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Friday
Dec302011

The Role of the CEO

Any startup that has both a CEO and a President/COO has the wrong person in one or the other (or both) of those roles. This sort of title inflation and proliferation is almost always – like most other “contortions” of the standard org chart – a red flag to VC’s. Can easily be taken to indicate that some of the co-founders are more worried about titles (and ego’s) than success.

Allen Morgan

Think of a startup as a soccer team. Every good soccer team needs a goalkeeper, a couple of defenders, some midfielders, and the forwards. It is vital to the success of the team that every member respects his role and acts to the overall benefit of the team. Sure, it is mostly the forwards who score the goals and capture the bulk of the fame, but the experienced soccer fan knows that the best teams are the ones which overcome the egos of the individual players and merge into one indivisible machine of organizational efficiency—with each player magnifying the strengths of the others.

One of the most important things when building a startup team is to overcome the egos and decide who should play which role.

Choosing your CEO

When building a startup team, you want to avoid title inflation. The first and most simple rule is to have a single CEO. You want one guy in charge of the whole thing—and only one.

Sometimes, the egos of the other founders may suggest otherwise. There is the co-CEO model—which looks good on paper but is rather a recipe for failure. There is the CEO and COO solution—a crafty way to cripple the CEO's role and water down his responsibilities. And then there are other paths to title inflation: having a CEO and a President, or worse, a CEO and a Chairman. Just avoid these constructs.

The CEO needs to be in charge of the big picture. Here is what the CEO does—borrowing from Fred Wilson's definition:

A CEO does only three things.

  1. Sets the overall vision and strategy of the company and communicates it to all stakeholders.
  2. Recruits, hires, and retains the very best talent for the company.
  3. Makes sure there is always enough cash in the bank. 

The CEO can do a lot more things, and often he does. But he should be in charge of at least all of the above responsibilities. If he is not, trouble may be ahead. If the CEO is not solely fulfilling the above functions, here's what can happen:

  • The CEO will not perform well. He will think about a lot of things, but he will not think them through in the way a CEO should. He will always count on the other founders' opinions. He will not feel in charge. He will not feel that this is his responsibility and his alone.

  • The startup will stagnate. There will be a focus on talking instead of doing. The founders will procrastinate a lot and spend a lot of time at the whiteboard. Whenever it is time to take action, the CEO will hesitate. The other founders will hesitate. Nothing will move.

  • The founders will be distracted too easily. Insecurity will drive the startup. Nobody will actually truly feel in charge. Temporary feelings and spontaneous emotions will have a huge impact on the startup's operations. Planning will be transitory and not authoritative. Tracing failure back to individual actions will be impossible.

  • In the worst case, the vision will oscillate. Someone has to internalize the vision and commit to it. If the vision isn't set in stone and dead safe, motivation will drop slowly but steadily, and communication among the founders will become more inefficient over time.

What you really want to do if you are not sure which CEO is the right one is to choose an interim CEO and evaluate the chosen solution after a previously agreed upon time period. During that time period, you do not want to challenge the CEO's position.

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References (2)

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  • Response
    Response: b2b marketing
    Amazing page, Stick to the beneficial work. Thank you!
  • Response
    The Role of the CEO - Thoughts on Technology and Innovation - Deviant Bits

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