Early in my career when I arrived at my first CEO spot, I was faced with finite capital, a company burning cash, and a very junior inexperienced team (including me). Nobody ever hires a new CEO if things are going great, so as a hired CEO you have to expect that something is wrong and that drove the board’s decision to hire a new person to run the show. I may not have recognized it at the time, but that was the situation at my new company. By this point in my career, I had held a range of leadership roles, so my ego led me to believe that I was up to the task and equipped to sort through any issues. Because we had finite capital and we were burning cash, the words that rang out in my head were “cash is king,” and I was loath to spend money. Specifically, I thought I could save money by not hiring an experienced executive team. I could do it all myself.
Needless to say, this was a very bad idea. It was like I was staring at a barbell loaded down with weights, and there was no way I could lift that thing all by myself, but I was unwilling to admit it. Fortunately, I had a wise seasoned investor who took me aside and gave me some of the best advice I ever received. He pointed out that the path I was on was going to be slow and arduous, and we would likely spend all the cash we had before we could turn the corner. However, by spending the money to hire a strong team we could accelerate our progress and as a team we would have the strength (and brain power) to overcome our challenges and, in effect, lift that barbell.
Throughout my career, I have seen it time and again where CEOs, particularly less experienced ones, try to follow the same do-it-yourself path I was on. Maybe it is ego, or maybe it is frugality that makes them think they can do it, but invariably it is the wrong path. The corollary problem is when the company has grown, and although there are executives and leaders in the company, they are not up to the task at hand. Rather than recognize the need to top grade the team, too many CEOs move to micromanage the areas that are weak, and end up trying to do too much while at the same time not doing enough of the CEO role.
Often, the company has outgrown the team that got it to where it is, but the CEO, and frankly some boards, are too slow to recognize the need for change. It is in our nature to be too quick to hire and too slow to fire, or at least to identify the need for a change of personnel. Even when some CEOs decide it is time to hire, they struggle with being clear about what they really need, which leads to bad hires or misfits, and once again, the CEO tries to jump in to prop up the new hire by doing their job for them.
One of the most important responsibilities of a CEO is to get the right people in the right roles, particularly the senior leadership team. This is also a place where the board can be most helpful. The board can provide advice and guidance for the CEO and take an active role in hiring the exec team. Many tech company boards are dominated by investors who work across a portfolio of companies. They have been to the movie many times, they know what good looks like, and they can see how bad will turn out. I always maintained a bright line between operations and the role of the board. I did not always welcome ‘help’ running the company, but one area where I learned to seek input was hiring executives. Not only do investors know potential candidates, they also have a keen sense of the CEOs strengths and blindspots, and they can be effective helping to make good hiring decisions that will complement the CEO.
I spent many years participating in a CEO group led by the High-Growth CEO Forum. They have a model of company/CEO growth that truly inspired my thought process about the CEO role. When a company is small, the picture looks like an atom with the CEO at the center and the team as the electrons circling around. When the company matures, it evolves to look more like a molecule made up of atoms where the exec team members are each at the center of their own atoms. The CEO moves from the center of the company universe to become more of a leader orbiting around the edges, inspiring the teams and empowering the executives to be the masters of their domains. The only way this works is if the CEO has hired well and has trust and confidence in the leadership team.
In my experience, this transition starts to happen in software companies as they approach $10M in recurring revenue, and really has to be in full bloom by $20M. When a larger company is still CEO-centric, it is an indicator that something is not quite right. Maybe there is a talent problem in the leadership team and it is time to top grade some of the execs, or maybe the CEO has failed to let go and is still playing ‘small ball.’ The result inevitably is constrained growth because no CEO can or should do it all. When this happens, it falls on the board to be the mirror that reflects the situation back to the CEO, and the board may need to drive for change. Unfortunately, sometimes it means the company has outgrown the CEO and it is up to the board to act - never a pleasant situation.
Back to that sage advice my board member gave to me in my first CEO role. Put an experienced team in place early and collaborate to drive for success - As a CEO, you can’t do it all alone, and you can’t do it with a sub-par team. Hiring well is a fundamental requirement for a successful CEO, and the task is ongoing as the team will require continuous renewal and up-skilling as the company grows. I recommend including an executive team scorecard in every board meeting. It does not have to be sophisticated, but it will cause the CEO to continually consider each member of the team and share their assessment with the board. Invariable, the scorecard tiggers a few minutes of board discussion and creates an early warning system to spur action when appropriate.