Founder Mode vs Manager Mode: Redefining Leadership in Australian Business

In effect there are two different ways to run a company: founder mode and manager mode. Paul Graham / Y Combinator

A recent essay by Paul Graham, co-founder of Y Combinator, has sparked a lively conversation about leadership styles in scaling companies in the world of entrepreneurship and innovation.

Graham’s take on “founder mode” has caught the attention of Silicon Valley and beyond, challenging traditional views on how businesses should grow. As an Australian entrepreneur with over a decade of experience founding three companies, I find Graham’s insights particularly relevant to our local business landscape.

What is Founder Mode?

Graham suggests two approaches to running a business: founder mode and manager mode. His main argument is that founders bring unique abilities that conventional managers often lack, and suppressing these instincts can negatively affect a company’s success.

“There are things founders can do that managers can’t, and not doing them feels wrong to founders because it is,” Graham argues. This idea resonates with many entrepreneurs who have felt the tension between their natural leadership style and more traditional management approaches.

The Manager Mode Trap

Typically, as companies grow, founders are encouraged to take on a more hands-off role, shifting into what Graham calls “manager mode.” This style treats the business like a modular system, where executives provide high-level guidance but steer clear of specifics to avoid micromanagement.

However, Graham contends that this advice, though well-meaning, can lead to disastrous outcomes. He provocatively claims, “Hire good people and give them room to do their jobs. Sounds great when it’s described that way, doesn’t it? Except in practice, judging from the report of founder after founder, what this often turns out to mean is: hire professional fakers and let them drive the company into the ground.”

The Entrepreneurial Manager

While Graham highlights the distinctive value of founder mode, it’s essential not to overlook that managers can also exhibit entrepreneurial qualities. Assuming that only founders can bring the same intensity, vision, and attention to detail would be a missed opportunity. Non-founder CEOs and key executives can also operate in founder mode, and leaders should actively encourage these behaviours.

At Meta, for instance, Mark Zuckerberg was known for deliberately fostering founder-like behaviours within his management team. He created an environment where some of his executives, even those not reporting directly to him, were tasked with driving ambiguous, entrepreneurial projects. This allowed them to demonstrate founder-like qualities, and these efforts were rewarded more than traditional managerial successes. Zuckerberg ensured that founder mode wasn’t just reserved for himself but was embedded throughout the company.

This shift in mentality allowed Meta to maintain its innovative edge as it scaled, and similar strategies could be employed by Australian companies to drive growth while keeping that entrepreneurial spirit alive.

The Steve Jobs Model

Graham cites Steve Jobs’ leadership at Apple as a prime example of the power of founder mode. One notable instance was Jobs’ annual retreat with what he considered the 100 most important people at Apple, regardless of their rank in the company.

Jobs’ approach allowed him to:

- Engage directly with key innovators and problem-solvers across Apple

- Preserve a startup-like culture even as Apple scaled to massive size

- Maintain a clear vision and ensure it was executed at every level of the company

Applying Founder Mode in Australian Business

As Australian companies strive to compete on a global scale, embracing aspects of founder mode could provide a significant advantage. However, founders shouldn’t be the only ones embodying this mindset. Encouraging managers and executives to adopt founder-like behaviour can drive innovation and help scale companies more effectively.

Here’s how local entrepreneurs and business leaders can apply these principles:

1. Stay Hands-On: Don’t restrict yourself to working only with your direct reports. Engage with people at all levels who are critical to your business’s success. At the same time, encourage your key executives to do the same—allowing them to remain close to critical projects while delegating less critical tasks.

2. Encourage Innovation Across the Board: Create opportunities for talented individuals, whether founders or managers, to contribute to strategic decisions, no matter their formal position. Non-founders can be just as entrepreneurial if given the right environment.

3. Keep the Startup Mentality Alive: Even as your business grows, retain the agility and innovative spirit that drove your early success. Founders and executives alike can foster this mindset across teams, driving growth while maintaining a nimble approach.

4. Trust Your Gut: While listening to advice is important, don’t be afraid to rely on your founder’s intuition when leading your company. And encourage your managers to take calculated risks, rewarding them for founder-like behaviour over traditional metrics of success.

5. Focus on Vision, Not Convention: Prioritise your company’s long-term vision, even if it means going against traditional management wisdom. This goes for both founders and managers—if key executives adopt this mindset, it can extend the founder’s vision across the business.

The Future of Leadership

As we delve deeper into the concept of founder mode, it becomes clear that leadership is not one-size-fits-all. The most successful Australian companies of the future might be those that strike the right balance between the visionary, hands-on nature of founder mode and the structured systems of conventional management. And this balance shouldn’t just be confined to founders—managers, too, can embody founder mode principles.

By identifying and nurturing “founder mode” talent within the company, founders can empower their teams to think and act like entrepreneurs, accelerating their trajectory into key leadership roles. This is one of the most powerful things a founder can do—finding individuals with entrepreneurial potential and ensuring they’re positioned in the most critical roles. As Paul Graham and many others have pointed out, this approach helps to prevent the rise of the “professional fakers” who can derail a company’s vision.

Graham concludes his essay with an inspiring thought: “Imagine what [founders] will do once we can tell them how to run their companies like Steve Jobs instead of John Sculley.” For Australian entrepreneurs, this offers an exciting chance to redefine leadership and drive innovation in our distinctive business environment. But let’s also imagine a world where not just founders but also their managers embrace this entrepreneurial mindset, ensuring that visionary leadership can scale beyond the founder’s own bandwidth.

By adopting the principles of founder mode and applying them at all levels, we can build more dynamic, innovative, and competitive businesses that hold their own on the global stage. It’s time for Australian business leaders to trust their instincts, challenge the status quo, and chart a new course in leadership.

The full essay is here