After six years of hard work, James Dowd's shipping company had 20 employees, revenue of nearly $8 million, and a roster of blue-chip clients such as Coty, HBO, and Time Inc. But by 2007, new growth was elusive. And Dowd was starting to believe that the main obstacle was himself.

On its face, the idea that the founder was a liability seemed absurd. Dowd had nearly 20 years of experience in the industry. But he still couldn't help wondering if someone else might be better suited to take the company to the next level. The main instigator of those doubts: his star employee, Justin Brown.

When Dowd hired him in 2001, Brown was a tenacious 22-year-old entry-level sales rep. Three years later, impressed by the young man's drive, Dowd offered him a minority stake in the company. But once Brown became an owner, he started behaving like one. He tried to push FGX in all kinds of new directions. He suggested going after international shipments from large retailers with hefty online sales, but Dowd balked at the cost of the technology involved. Brown recommended refocusing the company's marketing message on a commitment to environmental issues, but Dowd remained convinced "faster and cheaper" was good enough. His junior partner was growing frustrated. Brown believed FGX could be a $100 million company; indeed, he argued, it could be a $1 billion business -- if only Dowd would take some risks.

All these dustups reminded Dowd what it had been like when he was the brash upstart. He recalled the time he pushed and pushed, but his employer refused to take a gamble on the latest new technology: a fax machine that transmitted 14,400 bits per second.

The Turning Point

Clearly, something had to be done. Midway through 2007, revenue was 30 percent below projections. And the company's internal processes, which had developed over the years in a haphazard, ad hoc manner, needed a serious overhaul. Dowd felt he was stretched too thin to attack both problems simultaneously. And the things he did try hardly made a dent. He finally reconciled himself to the fact that the company needed new leadership.

Dowd began looking for outside candidates for the top spot. The half a dozen people he interviewed were seasoned, experienced, and professional. In short, they reminded Dowd of himself and were exactly what he didn't want. Brown, meanwhile, was spending much of his spare time studying the shipping industry and crafting a new business plan for FGX, waiting for his chance.

Finally, in late 2007, Dowd called Brown into his office and told him what he had been thinking. Dowd suggested that his protégé take over as CEO. Dowd would become COO. The younger man would be the new public face of FGX, responsible for hiring, strategy, technology, and sales. Dowd would focus on cleaning up operations and making the company more efficient. Why surrender the CEO title? All the ideas for change came from Brown. "I knew if I gave him the title, we would be able to make a quantum leap," Dowd says. "I'd had my shot at it already." Brown would get more money to match his new responsibilities, but Dowd would remain the majority partner. That was fine with Brown. At long last, he had his chance.

Performance Anxiety

Dowd was nervous about informing FGX's clients and 20 employees. He wanted to make sure they knew that he had made the decision for the good of the company and that they didn't perceive it as a coup by Brown. He called the troops into an open area on the operations floor and broke the news. They took it in stride. Brown, after all, had long been a force at the company. Soon after that meeting, the new CEO began calling on the company's clients, introducing himself to those he did not know and touting his ideas for improving service. "We made it a story about how I was going to make FGX better," he says.

In fact, the only resistance to the change seemed to come from Dowd. Sure, it had been his decision. But surrendering the CEO title was proving a tough pill to swallow. "Every idea, every change, every adjustment, every firing, and every hiring had come from me," he says. Watching his protégé assume those tasks wasn't as easy as he thought it would be. That ambivalence was not lost on FGX staff members. "Deep down inside, James is a salesman, and he's always going to want to be out there talking to customers," says Eduard Michaud, the customer service supervisor. Indeed, the former CEO seemed to be dragging his feet when it came to his new operations tasks. Instead, he continued to leave the office and meet with clients.

Brown, meanwhile, had quickly gotten to work. He began retooling sales protocols and writing detailed job descriptions for staff members throughout the company. He hired a researcher to interview existing clients and potential new ones to find out if FGX's oft-stated mission of providing cheaper, faster service was sufficient. He launched a sustainability initiative.

But Dowd remained reluctant to let go of the reins. He frequently made little calls that should have gone through Brown, frustrating his new CEO. Communication between the two partners rapidly deteriorated. Things came to a head when Dowd purchased 20,000 cardboard boxes printed with the company's longtime logo -- even though Brown was in the middle of designing a new logo to reflect FGX's new green image. Brown was angry. "I felt like I needed to micromanage the majority shareholder," he says. "It was a very odd dynamic to be in."

Stepping Aside

The incident prompted Dowd to commit to his new role. He hauled his desk out of his private office and onto the operations floor. It was a symbolic gesture, but it also put things into stark relief. He noticed that when the company's lead driver came into the office, employees would go to the driver with questions. "He had an air of leadership about him," Dowd says. "I recognized that he was a lost asset on the road." Dowd put him in charge of logistics. More tweaks followed, including rearranging the workspace to increase collaboration. "I'm not a big feng shui guy," Dowd says, "but we had guys with their backs to the rest of the group."

Brown's initiatives, meanwhile, were beginning to bear fruit. The market research revealed that customers chose FGX for its ease of use. That helped justify a $500,000 investment in technology to help clients track shipments. The overhaul of FGX's image helped the company land meetings with social responsibility teams at major corporations. A year after the transition, revenue was up to $10 million.

To address the breakdown in communication, the partners agreed to meet weekly with a business coach. "James and I have a marriage," says Brown. "I mean, I spend far more time with him than I do with my wife. And sometimes you need help." The coach's assessment, that the two were succeeding in spite of themselves, was encouraging.

Dowd, meanwhile, is becoming more at ease with Brown's new role. "It was an unwinding leadership process with him that I did need to be sensitive to," says Brown. For months, Dowd had been hung up on the fact that his work life wasn't going to be as exciting as it had been when he was building his business. But diving into operations has had its own rewards. "As the company grows, I can go back out and meet with clients," he says. "But my goal now is being able to cultivate the rising stars in the organization, and that's fun."