4 Qualities of Great CEOs--And Why They Don't Matter
For founders and investors alike, one of the most difficult situations a young company encounters is the founder transition: Can the founder be a great CEO? The short answer is yes. The long answer is that it’s more matter of “want” than “can.”
We’ll get to that in a minute. First, let’s look at the four qualities that great CEOs must have.
CEOs must be competent at four activities: managing “up” (working with the board and investors), managing “out” (being the face of the company face to the market and customers), managing “down” (leading the troops), and managing “forward” (devising strategy).
Managing up, out, and down are about consistent, credible, and regular communication. Any personal style--except being an obnoxious jerk--will work. Some CEOs jump up on tables and pump fists, others quote poetry. As long as long as the communication is there, it’ll work.
Managing forward-;strategy-;requires the CEO to melding his or her vision with pragmatism to achieve business results. That can be learned over time, but usually not on-the-job as CEO. Founders are great at vision, but pragmatism takes equal parts focus and compromise. That’s much less common.
No matter how “one-of-the-guys” you are, the CEO is inevitably enclosed in a bubble of agreement. You’re not just the boss--you’re the founder. People naturally defer to you.
To counteract this, I always reminded my team that “people who agree with me are a lot cheaper. You get paid more to disagree with me, so I want to hear what I don’t want to hear.” This works, but only if you follow through and act on the feedback. There’s nothing more demoralizing to A-player executives than disagreeing with the founder and getting ignored repeatedly.
Self-awareness also means knowing your own natural disposition and fitting it to the duties of CEO. For example, I am over-the-top passionate and gregarious, and I had to dial back on that during management discussions. Otherwise there would have been zero exchange of ideas. Eventually, I took myself out of the equation and had the team meet without me. That’s when they bonded and the business took off.
Perspective is the ability to assess situations in an appropriate context. This is where experience comes into play. The good news is that you don’t have to actually experience every situation in order to have perspective, but you need to be able to seek out and learn from others’ experiences.
As a newly minted CEO, one of my hot buttons was providing only generic soda in the company fridge. I wanted to send a message that we were a frugal company. Seriously -- that was an issue for me. Fortunately, I had a great COO who told me I was an idiot, and who convinced me to let the office manager handle the sodas.
Entrepreneur-CEOs often stumble over pet issues. Their passion or ego causes them to overweight their own judgment, leading to a thought process that can roughly be described as, “This is my product, I experienced the problem we’re solving, I started this company,” and so on. To appreciate the importance of perspective, we need only take a look at how Reed Hastings handled Netflix during last year’s Qwikster debacle.
Dwight Eisenhower said that the chief executive only gets the hard decisions. All the easy ones are made by people below him or her. Decision-making is the most important skill for CEOs, and is also the least learn-able. Founders are often poorly prepared, based on experience, and poorly equipped, based on personality, for CEO decisions.
Consider this: Say you’ve finally got your start-up off the ground, landing lots of customers who love the flagship product. revenue is growing by leaps and bounds. Soon, the mediocre players start copying your product design, marketing style, even making outlandishly false product claims.
You blow this off for a while, but then you start losing deals - customers are actually listening to the lies! Even your sales VP is begging you to build a product to compete against the vaporware.
Do you divert your resources to address a competitor’s desperation, even though you know it’s wrong? You started this company with your idea, and now, competitors aren’t playing fair, the market’s got it wrong, and it’s threatening your baby.
These are the situations where decision-making matters most. You can’t flip-flop, you can’t wait, and you can’t be inconsistent. Typical founder attributes, such as persistent contrarianism, stubbornness, and unwavering belief in themselves--the very things that make them entrepreneurs--inhibit the best decision-making in these circumstances.
So we’ve covered what makes a great CEO. For entrepreneurs, though, this should all be beside the point.
Here’s the take-home message: If you’re the founder, you don’t need to be the CEO. Being the CEO is most often slogging around with messy, hard, and un-fun stuff. Being the founder, the visionary, the passionate idea guy --that’s fun. Don’t let the headlines and your ego push you into needing to be the CEO when you don’t really want to.
The fact is that most entrepreneurs do not make great CEOs that can scale businesses. But they can become great CEOs by mastering the above qualities. The real question isn’t whether you can. It’s whether you really want to.
ALAN YING | Managing Director, Polus Capital
Alan is the non-executive chairman of KLAS Enterprises, a leading provider of healthcare information services. He is also the President of Polus Capital, a provider of entrepreneur-friendly capital to growing and profitable businesses based out of Houston. He was formerly the founder and CEO of MercuryMD.