s Transformational Reaction Syndrome
• 4 Founder’s Syndrome: The Theoretical Perspective
• 5 Theoretical Explanations of Stakeholder’s Behaviors
• 6 Founder’s Syndrome in Public Companies
• 7 Founder’s Syndrome in Nonprofit Companies
• 8 The Inevitable Life of Founder’s Syndrome
• Index