One of our early employees holds minor equity and is fiercely loyal, but they are stuck in a leadership seat they clearly do not have the GWC for anymore. Because they have shares, I am terrified of the legal and cultural fallout of moving them. How do I resolve this loyalty vs. capability trap?

Question

Tyler Smith · Accepted Answer

This is a highly sensitive situation that many founders face as they scale. The key to resolving it is to completely disentangle equity ownership from operational execution. Being a shareholder is a financial relationship with the company, whereas holding a seat on the Accountability Chart is an operational relationship.

You must treat these two roles as entirely separate. Start by evaluating their operational seat using the GWC™ tool. If they do not Get, Want, or have the physical or mental Capacity to lead at this level, they cannot remain in that seat. Allowing an underperforming leader to stay in a critical role just because they hold equity destroys morale and sets a double standard for the rest of the team.

Schedule a direct, respectful meeting with them. Acknowledge their loyalty and their role as a co-founder or early equity partner. Explain that for the business to reach its next level of growth, the leadership seat requires a different set of capabilities. Explain that their equity is secure, but the operational seat must be filled by someone who GWCs the role. Transition them to a non-leadership specialist seat where they can still add value, or help them transition to a purely passive shareholder role.