I have been on both sides of the fence.
As the founder of several companies, I have had some experience being the CEO. But in my last thirteen years as an investor, I have seen a few successful founders/CEO, but many that could not handle the challenges.
For founders and investors alike, one of the most difficult situations that an early stage startup will encounter is the founder transition. Can the founder be a great CEO? The short answer is yes. The long answer is that it’s more matter of “want” than “can.”
In my opinion here are the four qualities that great CEOs must have.
CEOs must be competent in many activities, but their most important attribute is their ability to manage.
A good CEO must be able to:
– manage“up” (board and investors)
– manage “out” (face to the market and customers)
– manage “down” (leading the team)
– manage “forward” (devising strategy).
Managing up, out, and down are about consistent, credible, and regular communication. Some CEOs yell, jump up on tables and knock down walls, while others quote poetry and have fire chat meetings. As long as the communication is there, it’ll work. Setting up the right expectation for a team and leading by example is one of the most important ‘things’ a CEO does.
Managing forward (strategizing) requires the CEO to meld his or her vision with pragmatism in order to achieve results. Managing forward can be learned over time, but a successful business usually requires someone who has already mastered this skill, not someone learning it on-the-job as CEO. Founders are great at vision, but pragmatism takes equal parts focus and compromise. That’s much less common. The small percentage of founders that have both have been very successful and made lots of money for themselves and their investors…
You’re not just the boss–you’re the founder. People naturally defer to you.
To counteract this, I (as a CEO) always reminded my team that “people who agree with me are a lot cheaper. You get paid more to disagree with me, so I want to hear what I don’t want to hear.” This works, but only if you follow through and act on the feedback. There’s nothing more demoralizing to A-player executives than disagreeing with the founder and getting ignored repeatedly.
Self-awareness also means knowing your own natural disposition and fitting it to the duties of CEO. For example, I used to be the ‘decision maker’ on all fronts, and I had to dial back on that during management discussions in order to perpetuate the exchange of ideas. Eventually, I took myself out of the some of the discussions and had the team meet without me. By taking myself out of the equation, the team members were able to form bonds that transformed them from a group of people into a cohesive unit. This transformation only could have happened without the pressure of ‘being under the bosses scrutiny’ and ultimately caused our business to take off.
Perspective is the ability to assess situations in an appropriate context. This is where good judgment and experience comes into play. The good news is that you don’t have to actually experience every situation in order to have perspective, but you need to be able to seek out and learn from others’ experiences.
As a young CEO, one of my biggest problems was that I was being ‘way too frugal’. I used to watch many ‘silly’ bills (including the kitchen supplies) that didn’t ultimately affect my company. I wanted to send a message that we were a frugal company. Seriously — that was an issue for me. I dedicated my time analyzing seemingly insignificant things. Fortunately, I had a great partner who told me I was an idiot, and who convinced me to let the office manager handle the ‘groceries’.
Entrepreneur-CEOs often bring their personal issues or habits into their business. Their passion or ego causes them to outweigh their own judgment, leading to unproductive ideations that can roughly be described as, “This is my product, I experienced the problem we’re solving, I started this company,” and so on.
A smart investor once told me: “sometime it is better to be ‘wrong’ and rich than ‘right’ and poor!”
Decision-making is the most important skill for CEOs, unfortunately it is also the least learn-able. Founders are often poorly prepared, based on experience, and poorly equipped, based on personality, for CEO decisions.
A CEO I am ‘close to’ was put in a hard position all CEO’s can face. His company hit a wall: things were not going well, the development team was blaming sales, sales were saying the product was not ready, employees were departing, funds were running short and, on top of all that, the investors were threatening to withhold funding unless the CEO took the company to another market altogether.
This CEO had to make a tough decision; should he have followed his investors and risked losing his sales people and engineers and potentially take the company down, or should he have rallied the troops, pursued his vision and improved the product and help sales. Luckily he chose to go with his instinct, against his investors’ advice, and both the company and the investors are doing very well today.
These are the situations where decision-making matters most. You can’t flip-flop, you can’t wait around, and you can’t be inconsistent. Typical founder attributes, such as persistent contrarianism, stubbornness, and an unwavering belief in themselves–the very things that make them entrepreneurs–inhibit the best decision-making under these circumstances.
So we’ve covered what makes a great CEO. For entrepreneurs, though, this should all be beside the point.
Here’s the take-home message: If you’re the founder, you don’t need to be the CEO. Being the CEO is most often slogging around with messy, difficult, and the tediousness of the everyday. Being the founder, the visionary, the guy who is passionate about his idea is fun! Don’t let the headlines and your ego push you into needing to be the CEO when you don’t really want to.
The fact is that most entrepreneurs are not born great CEOs. But they can become great CEOs by mastering the above qualities. The real question isn’t whether you can. It’s whether you really want to.