Does it seem right that a CEO should be discussing his succession plans after taking in more than $525 million from a wide variety of private investors, joining the Unicorn Club (private companies with an estimated market capitalization greater than $1 billion), but before going public? That’s what happened nearly two weeks ago when DocuSign CEO Keith Krach sent a memo to all employees describing a transition period ahead.
Krach will remain CEO during the search for his replacement, a phase likely to last anywhere from six months to a year. After his successor is chosen, he will step up to the role of chairman of the board, where he plans to remain “for at least three more years,” making his total tenure a decade.
In the memo, which he addressed to his “DocuFamily,” he used phrases like “… natural succession planning process …” and “… bring additional firepower …” and “… maintain our momentum …,” all of which are meant to be reassuring, but inevitably questions arise. Like, “Why?” and, “Why now?”
Here in the United States, we live in a culture of belief, which requires people to profess faith whether or not they actually buy in. Bend the knee, kiss the ring, never mind what your private thoughts are. The myth is: the man is the company. The example: Steve Jobs’s triumphal return to Apple to lead the firm all the way to glory before dying in the saddle.
But that’s just a myth. The reality is companies usually go through several CEOs on their way to a public offering and beyond. It’s highly unusual for the same person to be good at founding a startup, building an organization, and managing an established company (although Krach has done all three). Nonetheless, succession planning is a touchy subject. Doesn’t admitting that you’re not going to be here forever indicate that you’ve already left, at least in spirit?
I spoke with Krach at some length about this subject, and he makes a good case that revealing a succession plan well before its execution helps ensure that a company is built to last. Succession planning is one of the most important aspects of good governance and continuity.
We’ve all seen it the headlines. In both public and private companies, succession can be terribly mishandled.
By contrast, Krach clarified from the start the direction he wants to take the company. DocuSign has engaged a top-level executive search firm, which is expected to take a proper approach and sufficient time to find the right candidate. All the while, Krach will be running the company on fast-forward. He noted that, given where the firm is in its life cycle — last-stage startup, pre-initial pubic offering — it can attract contenders of the highest caliber. After all (and these are my words, not his), there is probably no more sure-fire way to get rich legally than to take over the top spot at DocuSign now. And, as mentioned previously, Krach will remain fully engaged in an executive, if not operating, role for several years to maintain continuity of culture and strategy.
To get to the heart of why and why now, though, it helps to know Krach’s history. It is long and illustrious, and I won’t lay out a hagiography here, but if you want to read more detail, you can try here or here. He founded, grew, and ran as a public company Ariba, and turned it over to SAP after 17 years as the clear market leader. The Ariba network now conducts nearly $1 trillion in business-to-business eCommerce annually, which is more than Amazon, eBay, and Alibaba combined. In Ariba, Krach literally created a new category.
His main passion is building things: businesses, markets, reputations, customer relationships, brands, but, in particular, teams. He has achieved all these things at DocuSign while building another new category: digital transaction management. He attributes much of this success to his focus on putting in place a high performance team. “Hire best people, get them working together, and give them a clear direction,” he says. “It’s a passion.”
And money is not an object either way. He’s already been on and off the Forbes 400 billionaires list, which he first made 15 years ago. Today, he is the largest individual holder of DocuSign stock and invested further in the company’s most recent round. At last valuation, the company was worth ~$3 billion. So, he’s got all the money any rational human could need. And his attitude about it? “ I could probably live out of a backpack,” he says.
For him (as for all of us, if we really look at it), the scarce and valuable resource is time. Half jokingly, he recently told his wife that once the new CEO is installed, he plans to cut his hours back by 20% — from 100 to 80 per week.
As to why preannounce the transition-to-come now, Krach cited one of his main leadership principles: “direct, open, and honest communication.” After meeting with his top lieutenants in early October to tell them of his recommendation, it was only a short step to bringing the rest of the company in on it. Of course, it was inevitable that someone would leak it to the press. And although articles speculated wildly on what is going on at the company or with the man, the writers seem not to have grasped the point that this is how succession planning should be done if one wants to build a company to last.
Disclosure: My company, Endpoint Technologies Associates, has a consulting relationship with DocuSign.