The observation
Larry Greiner’s research into how organisations evolve identifies the earliest phase of growth as one built almost entirely around a founder’s direct, informal involvement — creativity, close proximity to customers and staff, rapid personal decision-making. Greiner’s central argument is that this phase ends not because it fails, but because it succeeds: the organisation it builds becomes too large for one person’s direct involvement to coordinate, producing what he termed a “crisis of leadership,” which is resolved only by introducing more formal management structure — something many founders, by temperament and by what made them successful in the first place, are reluctant to do.
Edith Penrose’s foundational work on firm growth adds a complementary mechanism. Penrose argued that a firm’s growth rate is constrained by its existing managerial capacity, and that this capacity is disproportionately concentrated, in founder-led businesses, in the founder personally — their judgment, their relationships, their accumulated understanding of the business. As the organisation grows, the demand for that judgment grows with it, but the founder’s personal capacity to supply it does not expand at the same rate. Something has to change, and the research consistently points to the same conclusion: what changes is not how much the founder does, but what kind of thing the founder does.
What it means in practice
The common, intuitive version of this transition is “the founder needs to delegate more” — hire good people, hand off operational work, step back from day-to-day involvement. This is directionally correct but frequently under-specifies what actually needs to happen, because delegating tasks is different from delegating authority, and the research on decision rights suggests the second is where founder-led businesses most often fall short even when the first appears to have happened.
A founder can genuinely hand off a function — hire a strong operations lead, a strong finance lead — while continuing to make, or quietly revisit, the decisions those leads were ostensibly hired to own. This is rarely deliberate obstruction. It usually reflects the same judgment and instinct that built the business successfully in the first place, now applied in a context where its main effect is to undercut the authority the new hire needs in order to actually do the job they were hired for. The organisation looks, from an org chart, like it has professionalised. In practice, decision-making authority has not moved as far as the reporting lines suggest it has.
Where it varies
How acutely this presents depends heavily on the nature of the business and the founder’s original role within it. In businesses where the founder’s core contribution was a specific expertise — technical, creative, deeply domain-specific — the transition tends to be somewhat more tractable, because the founder can often continue contributing that specific expertise directly while genuinely delegating the surrounding operational and managerial responsibility, since the two are more separable. In businesses where the founder’s core contribution was closer to generalist judgment — a feel for the market, an instinct for what customers want, a personal relationship with key accounts — the transition tends to be harder, because that kind of contribution resists being cleanly separated from the day-to-day decisions it was always embedded in.
Company size and growth pace also shape the timeline. A business growing steadily over many years gives the founder more opportunity to make this transition incrementally, testing delegation in one area before extending it to another. A business growing rapidly compresses this timeline, often forcing the transition to happen under pressure, across multiple functions simultaneously, with less room to learn from early missteps before the next one arrives. This is part of why rapid growth is disproportionately associated with founder-related leadership strain in the research literature — not because rapid growth is inherently more dangerous to navigate, but because it removes the slack that would otherwise allow the transition to happen gradually and with correction along the way.
There is a genuine tension underneath this that deserves acknowledgment rather than a tidy resolution. The instinct and judgment that make many founders effective — deep personal conviction, willingness to override consensus, comfort making fast calls with incomplete information — are frequently the same qualities that make formal delegation difficult, because delegation requires tolerating decisions made differently than the founder would have made them, at least some of the time. Greiner’s research does not suggest founders should suppress these qualities; it suggests the organisation needs a structure that channels them appropriately as it grows, rather than either preserving unlimited founder involvement or removing it entirely — neither of which the evidence supports as consistently effective.
A further complication is timing from the perspective of the people around the founder. Senior hires brought in specifically to professionalise the business often arrive with an explicit or implicit expectation that they will hold real authority in their domain. When that authority does not fully materialise, the more common response is not open conflict but quiet disengagement — talented people who were hired to lead a function gradually stop pushing for full ownership of it, because repeated experience shows that significant decisions will be revisited regardless, and pushing back on that pattern carries social and political cost that many capable people are unwilling to spend repeatedly. The organisation can end up losing exactly the calibre of senior leadership it was trying to attract, not because the wrong people were hired, but because the authority they were promised, explicitly or implicitly, never fully arrived.
The same pattern appears across many kinds of organisation; see Other Sectors for how it is read elsewhere.
Questions worth considering
- In areas where responsibility has formally been delegated, has decision-making authority genuinely moved with it, or does it still, in practice, return to the founder?
- What was the founder’s original core contribution to the business — a specific expertise, or a more generalist judgment — and how separable is that contribution from the operational decisions currently being asked to move elsewhere?
- Has the pace of recent growth left room for this transition to happen incrementally, with correction along the way, or has it been compressed into a shorter period than the organisation’s other changes would comfortably allow?
More on this topic: Growth.
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