Ian Neal and Role of The CEO in an early stage venture

Role of the CEO

Everyone will agree that the role of the CEO is critical in the success or failure of any enterprise but just what makes the difference?

In the early stages of development (concept and seed stages) the CEO must have demonstrated management, team-building and leadership ability involving technology and product development, in a resource constrained environment and "do it from scratch" basis (e.g. startup). There is a big difference in managing a mature business to driving a cash consuming start up where there is never enough money to do the things that need doing. It takes a special kind of person to take on and thrive in this most challenging of environments.

As well as being a doer who manages and leads this person must articulate and sell the company vision to attract the financing, engineering and other key talent needed for the next stage. The CEO must lead the team to successful and timely completion of the principle objectives of the Seed stage: proof of technology uniqueness, clear translation of that uniqueness to the development plan for the product and a successful capital raising.

As the business grows through the product development phase into first commercial sales the CEO must be a leader and team builder across departments and he/she needs to lead and manage the team. The CEO must understand and resolve the content, scheduling and management interdependencies of engineering and marketing in the early phases, and manufacturing and sales in later stages. The CEO must function actively as company missionary in pre-selling, negotiating strategic alliances, and co-development partners during the Product Development stage.

Once product/ services begin to be delivered and revenue commences the CEO serves as principal monitor and director of the formal company reviews and must manage the company through the executive staff's objectives, with a process of departmental reviews and staff meetings. Day to day operations and decisions must be delegated to department heads as the company grows through the break even point.

As the business continues it rapid growth the CEO serves as a high level arbitrator in prioritising and resolving cross-department conflicts at the executive staff level. The most common disputes come between product development and marketing (the engineers want to gold plate the product and the marketing people want it out in the market NOW!) and manufacturing and sales (manufacturing needs a lead time to produce quality product and sales have promised short delivery to meet a special customers special needs).

As growth continues the CEO now makes weekly or bi-weekly customer calls and visits to verify the effectiveness of the company's operation instead of making all the sales calls.

Responsibility for the ongoing strategic business planning for the company is now important and this responsibility needs to be manifest by explicit review at the board,

On the outside, the CEO needs to be the primary company missionary/seminal figure for making high level sales and strategic deals and maintaining/extending relationships with the financing communities for the next round funding efforts, high level PR activity (as company and industry spokesperson) to market researchers & analysts, business and key trade press, speeches, industry forums.

As the company matures the CEO has three main roles:

• Chief strategist
• Chief team builder
• Chief salesman (high level and strategic deals)

In short the transition from start up to mature company requires the CEO to move from being chief cook and bottle wash- the person who DOES everything to being the chief manager and leader with very good systems of delegation and control, so that others are properly empowered to Do while the CEO focuses on the higher level activities.

Importantly this is a journey THROUGH which a business must grow. If you start a company with a great manager as CEO the venture will surely fail as that CEO is actually not doing the correct activities for the stage of business. If the venture has a major DOER in the chair once the business is mature then that person will also fail as those under him will not be lead. They will not know what to do, things will always get stuck on the CEO’s desk as he will always have far too much to do, because he is actually trying to do too much rather than being the leader and chief team builder, strategist and salesman.

It is a complex journey from embryonic start up idea on the kitchen table to multi billion dollar corporation and very very few individuals are suited to lead the business through all of the phases. Some are great at starting, others are great at building and others are great and managing a stable mature bureaucratic organization.

The big message is try and ensure that the person occupying the CEO slot is appropriate for the stage of development. When a founder is better suited to going back to his specialist functional role then make room for that person, have him help hiring the CEO for the next part of the journey and employ the right calibre person to take the venture onto and through the next stage.

The role of the CEO is probably more critical than any other position in the firm. This person has enormous power and influence over everything, no matter how strong the board nor how tight the governance practices. This person MUST be absolutely right for the venture and its stage of development. Get this person right and almost everything else is easy. Get it wrong and you always wake up at 3am wondering and worrying - and that by the way is a clue that you have got it dead wrong!!