The role of the CEO
I have recently been invited to The Family to talk about the role of the CEO. As the CEO of Doctrine.com, I spend a fair amount of time researching and reading about the role of the CEO. I eventually aggregated all this knowledge into a single doc. Several people asked me to publish the doc so here it is. Nothing groundbreaking, it’s just a compilation of articles written by a16z, Paul Graham or Sam Altman.
Three phases for the CEO
Phase 1: Doer in chief
Deeply involved in both building the product (observing/interacting with users, writing code, designing product specs) and acquiring users/customers.
Delegation should not be a word in your vocabulary. If you succeed, it’s because your deep involvement and unique vision give the company a perspective and drive that few others have.
The other imperative for a Phase 1 CEO is to conserve money in order to extend the time to iterate and improve the product.
Most startups fail because they are not able to create a product that users love enough to abandon existing alternatives. Success in this first phase means discovering more demand for your product than your small team can handle. When this happens, you have to shift your focus as CEO to building a company that can capture and maximize the demand that your product has surfaced.
Phase 2: Company-Builder-in-Chief
When you’ve been a successful Doer-in-Chief, it’s hard to stop. It’s hard to stop coding, designing product specs, and interacting with customers on a daily basis. It’s hard to stop answering support tickets, doing all the product demos, and debugging the latest build. It’s even hard to delegate the random and sometimes menial tasks that you’ve accumulated over the years because they were “no one’s job.” But you have to stop doing all of these things so that you can safeguard your time for high leverage tasks that only CEOs can do.
Without delegating, you simply won’t have time to focus on company-building and you’ll end up slowing everyone else down.
But your job is to replace yourself by hiring people better than you into leadership positions
In practice, Phase 2 usually begins when a startup has around 20–25 employees and ends when it reaches 400–500 employees. At the end of Phase 2, you’ll have a leadership team that you’ve “road tested” to the point that you can confidently delegate everything you did in Phase 1. Your direct reports should be experienced leaders who can perform at a high level with minimal involvement from you, provided that you have set direction well. You can then shift the burden of company building to your leadership team so that you can start working on
Phase 3: taking profits from the core business and investing them in new, transformative products.
As an example, Facebook built its senior management team in Phase 2 while running the business at roughly breakeven. In Phase 3, it began to generate huge profits in its core business thanks to more lucrative in-stream ads, so it could allocate significant resources towards Messenger as a separate product and buy Instagram, WhatsApp, and Oculus.
Transition from phase 1 to phase 2
Look at where you’re spending your time, then fire yourself from that position.
Perform The Role, Then Hire Someone Better
Leave egotism out of it: you should always be able to find someone who can perform a given role within your company better than you can — and that’s a good thing. (If you honestly can’t, play that role instead and question whether there is someone better than you at being CEO…)
I like to picture my org chart upside-down. They don’t report to me. I report to them. What do they need to succeed at their roles? Context to prioritize. Context to make decisions. Context to know when to push for more resources, or when to make-do.
Make 10% (or less) of all the key decisions in your company.
Deference shows your team that you trust them to make their own decisions.
What are CEO objectives?
Hire the team
Hire the rockstars
Push the team
Challenge rockstars to do extraordinary things.
You have to evaluate how well they are building their organizations, how productive and happy their employees are, and how well they are working with other teams and executives.
Set aggressive goals
Give frequent feedback
Hold weekly staff meetings
Schedule bi-monthly 1:1s
Fund the team
Sell the Vision
Employees, customers, journalists, investors, friends…
When I think about all the important things CEOs must do, succinctly and convincingly articulating “the story” is right up there. But there’s a catch: it must be told with both authenticity and passion — like it’s literally pouring out of them. We refer to the best of these entrepreneurs as “glow in the dark”.
Communicate to employees and customers (formally and informally)
Just a simple plopping down in an employee’s cube with a “Whatcha working on?” would yield so much valuable information. As the final decision-maker on so many difficult calls in a fast moving business, the CEO’s connection to the people that are actually writing code or talking to customers is critical. And you don’t get it from sitting in your office
A CEO should probably be spending about 30% of his or her time with customers, and this is especially true for an enterprise CEO.
Difficulties
CEO psychological meltdown
It’s like the fight club of management: The first rule of the CEO psychological meltdown is don’t talk about the psychological meltdown.
The first problem is that everybody learns to be a CEO by being a CEO.
The only thing that prepares you to run a company is running a company. This means that you will face a broad set of things that you don’t know how to do that require skills that you don’t have. Nevertheless, everybody will expect you to know how to do them, because, well, you are the CEO.
Even if you know what you are doing, things go wrong. Things go wrong, because building a multi-faceted human organization to compete and win in a dynamic, highly competitive market turns out to be really hard.
If you manage a team of 10 people, it’s quite possible to do so with very few mistakes or bad behaviors. If you manage an organization of 1,000 people it is quite impossible. At a certain size, your company will do things that are so bad that you never imagined that you’d be associated with that kind of incompetence. Seeing people fritter away money, waste each other’s time, and do sloppy work can make you feel bad. If you are the CEO, it may well make you sick.
Ideally, the CEO will be urgent yet not insane. She will move aggressively and decisively without feeling emotionally culpable. If she can separate the importance of the issues from how she feels about them, she will avoid demonizing her employees or herself.
Tip to aspiring entrepreneurs: if you don’t like choosing between horrible and cataclysmic, don’t become CEO
Nobody to Blame
Ben Horowitz: “When people in my company would complain about something or other being broken such as the expense reporting process, I would joke that it was all my fault. The joke was funny, because it wasn’t really a joke. Every problem in the company was indeed my fault. As the founding CEO, every hire and every decision that the company ever made happened under my direction. Unlike a hired gun that comes in and blames all of the problems on the prior regime, there was literally nobody for me to blame.
If someone was promoted for all the wrong reasons, that was my fault. If we missed the quarterly earnings target, that was my fault. If a great engineer quit, that was my fault. If the sales team made unreasonable demands on the product organization, then that was my fault. If the product had too many bugs, that was my fault. It kind of sucked to be me.”
Too Much Broken Stuff
Given this stress, CEOs often make the one of the following two mistakes:
- They take things too personally
- They do not take things personally enough
It’s a Lonely Job
In your darkest moments as CEO, discussing fundamental questions about the viability of your company with your employees can have obvious negative consequences. On the other hand, talking to your board and outside advisors can be fruitless. The knowledge gap between you and them is so vast that you cannot actually bring them fully up to speed in a manner that’s useful in making the decision. You are all alone.
What CEO need
Feedbacks
Most companies don’t have a good mechanism to give the CEO real, honest feedback. Sometimes the board gives feedback, but it’s often based on impressions at board meetings, perceived success of management hires and overall results of the company; no specifics on how to lead and inspire people, conduct better meetings, or deal with conflicts, to name a few.
Good investors
Make some friends
Get it out of your head and onto paper
Focus on the road not the wall
Decision making
Some employees make products, some make sales; the CEO makes decisions. Therefore, a CEO can most accurately be measured by the speed and quality of those decisions. Great decisions come from CEOs who display an elite combination of intelligence, logic, and courage.
Courage
Courage is particularly important, because every decision that a CEO makes is based on incomplete information. In fact, at the time of the decision, the CEO will generally have less than 10% of the information typically present in the ensuing Harvard Business School case study. As a result, the CEO must have the courage to bet the company on a direction even though she does not know if the direction is right. The most difficult decisions (and often the most important) are difficult precisely because they will be deeply unpopular with the CEO’s most important constituencies (employees, investors, and customers).
As CEO, there is never enough time to gather all information needed to make a decision. The CEO must make hundreds of decisions big and small in the course of a typical week. The CEO cannot simply stop all other activities to gather comprehensive data and do exhaustive analysis make that single decision. Knowing this, the CEO must be continuously and systematically gathering knowledge in their day-to-day activities so that they will have as much information as possible when the decision point presents itself.
Don’t quit
As CEO, there will be many times when you feel like quitting. I have seen CEOs try to cope with the stress by drinking heavily, checking out, and even quitting. In each case, the CEO has a marvelous rationalization why it was OK for him to punk out or quit, but none them will ever be great CEOs. Great CEOs face the pain. What the great Alfred Chuang (legendary founder and CEO of BEA Systems) calls “the torture.”
Ben Horowitz: “Whenever I meet a successful CEO, I ask them how they did it. Mediocre CEOs point to their brilliant strategic moves or their intuitive business sense or a variety of other self-congratulatory explanations. The great CEOs tend to be remarkably consistent in their answers. They all say: “I didn’t quit.””
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