Being CEO

I talked earlier about how you get to be CEO (basically, luck the first time; track record after that). But what does being a CEO entail?

I think all senior management jobs consist of two separate dimensions that have two separate skill sets. I call these management and leadership. Some people are good at both, some are good at only one.

Management is the basic operational management of the company. Presumably you already know how to do this, at least in your own domain (engineering, marketing, sales, etc) or you probably wouldn’t have been promoted. When you get more senior you have a new challenge: you have to manage people not from your own domain. If you are an engineer, it’s like salespeople are from another planet and you don’t understand what makes them tick. If you are a salesperson you may think the same about engineering. If the company is medium sized things are not so bad since you’ll have a sales manager and an engineering manager to insulate you. But if the company is small then you’ll have to manage the aliens directly. My recommendation is to get some advice. If you’ve never set up a sales commission plan before, don’t assume that because you are a smart engineer who knows Excel that you can just wing it. If you don’t know a friendly VP sales who can give you free advice, find a consultant and pay them. It’s a lot cheaper than making major mistakes.

As CEO you may have only an accountant (or maybe nobody) to support you in finance. I think it makes sense to get a “CFO for a day” consultant to help you unless you are very comfortable with all the finance issues and already have a good feel for how to put together a business plan, how to turn a sales plan into a cash-flow forecast and so on. If your eyes glaze over when you read my blog postings on finance, you need someone to help you. Whatever you do in finance, don’t treat it as a problem that will go away if you ignore it. You’ll need to get a financial audit done at some point, sooner than you expect, and cutting corners will then come to light.

If you are not an engineer by background, you can’t manage engineering. That’s not to say that you aren’t capable of managing engineering but just like salespeople won’t respect you unless you’ve carried a bag, engineering people want to be managed by someone who understands technology and development and knows what it takes to get a product out. If you don’t have an engineering manager you’ll at least need to trust one of the senior engineers to be feeding you the unvarnished truth.

The second leg of being a CEO or a senior manager is leadership. The most important aspect of this is to get everyone in the company committed to moving the company in the same direction. Unless you make truly stupid decisions, it is more important that everyone is aligned than that the decision is ideal. As General Patton famously said, “A good plan executed violently now is better than the perfect plan next week.” In business, “violently” is the wrong adverb but the sentiment is the same.

Having said that, it is also important that the overall strategy of the company is good and represents the best that the management team can come up with. It is also important to be flexible. If something isn’t working then you’ll need to try something else and preferably while you still have enough money in the bank to find out whether that new approach is good. Remember, most successful startups end up doing something somewhat or completely different from what they set out to do initially.

A general rule about management and especially being a CEO: if something good happens in the company, everyone will tell you about it. If something bad happens, nobody will tell you. Despite the proverb that "bad news travels fast," inside a company bad news travels really slowly so you need to make a special effort to discover it. In the early stages it is good to have someone in engineering who is a personal friend who will not hide bad news. Later on, you need someone in sales like that who’ll tell you what is really happening when the company tries to sell the product. You can’t sit in your CEO office and believe everything that you are told. You have to get out and dig.

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