Business Strategy

Can A CEO’s Return Save A Floundering Company?

ceo return

What do Apple, Starbucks, Pandora, Tinder and Twitter have in common?

All of these companies got rid of their founders-turned-CEOs and replaced them with a new chief executive. Then they turned around and brought their founders back to help revitalize the company.

These boomerang CEOs use to be rare but aren’t anymore. In fact, the number of comeback stories from cofounders who were pushed aside and then asked to return is growing. One of the most famous, of course, is Steve Job’s legendary return to Apple in the 1990s, after he was pushed out by the board in 1985. It may be legendary because of the lesson it teaches—sometimes only a founder can revitalize (or save) — a company.

In 1985, Jobs was considered uncontrollable by the company’s board–even company president John Sculley found it often impossible to work with Jobs — and it was Sculley that orchestrated the ouster. But in 1997 Apple was operating at a loss and Microsoft’s Windows 95 had soaring sales. Apple’s board decided that Jobs was actually just the medicine the company needed and in August 1997 Jobs came back to the company he cofounded, becoming its interim CEO. It was soon clear he needed to be permanent CEO. Jobs had matured as a leader and the company recognized him as one of its most valuable assets.

In the last two years the cofounders of Twitter, Zynga and Reddit have returned to the helms of the companies they helped create. Reddit’s cofounders Alexis Ohanian and Steve Huffman stepped back into the company to stabilize it after months of internal strife under previous CEO Yishan Wong, who had disagreed with Reddit’s board about the location and cost of new offices, mandated that Reddit employees relocate to San Francisco, and other controversial actions. Ohanian said believed he could bring “as a founder, a kind of stabilizing presence and vision for the company.”

Is this true that it’s good for companies in trouble–whether it’s financial, cultural or media-related–to bring back the founders? One thing the research tells us is that companies prefer insiders, those that already know the organization, in hiring a CEO. Outside hires of well-known corporate stars may get lots of press but in a 2012 study from the PWC’s strategy consulting team Strategy&, titled “Time for New CEOs,” the authors found that 71% of incoming CEOs at the time were insiders. It’s also hard to understand the challenges of being a company’s CEO until you have, actually, been a CEO. And in times of crisis a company’s corporate board many not have the time to do a comprehensive search for a new CEO, whether that’s within or outside of the company. It makes sense then, to bring back the person that likely knows the company better than anyone–its founder and former chief executive.

Pandora’s founder Tim Westergren returned as the company’s CEO in March, after serving as the company’s CEO and president from 2002-2014. Pandora, the radio streaming service, is shifting directions, toward on-demand streaming and concert ticketing.  Westergren replaced Brian McAndrews, who became the company’s CEO in 2013. In a statement about Westergren’s return, Pandora’s chairman Jim Fueille said, “As the original founder, Tim carries the vision for how Pandora can transform the music industry.”

In 2008 Jack Dorsey was fired from his job as CEO of Twitter, the social network he helped invent in 2006. At the time Twitter was a startup in disarray, experiencing regular server crashes and struggling to deal with mismanaged employees. But seven years later—last October—Dorsey came back to helm the company, whose performance was flagging and growth stagnating because of a plethora of management changes, strategy shifts and sinking stock price.

Of course little in entrepreneurship is foolproof and going back to the future doesn’t always work. Case in point—gaming company Zynga (of Farmville fame). Last April Zynga founder Mark Pincus returned to the company to reclaim his job as CEO. He had left less than two years earlier, under pressure from Wall Street because the company was struggling. In this case, however, the founder wasn’t the secret sauce. Zynga’s stock was trading lower in March than it was when Pincus returned as CEO a year ago. Now he is stepping down again, this time bringing in someone from outside the company to save it: Frank Gibeau, a board member and longtime game industry executive, having spent two decades at Electronic Arts (which makes games likeMadden NFL and The Sims). For Zynga, an outsider may actually be its best bet. Wall Street analyst Michael Pachter believes bringing in Gibeau—with Pincus bringing up the rear—“will be the combination that brings investors back.” We’ll see.

About the Author

Elena Bajic is the founder and CEO of Ivy Exec, a selective online career network for top performers.