Why it’s crucial for companies to maintain a founder's mentality

Many companies set high expectations for growth, but only a few manage to achieve it. And here’s why: It’s all about maintaining a founder's mentality. Firms led by founders or with founders on their boards have performed more than three times better than all other companies over the last 15 years.

That’s according to a new book out Tuesday, The Founder’s Mentality: How to Overcome the Predictable Crises of Growth. The book examines why only one company in nine has sustained more than a minimum level of profitable growth.

Chris Zook, co-author of The Founder’s Mentality and a partner at Bain & Company, told Yahoo Finance’s Seana Smith in the video above that most companies achieving sustainable growth share a common set of motivating attitudes that can be traced back to their founders, called the founder’s mentality.

“The first thing is to have what we call a sense of insurgency,” said Zook. “The second attribute to have is a deep connection with the front line of the business. And the third element is an owner’s mindset.”

Zook said an example of one company that’s doing it right is Facebook (FB), led by its founder and CEO Mark Zuckerberg. The stock has skyrocketed since going public in 2012. “He clearly has amazing attention to detail and knowledge of the front line since he was the original coder,” said Zook. “He also has amazing vision for connecting every single person on the planet. We have seen how to maintain the third element [of the founder’s mentality], an owner’s mindset. [Facebook] is now thinking of reconfiguring the nature of its stock.” Facebook’s board has proposed removing Zuckerberg’s majority voting control should he decide to leave the company at some point in the future.

However, not all companies have stayed true to their founder’s vision. Bain research found that more than 80% of a company’s major swings in value can be traced to the decisions and actions the companies take or do not take during moments of internal crisis. In this case, Zook said it's important for a company to go back and "deeply reflect" on the three elements of the founder’s mentality.

“A lot of great renewals are of companies that really did that. Apple (AAPL) will have to make sure it maintains its insurgency,” said Zook. “And Sears (SHLD), which is unraveling, must look back and examine how it lost touch with its customers.”

Advertisement