Korva is a scroll of the internet’s best ideas.
The founders fired themselves
Why they stepped aside
Mitch and Steve Rales had come to see that they were not great operators. Their strengths were long-term vision, strategy, and allocating capital, while running a public company day to day takes attention to detail every day of the year. They had always told each other the leader they wanted was someone like George Sherman, then chief operating officer at Black & Decker.
The dinner
At dinner, the brothers arrived with ideas for taking over a Black & Decker manufacturing plant in South Carolina. Instead, Sherman said he was thinking about leaving Black & Decker, which was exactly the opening they had hoped for. Mitch kicked Steve under the table, and Steve knew exactly why.
Ten years under Sherman
Ninety days later they had a deal. Sherman did extensive due diligence first, and Danaher was mostly a tool company then, which suited a tool executive. He gave Danaher ten great years: he professionalized the business, brought in processes, helped roll out the Danaher business system, and took the company's share of non-powered hand tools from 20 percent to 40 percent. His exit led to a seamless handoff to Larry Culp.
Why do founders often step aside as CEO?
The skills that start a company and the skills that run a large one are often different. Noam Wasserman of Harvard Business School, in his research on startup founders, found that founders are frequently replaced as chief executive as their companies grow. Large organizations need systems, delegation, and steady execution, which reward different habits than invention does. Wasserman laid out the pattern in his 2012 book The Founder's Dilemmas.
How did Black & Decker shape power tools?
Black & Decker was founded in Baltimore in 1910 by S. Duncan Black and Alonzo Decker. In 1917 the company patented a portable electric drill with a pistol grip and a trigger switch. That design became the template for handheld power tools. The company later expanded into household appliances and acquired other tool makers.
More from Joys of Compounding
