Company: InnovateTech Solutions (fictitious), a 12-year-old SaaS startup that recently went public.
Background:
For 12 years, Arjun Mehta was InnovateTech. He coded the first version of the product in his flat. He pitched to the first 50 clients personally. He hired every employee until headcount crossed 200. The company’s culture, pace, and decision-making style all bear his imprint.
Now, post-IPO, the Board has convinced Arjun to step back. He’s moved to an Executive Chairman role. A professional CEO—Kavita Rao, a seasoned operator from a large enterprise SaaS company—has been brought in to scale the business.
On paper, the transition looks clean. In practice, it’s a mess.
The situation
Six months in, Kavita is struggling—not because she lacks capability, but because she lacks authority. Employees continue to bypass her and approach Arjun directly for decisions. A product manager Slacks Arjun at 10 p.m. about a pricing call. A sales lead emails him about a stalled deal. A team lead asks him to settle a hiring dispute.
And Arjun, despite good intentions, keeps responding.
“I don’t want to micromanage,” he tells HR privately. “But people come to me, and I can’t just ignore them. They built this company with me.”
Kavita, meanwhile, feels undermined. In leadership meetings, her decisions are second-guessed. “What does Arjun think?” has become the default question. Employees are polite to her face, but she knows where their real loyalty lies.
She’s told HR frankly: “I was hired to lead this company. But I’m leading in title only. If this doesn’t change, I’m not staying.”
The dilemma
Should HR coach Arjun to completely disengage—cutting off informal channels, redirecting all queries to Kavita, and stepping fully into a board-level role? That might empower Kavita, but it risks losing Arjun’s visionary edge, demoralising loyalists who feel abandoned, and creating a leadership vacuum in a still-fragile organisation.
Or should HR manage a dual-leadership structure—where Arjun stays involved in strategic matters whilst Kavita handles operations? That sounds balanced, but it risks permanent confusion about who’s truly in charge, eroding Kavita’s credibility, and turning every decision into a negotiation between two power centres.
What’s really at stake
This is a test of whether InnovateTech can transition from a founder-led startup to a professionally managed enterprise—or whether it remains perpetually stuck between two identities.
If the transition fails, Kavita will leave. The Board will lose faith in professionalisation. And InnovateTech will learn the wrong lesson: that founder-led chaos is safer than structured leadership.
But if it succeeds, the company will prove it can evolve beyond one person—and that loyalty can shift from individuals to institutions.
What HR leaders said
Suchismita Burman, senior HR leader
“In startups, HR often doesn’t have the perspective—or the influence—to meaningfully shape situations like this. The first question I’d ask is: who does HR report to? The founder or the CEO? That structure alone determines whether HR has the perspective needed to participate in senior-level conversations.
Most startups treat HR as a compliance function early on. Culture and leadership systems come much later. So I’d examine: when the founder was running things, did he genuinely create space for people to operate independently? Or was decision-making always routed back to him? If employees keep going to the founder, it’s often because that hierarchy is what they’ve experienced and internalised.
People in startups crave stability because volatility is constant. They instinctively gravitate towards whoever they believe can protect their role and make decisive calls. That’s usually the founder.
I’d also look at the incoming CEO’s background. If she comes from a similar entrepreneurial environment, she has an advantage. If not, expectation-setting becomes critical. How was this transition communicated? Were managers coached on what changes—and what doesn’t?
Another uncomfortable question: what’s the cost of failure if the CEO doesn’t succeed? Who bears that cost—the CEO, the founder, or the system? Without understanding the opportunity cost of failure, any intervention is blindfolded problem-solving.”
Chandrasekhar Mukherjee, senior HR leader
“I see this repeatedly in founder-led and family-run businesses. Bringing in a professional CEO is the right decision, but it only works if the founder not just announces it, but visibly demonstrates it.
If anyone approaches the founder for operational matters, the founder must redirect them—every single time—to the CEO. No exceptions. The founder should only engage with the CEO on business matters, whilst keeping informal, personal channels open with employees for non-official issues.
More than the CEO, the founder has to model the new behaviour. Even a single indulgence—listening to complaints or giving directions—undermines the transition.
From an HR standpoint, I’d immediately recommend a structured leadership intervention, such as a team-building workshop involving the founder, CEO, and leadership team. This forum should clearly communicate evolving focus areas, leadership styles, and organisational priorities.
At the same time, the CEO must actively keep the founder informed. Regular updates—daily at first, then tapering off—help the founder feel included, not sidelined. Over time, this builds trust. The founder should ideally engage through board or advisory mechanisms, not day-to-day operations.
This only works when both sides act maturely. The CEO cannot behave like an unquestioned authority, and the founder cannot behave like the shadow CEO. It’s teamwork, not a power transfer in one stroke.
HR’s role is to act as a bridge—between employees and leadership, and between founder and CEO. HR must model the behaviour it wants others to follow by routing everything through the CEO.”
Nihar Ghosh, senior HR leader
“The real risk here isn’t dual leadership—it’s undefined leadership. Employees will always gravitate towards the source of clarity and control. If the founder continues to be accessible for decisions, employees are simply responding rationally.
HR’s role is to institutionalise authority, not manage personalities. That means codifying decision rights, escalation paths, and visibility protocols. Who decides what, who is consulted, and who is informed must be explicitly documented and reinforced—through town halls, leadership forums, and everyday behaviour.
The founder doesn’t need to disappear, but their role must shift from decision-maker to symbol and steward. The CEO, meanwhile, must be publicly empowered—even when decisions are imperfect. Short-term discomfort is the price of long-term credibility.
Without structural clarity, culture defaults to legacy power. Founder transitions fail not because of intent, but because ambiguity is allowed to linger.”
Your turn
What would you do? Share your response in the comment box or share on LinkedIn with #HRKathaCaseInPoint