Who's (Going to Be) Boss?

Giving up the reins of your company is hard enough. Finding the right CEO is even harder

By RANDYE HODER

Last spring, the husband-and-wife team who founded Internet telecommunications company telezoo.com (http://www.telezoo.com/) began to tackle one of the toughest challenges facing them: They looked to replace themselves as heads of the business.

"There is always the fear that you will hire someone who will take the company where you don't want it to go," says Sharmine Narwani, who along with her spouse, Elias Shams, started telezoo from the basement of their Washington, D.C., home in March 1999. "You don't just hire someone overnight to take over a company that your sweat and blood went into."

But telezoo, having landed $3 million in investment by Lazard Technology partners, had reached a size and complexity that made it clear to Ms. Narwani, a former journalist, and Mr. Shams, a network engineer, that they needed an experienced manager. The couple recently spent five months sorting through stacks of resumes and interviewing dozens of candidates.

Many an entrepreneur has found that a start-up requires a leader with experience to guide it into the future. Often, outside investors make such a hire a condition of funding. But how does an entrepreneur know when it's time to hand over the reins? And how does he or she go about picking the right person?

"I have heard people compare it to cutting off a finger," says Victor Hwang, chief operating officer of the Los Angeles Regional Technology Alliance, which supports high-tech companies in Southern California. "It takes discipline to step aside and let a new CEO implement his own vision."

For some founders, gauging when to let go can be tough. "We have always thought that what we would do is best for the company, and right now that has been to keep me in this job," says Jeb Britton, CEO of Invesmart Inc., a Pittsburgh provider of retirement plans and financial services that he helped found in May 1999. The 55-year-old Mr. Britton has nearly three decades of industry experience and previously served as the CEO of a community bank.

But he can foresee a day when a better-known chief executive might be useful in cultivating relationships on Wall Street. He'd still be disappointed, he concedes, to watch someone else at the helm. "It's almost like who marries your daughter," he says. "They are never good enough."

Sometimes, even when founders acknowledge they need help, they turn to headhunters to find a chief financial officer or chief operating officer -- anyone but the CEO. Or when they do finally look for a CEO, they fall into what observers call the "Yes, but" syndrome. "You hire a search firm, you get CEOs who are extremely qualified, but the founder continually finds a reason to reject them," explains Brad Jones, a partner with Redpoint Ventures, a Los Angeles venture-capital firm specializing in Internet and broadband technology. "You go through a process that eventually fails or is fraught with problems."

It's Good to Give Way

Many management experts say that, in general, the faster a callow entrepreneur can make way for a more seasoned CEO, the better. "It's an issue of credibility," says Jon Goodman, executive director of EC2, an Internet incubator at the University of Southern California. "The fact is, growing a business of size is not fool's play."

Brian Johnson, 26 years old, was one of the lucky ones. In the fall of 1998, he started eteamz.com, a Web site (http://www.eteamz.com/) devoted to amateur sports that features everything from schedules and standings to rosters, weather reports and photos for some 120,000 teams in more than 50 countries. For the first nine months, Mr. Johnson ran the company in classic start-up fashion: Though he held the lofty CEO title, most days he could be found sitting in his pajamas in his living room in Pittsburgh, working through the initial $10,000 he raised from "cracking open some pretty small piggy banks." He tried to save money by eating a steady diet of canned tuna.

Then he caught a big break. He and a friend, a student at UCLA's John E. Anderson Graduate School of Management, won the school's New Venture Competition, with eteamz's business plan. Some $5 million in venture capital soon followed. So did the realization that it was now the right moment to bring in someone with more experience -- someone whom Mr. Johnson could look to as a mentor. "I knew that as we grew I would be in over my head quickly," Mr. Johnson says.

He signed up Korn/Ferry International, a Los Angeles-based executive recruiter, to help him find a new CEO. The firm quickly fixed on Steve Wynne, who for some time had been planning to step down as CEO of Adidas America. Mr. Wynne, 48, had figured on taking some time off and sharpening his golf game. But he was caught up by Mr. Johnson's enthusiasm.

"With the market crashing all around the dot-com universe, I felt this was a company that was worthy of being saved," Mr. Wynne says. "And I knew I could do that."

For his part, Mr. Johnson says he knew that Mr. Wynne was the perfect choice after talking with him for just a few minutes. "I understood right away that he got our business."

The recent boom in technology start-ups has made the hunt for chief executives a thriving sub industry. Randy Frasinelli, managing principal of Grant-Williams Associates, an executive-search firm based in Pittsburgh, says that 90% of his executive-recruiting practice is now devoted to finding top executives for start-ups. That's up from a mere 10% two years ago.

Be Selective

Finding the right match is tricky, he says. Just as not every entrepreneur can adjust to the demands of managing an up-and-coming business, not every veteran executive can thrive at a bare-bones start-up. "Not everyone from the AT&Ts and the IBMs can do it," Mr. Frasinelli says. "Most people think they are pioneers, but the reality is that most people are settlers. It has to be someone with the experience, but someone who can also take off that three-piece suit."

At Arlington, Va.-based telezoo, the online B-to-B marketplace for telecommunications equipment and services, the 33-year-old Ms. Narwani and Mr. Shams, 37, began by handing an executive recruiter a wish list of attributes for their dream CEO. Among other things, they wanted someone with a great work ethic; online telecommunications expertise; sales and marketing know-how; experience at a public company; the ability to communicate with investors, analysts and the media; and a track record of helping a business achieve strong growth. "We were going for a star," says Ms. Narwani.

They interviewed executives from MCI Communications Corp., AT&T Corp., Lucent Technologies Inc. and Nortel Networks Corp. One by one, the applicants were rejected for being too technical, not having the right mix of skills, and having suffered too many past failures.

But mostly, Ms. Narwani says, the rejects just wouldn't have fit into telezoo's playful culture, which is built around the notion that the telecommunications industry is a jungle in need of taming. One would-be CEO "came in with the most starched, pinstriped suit you could possibly imagine," Ms. Narwani recalls. "Others couldn't recognize passion if it hit them over the head."

'King Comm'

Finally, she and Mr. Shams settled in August on Giulio Gianturco, who had 17 years of experience as a senior executive in the industry, including stints at Newbridge Networks, Cabletron Systems Inc., Digital Equipment Corp. and Lucent. And how did they know he was right for telezoo?

"Anyone who is OK with being dubbed 'King Comm of Telecom,' was going to fit in," says Ms. Narwani, who as telezoo's senior marketing executive herself carries the title "Queen of the Jungle." Mr. Shams, who continues to oversee technology development, is "Chief Zoo Keeper."

Mr. Gianturco made it clear during an interview that he was comfortable in the jungle. "We were sitting around during the third interview, and he was doing all the right things and sounding very CEOish," Ms. Narwani remembers. Then, out of the blue, she asked him this question: "What is the best animal sound you can make?"

Mr. Gianturco didn't hesitate. "I just figured that if I was going to dive off this cliff, I should just do it," he says. And so he let loose with a thunderous roar.

"We were in love," says Ms. Narwani. "It was the clincher."

-- Ms. Hoder is a writer in Los Angeles.

Write to Randye Hoder at breakaway@wsj.com