When Companies Flounder, Bring Back the Founder

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Following Monday's news that Starbucks (Nasdaq: SBUX) would bring back founder Howard Schultz to revitalize the coffee shop's lethargic growth, investors reopened their New Year's champagne, sending shares soaring.

Schultz joins Michael Dell at Dell (Nasdaq: DELL), Steve Jobs at Apple (Nasdaq: AAPL), and Charles Schwab at, um, Charles Schwab (Nasdaq: SCHW) as leaders who've regained the reins of the businesses they built. When companies fall into hard times, they need management as passionate as it is skillful. They need executives worried more about their legacy -- even their name -- than their paycheck.

Going back to the beginning
Why do companies' founders hold so much value in management? It may be their undeniable role in creating the company's vision. Nearly every successful company today started with a concept that defied traditional thought, championed by entrepreneurs out to turn their dreams into reality. When leaders bring passion and dedication to the table, they can forge a bond with their company that no other manager can match.

Take Starbucks. When Schultz began building a gourmet java empire back in the 1980s, consumers seemed quite happy with Folgers instant brew. Schultz undoubtedly got laughed at more than a few times. But a few decades later, Starbucks' worldwide growth continues to defy even its most optimistic supporters.

After achieving such success, Schultz has more than a vision for the company's future; he's got a sense of where it came from. Starbucks is his corporate child, not just his job. He's made personal sacrifices over the years for the business, but now that they've paid off, he's driven by more than just the prospect of more money. Schultz doesn't want his efforts to have been in vain.

You can't learn that sort of dedication in business school, or by climbing the corporate ladder. Only a founder can command that level of commitment.

When greed prevails
In all fairness, not all founders are successful, and plenty of non-founders aren't. Founding leaders like Enron's Ken Lay and WorldCom's Bernie Ebbers apparently concentrated on building dynastic financial empires for themselves, rather than creating successful companies for their shareholders and employees. And the ranks of the very best CEOs include plenty of non-founding leaders, including former General Electric (NYSE: GE) head Jack Welch and Wal-Mart (NYSE: WMT) boss Lee Scott.

But despite these exceptions to the rule, in most cases, a company's founding manager has only its best interests -- both financial and ethical -- in mind. And while talented managers can be trained, their exceptional leadership skills and business prowess are more often based upon the founder's blueprint than built from scratch.

High-quality management is probably the most overlooked aspect of finding great investments. As Peter Lynch has stated, "Find a business that any idiot could run, because sooner or later, any idiot is probably going to run it." All the same, Fools, do yourself a favor -- place your money in the hands of leaders with more on the line than just a high-paying job.

For related Foolishness:

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