When CEOs Are Proud to Be Powerless

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By Janet Choi

powerless ceo

At Menlo Innovations, a software company in Ann Arbor, bosses aren’t the major decision-makers — even over how to hire and fire.

When James Goebel and Richard Sheridan founded Menlo, they went all in on their ideas of decentralizing power and rethinking modern management that they’d implemented at a previous workplace. In doing so, they crafted a strong identity and culture at their new company. The “Menlo way” is remarkably open, collective, and democratic.

One of the best tests of those ideas took place when Goebel, who is the COO, had a niece, Erin, who worked as an admin at the company for a few months.

The company’s employees wanted to let her go — having collectively decided that nepotism wasn’t something that fit the Menlo way. Firing someone is always a serious decision, and firing the boss’s family member can be particularly thorny. But the rules applied equally — Goebel wasn’t able to object to the final decision to fire her. “Actually, my niece lives with me,” he told New York Magazine. “And she was really pissed….it was a little frosty for a while.”

For CEOs and bosses reinventing the traditional top-down way of running a company, being a strong leader means less power. Their proudest moment is when they are weakest.

Strong Leaders Grant Veto Power

While research has repeatedly shown that autonomy is crucial for employee happiness and optimal work, the people with the most autonomy tend to be those at the top. They’re usually able to veto any decisions made by anyone lower on the totem pole, no matter how much autonomy is cited as a company value.

For Steve Newcomb, founder of Famo.us and Powerset, granting this power of the “founder’s veto” to all your employees — even over hiring and firing decisions — is crucial. It makes the intention to empower people “with a sense of ownership in the company” and have that be a defining part of your culture a reality.

When a co-founder at one of his companies brought in a family member to interview for a position, Newcomb let the candidate go through the hiring process because he wanted to see if the veto would take place. It was a real values test, and the company passed with flying colors when someone who would otherwise have the least amount of power said: “No.”

That was the moment Newcomb realized that he’d built an amazing culture.

“The person that pulled the veto was our most junior engineer at the time,” Newcomb writes. “It was one of the proudest moments I had during the process of building my team. In the face of the power of a founder, I had created a process that made a junior employee not only feel like they had a right to stand up against a founder, but that I actually gave them that power and they used it — ultimately to protect the team.”

The Powerful Stupidity Check

Imagine if Newcomb had sincerely gone along with his co-founder, which could very well have happened for any number of reasons. He could have been busy or uninformed on who exactly the candidate was or felt he was in a position where he didn’t want to hurt his relationship with his co-founder.

When the founder’s veto is exercisable by anyone, it provides an important constraint. As Newcomb points out: “It protects against founders making stupid decisions.”

The very fact that you’re a leader means that you’re at risk of distorted judgment, even as a well-informed, self-aware person. Power not only can change how your brain works, you’re also susceptible to the same irrational cognitive biases, such as confirmation bias, as everyone else. You become convinced that you’re the only one who knows what’s going on — except you’re in the position to make the final decision. Giving others a veto protects against the strong leader’s delusions.

Newcomb points to the healthy consequences of that good decision — that veto “let other junior engineers and even non-technical employees know that when it came to adding a new person to the team, they had the power, the same exact power as a founder, to protect their team.”

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Writing down your values doesn’t create a culture. It’s when your values are tested and hold true that they gain meaning. And one major test to see if your core values are actually real, as Scott Berkun writes, is to ask whether they are actually being used to make decisions. In other words: “Can an employee say NO to a decision from a superior on the grounds it violates a core value?”

When the junior engineer can veto a hire or a bunch of employees can reject the employment of a co-founder’s family member, values become something more than words on a poster. Upending the power distribution of the traditional pecking order by extending the founder’s veto to your team in a real way is proof of a living, breathing, thriving company culture.

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