Identifying Blind Spots: How to Make a CEO Successful in the Role

Note: This article is part of an ongoing series on Board Directors. To learn more about their roles and responsibilities, download this free eBook today Director's Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.

Identifying Blind Spots: How to Make a CEO Successful in the Role
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Being CEO is one of the loneliest jobs in the world. As CEO, you are ultimately held accountable for the success or failure of the company. Your employees and their families depend on you for their income. Customers depend on you to solve important problems for them. Shareholders depend on you to deliver the promised return on investment.  When times are good and the company is growing and profitable, it’s a great job to have. Unfortunately, times are not always good. No company I’ve ever been involved with for a decent length of time avoided having serious issues crop up that the CEO had to address quickly. Businesses are complex organisms. Primarily, this is due to the fact that all businesses involve people… and people are the root cause of most problems.

You might think that the CEO can rely on her senior managers to deal with complex issues. In many large organizations they can most of the time. Even in big organizations, senior managers have the luxury of reaching out to their peers and the CEO for help. The startup CEO does not have a peer at the company and often does not have a full set of capable senior managers to help shoulder the load. So the CEO must reach out to the board for guidance.

As a director, it’s your responsibility to help the CEO through these difficult moments. It might be a conflict with a co-founder that will result in a breakup of the founding team. Or it might be a difficult strategic decision that results in a layoff of half the staff. Whatever the problem is, directors need to act like a head coach, a chief psychologist or a consigliere. And providing that kind of help requires being involved and having a good relationship with the CEO.

Q: Ham, how do you advise new directors to start building a relationship with the CEO that allows the CEO to become comfortable asking for help?

The first step in this process is opening up a regular line of communication. I have one approach that has worked well for me over the past two decades. When I first join the board, I ask the CEO to put a 30-60 minute phone call into his or her calendar at a scheduled time every week. I know every minute of a CEO’s time is valuable, so I don’t take this request lightly. Before each call, I take a few minutes to write down the questions I plan on covering and make sure I leave time for the CEO to ask for help.

There are obviously times where a call needs to be canceled. But in a typical year, the CEO and I will end up talking at least 40 times. I don’t like using this analogy, but our calls are not that dissimilar to the weekly sessions that patients have with their psychologists. The CEO tells me what’s going on at the company and what problems he or she is trying to address. I listen and then, if appropriate, give some directed advice. It’s a regular, non-confrontational discussion that allows the CEO to put voice to the problems he or she is facing.

Before a CEO is truly comfortable asking for help from a director, I believe there needs to be a strong personal relationship. That relationship must be built. Before I invest in a company and take a board seat, I will get together with the CEO in a social setting. It might be dinner or perhaps a sporting event, or even a quiet moment while joining them on a customer call. Whatever the setting, the purpose of this time is to get to know one another in a non-work related context. My goal is to understand their personal motivations, and I want them to understand mine. That can take some time and often requires interaction outside the conference room.

Once I make the investment and we start our weekly calls, I begin phase two of building a personal relationship. This involves asking a few unobtrusive questions during some of our calls that are related to the CEO’s personal life. I like to know what’s going on with his or her primary non-work interests: family, health and hobbies. When appropriate, I might add my personal stories to our discussion. This is all part of breaking down barriers and allowing us to build a position of trust and familiarity. We can’t help each other if we don’t build real, deep comfort and trust in our relationship.

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Q: What topics do you focus on when you are speaking with the CEO?

On my weekly phone updates with the CEO, I like to keep it really simple. I start by asking for a quick status update on the business, but I don’t dig into the nitty-gritty of the company’s daily operations. I spend most of my time discussing the following three themes:

  1. Team

  2. Finances

  3. Strategy

When talking about the “Team”, I want to make sure the CEO is spending a significant percentage of her time hiring the right people (“A” players), building a strong company culture, and keeping the organization focused. In our weekly conversations, I am always listening for bottlenecks that might indicate it’s time to bring on a new team member or create a new role. Sometimes it’s as simple as hiring an assistant to offload some of the non-critical tasks on the CEO’s overburdened desk. Other times it’s when the company reaches an inflection point where it’s important to bring on a full-time CFO to make sure the company is receiving the right metrics to help operate and grow the business. The conversation about Team is the most frequent topic on my weekly CEO call. I can’t remember the last time I didn’t discuss it in one form or another.

With “Finances”, the key topic revolves around not running out of the financial resources necessary to invest in the company’s growth. Startups burn through cash quickly. The biggest mistake a board and CEO make is to not be prepared for replenishing the bank account in time. As a director, you need to make sure the CEO recognizes when the company will be out of cash and then work with the CEO to ensure it doesn’t happen. Conversations around Finances are episodic. They are held frequently during periods of fund raising, and then they go quiet for a quarter or two when the company’s bank account has sufficient cash to last out the year.

The final topic, “Strategy”, is a bit more nuanced. In my case, I think of strategy along the lines of the company’s “North Star." For me, a company’s North Star is the beacon toward which it navigates. Once you find your North Star, you stick with it and make sure the entire company understands where you are going. This is an important aspect of company culture. I want to make sure the CEO is communicating on a regular basis with the ENTIRE company to keep everyone on course. As a director, you can help the CEO by acting as a sounding board in defining and refining the company strategy. Remember it’s not your job to create the strategy and make the CEO follow it. Conversations on strategy occur on a fairly regular basis.

Q: Talk to us about helping a CEO grow as the company grows. What does it mean to have a CEO move from player to player-coach to coach?

Great question! I love to use this sports analogy when I am providing guidance to a CEO. Let me start with a little background to explain what the terms mean. Here’s how I see it:

CEO as a Player: In the early days of a startup company, you might have 3 to 10 employees. During that time period, everyone, including the CEO, is responsible for many different tasks. At this stage, in addition to helping manage the team, the CEO is spending a significant percentage of his time doing more low level tasks such as finding a new office, selling product to customers, and paying the bills. To keep the sports analogy going, the CEO plays out in the field for every game and yells encouragement to his teammates.

CEO as a Player-Coach: As a company makes progress and the team grows, the CEO sheds many of her low level tasks and spends a higher percentage of her time managing the team. The company is starting to put process in place and build out more traditional departments like sales, product development, customer success, finance, marketing, etc. Some departments have VPs running them, others don’t. So the CEO still needs to suit up and play part of the game, but only in a utility role. More of the CEO’s time is spent creating the game plan, recruiting the talent and coaching the players.

CEO as a Coach: When a company reaches the stage where it moves to a more structured organization with lots of process in place, the CEO has limited time to work on specific projects. No longer does the CEO put on a uniform and trot out onto the field. Her role is 100% focused on creating the game plan, recruiting the talent and coaching the players.

So, let’s get back to the gist of your original question… what do I need to do as a director to help the CEO make these transitions? First off, you need to make sure the company is growing. Second, you need to understand what stage the company is at. Third, you need to understand how the CEO spends her time on a daily and weekly basis. If the stage doesn’t match up to the weekly task list, you have a mismatch. Here are some examples where you should step in with guidance:

  • In an early stage startup still trying to refine product market fit and build a repeatable sales model, it makes no sense for the company to hire a senior VP of sales. The CEO, and often the co-founder responsible for product, should be out on the front lines talking with customers and understanding their perspective on the product. Tell the CEO eager to off-load sales to wait on that extra layer of burn and isolation from customers until the product market fit is assured.

  • In a growth stage startup with 30 employees, I don’t expect the CEO to be heavily involved in finding a new office, paying bills, and doing a lot of grunt level work. At this stage, she should pass that work off to a finance team that has a Controller or CFO. If the company doesn’t have someone in this role, it’s time to hire for that position. And that’s great advice for the CEO.

These two examples are relatively simple to understand, and only represent two of many scenarios you will run into. The key point I am making relates to where you, as a director, are most needed by the CEO. Use good business judgement along with an understanding of company stage to make sure the CEO is optimizing her time for the job at hand.

Q: What if the CEO has never done it before and is really overwhelmed?

There is only so much a board can do in terms of day to day hand-holding. For CEOs who are really struggling to learn core aspects of the job, it can be appropriate to bring in additional resources. Many start-up boards employ executive coaches to help speed the CEO up the necessary learning curve. This can be particularly helpful in personal growth areas like the softer or less tangible skills of being a leader and a great manager or being personally productive and on-task all the time.

Q: How do you decide if your CEO needs an executive coach?

In the world of early stage companies, the majority of CEOs are high-potential individuals with limited on-the-job experience. A great coach will help the CEO develop the skills needed to manage the company through rapid growth and change.

The majority of early stage CEOs do not have executive coaches, but those who do report that they receive real value from the relationship. A coach is a safe place to get unvarnished feedback without the risk of divulging problems that might result in the CEO losing his job or harming key personal relationships.

Great coaches don’t come cheap, costing anywhere from $1,000 to as much as $15,000 a month, and so many early stage companies expect one of the board directors to take on this role in the early days. This can work, but is not ideal, due to the issue surrounding confidentiality.  But it can be useful during an interim time period where an outside coach is not within your budget.

Personally, I believe everyone can benefit from some outside perspective and guidance. Whether you are working with a first time CEO or an experienced serial entrepreneur, an executive coach is a resource you should look to retain.

Q: Sometimes a CEO is struggling to get out of their own way. What do you do to help out in this situation?

Let me start with a brief story. Several years ago, I was speaking with a CEO. We were having our weekly phone conversation, and he started the call with a brief status update on the past week. Most of the update focused on the myriad tasks he had to deal with in the past few days. I was taken aback by the amount of time he was spending on low level administrative tasks. When he finished his update, I asked one simple question. “Do you enjoy doing those tasks?”

His response was very telling. “No, I hate doing this stuff, and I’m not very good at it! I know it takes me more time than it should, but there is no one in the company who I can pass it off to.” At the time of this conversation, the company had about 7 employees, and they were generating a small amount of revenue from a handful of customers. As you can imagine, resources were pretty tight.

My second question to the CEO was, “Why don’t you hire an executive assistant or executive administrator? That person could take over all these tasks you don’t like and you could put your time and energy into more valuable efforts for the company.” The phone went quiet for a minute or two, and then he responded. “That’s a good idea, but I don’t think we can afford that hire.”

He was right in one way. The company didn’t have a lot of money to spend on this type of resource. But he was wrong in another: what the company really couldn’t afford was to not have a CEO, or rather to have a CEO spending all of his time on non-essential things.

In the end, I prevailed and convinced him that this investment in growth was the right thing to do. He was letting the minutiae of running the company keep him from addressing more important items. A few months after hiring his assistant, I noticed during our weekly phone calls that the CEO was a bit more relaxed and on top of his main responsibilities. I felt good that I had helped him get out of his own way.

So what’s the key takeaway from this story? Part of your job as a director is to listen to your CEO and understand what roadblocks he is facing. How does he handle those roadblocks? And, what guidance can you give him to help get around those roadblocks?

Want to learn more about the roles and responsibilities of Directors? Download this free eBook today Director's Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.