Finding the right CEO: “The issue is often approached opportunistically rather than strategically.”

Experts interview
Felix Haas
Partner at FLEX Capital

Felix Haas is a serial entrepreneur and Founding Partner of FLEX Capital and 10x Group. His founding companies include Amiando and IDnow. Felix Haas is also co-host and chairman of Bits&Pretzels, Germany's largest networking event for founders and entrepreneurs.

Christoph Jost
Managing Partner at FLEX Capital

Christoph Jost is a serial entrepreneur and co-founder of FLEX Capital. He has founded and built Absolventa, an online job portal, into the market leader in Germany. He also developed the online listing group Passion 4 Gästezimmer. Christoph successfully sold both of these ventures to the FUNKE Media Group.

Both have several successful exits behind them: In this interview, Christoph Jost and Felix Haas from FLEX Capital share their experiences in hiring external CEOs. What matters, what are their learnings? The answers in the interview.

Christoph: Felix, what are your experiences with hiring a CEO for your own company?

Felix: The topic of CEO succession or collaboration is exciting because, in my view, many founders approach it opportunistically, but not strategically. Most are doing it for the first time and stumble into it. Just like I did back then. Then you notice on the road what works and what doesn’t – and you have to recalibrate. Choosing an external CEO is a very powerful tool to put even more power on the road and make a difference for further growth.

I have looked for an external CEO twice so far. First for Amiando back when it was clear that I would be leaving as CEO after the earnout, and then for our current startup IDnow. This time, we made a conscious decision to look for leaders who could complement us and bring better management skills to the company for the next phase of the company.

Christoph: What did you look for when choosing CEOs and what role did the company phase play?

Felix: At Amiando, we did the search for a successor together with the new owner Xing. In the end, we chose a person we had known for a while. The same was the case with IDnow. We had already established a relationship and both sides knew what to expect.
Nevertheless, the process was very different. At Amiando, there was a clearly defined date by which we founders would leave the company and we had to have found a successor. At IDnow, as founders, we decided to look for a CEO. It took us two or three attempts to find the right leader.

“The topic of CEO succession or collaboration is exciting because, from my perspective, many founders approach it opportunistically, but not strategically.”

Christoph: What distinguished the right leader?

Felix: At IDnow, we have set up an internal criteria catalog. An important criterion was the leadership qualities of the candidates. Of course, integrity was important to us, but we also valued cultural fit highly. We talked to some experienced leaders who were highly successful and enthusiastic, but we were not convinced of the cultural fit with us as founders and with the company. That’s why we decided against it.

I always try to work with people who are actually a little too early for the upcoming corporate phase, but who are coming into their sweet spot two to four years from now. Why? Because my experience is that any leadership transition takes longer than you think. At IDnow, we had a honeymoon period of just over a year, during which you groove in. That doesn’t always go without jerks, but if you have a common value base, you enter a very productive phase afterwards. That’s why I tend to look at candidates to see if they have the skills for this later phase.

Christoph: You mention the topic of cultural fit. At the job board Absolventa, my very first startup, I was looking for a successor as CEO in 2014 because I wanted to devote myself to other topics. We then brought in someone from our extended network. An incredibly strong guy, but so energetic that he almost overwhelmed the organization. He embarked on an aggressive growth path, which we had also called for, but the company struggled to keep up the pace.

“I always try to work with people who are actually a bit too early for the upcoming company phase (…). Why? Because my experience is that any leadership transition takes longer than you think. “

Felix: You say at Absolventa your successor was not a cultural fit in the end. Were you still on board at that time?

Christoph: We hired the colleague six months before I left. First as Head of Strategy, but with the clear perspective to then take over as CEO. At that time, we were growing at over 100 percent per year, and we gave the new CEO the mission of continuing to step on the gas. And he did. After a year, however, we realized by mutual agreement that his style was overwhelming the company. So I took over again and then but soon initiated the final sale. The CEO then founded a company himself and led it to a very successful exit. That’s about cultural fit and the question of what the company can be expected to do.

Felix: That’s a super important point. Whether you’re looking for a successor or adding leaders to the team, it’s important to have a common expectation. Do we want to go full throttle? Would we rather go for safety? What major strategic decisions do we want to answer and how? If there is agreement on this, then it is a matter of building trust.

It may be that the founder and CEO are different types. One is more willing to take risks and just go for it, the other takes a more structured and cautious approach. We have such a constellation at IDnow. You have to quickly get to the point where, although you discuss things intensively, you trust each other and sometimes one gives in, sometimes the other.

Christoph: When Absolventa exited to FUNKE, I handed over to the managing director, who had previously been head of sales. In terms of cultural fit, of course, that worked out extremely well. We also sold and to FUNKE and brought in a managing director we knew before. The third handover was by far the best. Not only because the cultural fit was right, but also because we were transparent and realistic.

The first time, we expected Absolventa’s new CEO to iron out our mistakes and do it in half the time. In comparison, we had a very clearly described task at the third exit. The managing director is still very successful for the company today.

Felix: We brought in Andreas Bodczek as CEO at IDnow. We had known each other for many years at that point. I was a business angel at his previous company. He has been on board as a business angel since IDnow’s inception. You know who has what strengths. Then, when we were looking for an addition to the leadership team, we didn’t talk to him at first. We had hired a headhunter for the position. He also did a great job, but in the end we ended up with Andreas. He had already supported us in the strategy process of the company and helped us super. So it was only logical to ask him if he would like to work with us more intensively and in a different role. Fortunately, that worked out.

It is important to have a common expectation. Do we want to go full throttle? Would we rather go for safety? What major strategic decisions do we want to answer and how?

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