Nasty Gal
Nasty Gal founder and chair Sophia Amoruso and CEO Sheree Waterson.
It's why many were surprised to hear her announcement on Monday that she was stepping down from the CEO role, remaining as executive chair. Yet, as Nasty Gal aims to grow again after a period of flat sales, it seems like the best move she could have made.
Amoruso writes in a blog post that she's been considering handing over the chief executive reins for two years, and that when she hired Sheree Waterson last March as president of Nasty Gal, she "was hiring a CEO."
Waterson was a veteran hire on the heels of high-level employee acquisitions from Urban Outfitters and Sephora during a time of rapid growth. Nasty Gal had exceeded sales of $100 million in 2012, but had a rough 2014, laying off 10% of its staff and hitting a plateau in sales.
When young entrepreneurs find their companies getting larger and more complicated, says Duke Fuqua School professor Sim Sitkin, they need to bring in experienced managers to either mentor them through the scaling process or take over the role of CEO. In the former case, however, there's the chance that if an organization grows very rapidly, the founder may not have time to learn "the game," he says.
Re/code reports that it was entirely Amoruso's decision to promote Waterson, who had previously worked in an executive capacity at Speedo, Levi's, and most recently as chief product officer at Lululemon. She resigned from Lululemon in 2013 after the "see-through yoga pants" scandal. When she made the hire, Amoruso said the scandal didn't reflect Waterson's long career.
"As you know, part of being a #GIRLBOSS (and just a decent human being) is about playing to your strengths," Amoruso writes in her blog post. "I've been wondering for a while now if the CEO role is one that I want - and the one that I'm best at."
Waterson's promotion to CEO "is a choice that will give our team, and our business, legs," Amoruso writes.
Creative and brand marketing will continue to report to Amoruso; finance, tech, HR, design, merchandise, production, and planning will report to Waterson. Amoruso will now spend more time as Nasty Gal's "brand connector," serving as the face and soul of the brand.
In a video accompanying her blog announcement, she says that she will be focusing on customer outreach, working with Waterson on expanding Nasty Gal's brick-and-mortar presence, and may pursue another book in the vein of #GIRLBOSS.
Duke's Sitkin says when there is a transition in senior-level management at a company, it is crucial for the founder to "recognize what their real continuing contribution is, what their real continuing contribution is not, to let go of the things they need to let go of, and to do so gracefully."
LinkedIn founder Reid Hoffman effectively pulled this off when he handed over the CEO job to former Yahoo exec Jeff Weiner in 2008. The move was followed by tremendous growth.
On the other end of the spectrum, Nick Bilton writes in his book "Hatching Twitter" that the inability of the four Twitter founders to agree on responsibilities and an ungraceful management transition is a major reason why none of the site's creators work for Twitter any longer.
Any transition to new management is difficult for a company's leaders and employees, Sitkin says, since the founder may be reluctant to identify and pursue their specific strengths, and the new chief executive needs to figure out how to leverage the talents and reputation of the founder.
Amoruso seems to be headed in the right direction.
Giving Waterson the CEO title and the authority to take Nasty Gal to the next level "will give me the freedom to feel that I'm using my talents at my best and highest," Amoruso writes.