Saturday, January 31, 2015

Lesson #196: The CEO’s Role Must Evolve Between Early Stage and Growth Stage Companies

Posted By: George Deeb - 1/31/2015


& Comment

I have previously written about The Role of a Startup CEO. This article is going to detail how that role changes over time, between a company’s early days and when it starts to scale. For simplicity sake,  I am going to compare the role of a CEO in businesses between zero to $10MM in revenues (early stage), versus CEOs in businesses between $10MM to $50MM in revenues (growth stage).


For early stage startups to be successful, it really needs a hand-on leader that is involved in the details.  That person is making sure all team members are clearly aligned with the vision. They are in the weeds of launching the products, to get it just right. They are helping to craft the early marketing messaging to properly tell the story. They are assisting their sales team in helping close initial clients.  They are designing operational processes from scratch. And, so on. This inward facing, hands-on role is what is required to successfully get a business off the ground in the early stage.


In comparison, for growth stage companies to be successful, the focus needs to move from inside the company to outside the company. This includes things like hiring the best talent, building a strong outside board of directors, romancing investors, working the speaker circuit and looking for interesting M&A opportunities, to name a few examples. Therefore, the CEO’s role is to hire the best senior management team possible, and let them run the day-to-day of the business. So, this is much less of a hands-on role bogged down in the minutia of the business.


The problem here is very few entrepreneurs of early stage businesses, can successfully make the pivot into a growth stage CEO. Either because they are not aware their role needs to materially change in order to effectively manage the next phase of their growth.  Or, because they simply cannot change their behavior (as most people cannot)—they simply love working in the details, having to be involved in every decision. 
And, that simply is not a scalable solution. You can’t have a CEO of a growth stage business acting as a bottleneck on all major decisions. And, you certainly cannot attract and retain the right senior level management team that is required to scale a growth stage business, if the CEO is constantly micro-managing them on every business decision. Growth stage companies need to be built on the shoulders of a strong team empowered to make their own decisions, as it relates to the day-to-day operations.


So, what does this all mean? Either the founding CEO needs to embrace the above shift in their role over time, and successfully execute upon such. Or, they need to acknowledge they are the wrong person to lead the next phase of the company’s growth, and they should hand off the reins to a more qualified growth stage CEO. This is not about “pride of authorship” and keeping your job. This is about maximizing the value of your equity, to give your business the highest odds of success at maximizing its valuation over time. So, take a candid look at yourself in the mirror, and make sure you are the right person for the job, in relation to the revenue stage of your business.

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