Leaders of start-up companies often ask what qualities and practices determine a successful CEO. Over the past 35 years, I have served as CEO of private and public companies and have worked with dozens of other CEOs and executives. Some were extremely effective, and others were woefully inept, despite their best efforts. Since leadership significantly influences the trajectory of a company, identifying the salient qualities of great CEOs is a valuable exercise. Below, I offer suggestions for CEOs to guide them (and hence their companies) on the path to greatness.
1. Earn your job.
Just because you founded the company and own the most stock doesn’t mean you should be the CEO. You should only be the CEO if you are the best person for the job. When you are no longer the best person, you should step aside before your Board asks you to step aside. I always told employees that they could be CEO if they are better than I. CEO is not an entitlement.
2. Create a strategy, build a consensus, and execute the hell out of it.
You don’t develop the strategy; you lead your team in building a strategy. There are a hundred tactics you could do. Your job is to find the five to seven tactics you must do to win. Consensus often already exists on what you must do. Weak CEOs are afraid of “missing” something so they spread their resources too thinly across noncritical areas. Success is 10% strategy and 90% execution.
3. Focus, focus, focus.
The curse of the entrepreneur is they have a lot of ideas. The vast majority of ideas are terrible, but they will still expend resources to pursue ideas that defocus the company. The 2nd law of thermodynamics basically states that without energy, systems will tend to disperse and become chaotic. You, as the CEO, are the energy to keep your company focused and not allow it to become chaotic.
4. Don’t run out of money.
When people are giving money, take it. When they stop giving money, conserve it. The days of “free money” created bad business practices and those days of easy money are over. Your job is to responsibly invest your money in a very focused and meaningful way. Every initiative is a hypothesis, did the initiative deliver on your hypothesis? Are there meaningful lessons to be learned to generate a new hypothesis? Once you prove your hypothesis, scale in a reasonable way. Investors love to back Scalable Opportunities (ScOps).
5. Trust but verify.
Many first-time CEOs are strong individual contributors and have never managed. The only way to scale a company is to delegate to others who are more knowledgeable in their fields. You need to trust them. However, as the CEO you also need to verify they are delivering results and when they are not you need to dig deep to help your leaders to identify the root problem and possible solutions.
6. Solve big problems.
The ability to solve problems is highly correlated with strong leadership. People will follow leaders who succeed more often than they fail. A great Amazon principle is, “Leaders are right a lot”. For big, critical problems, I like to gather as much information as possible and make the decision only when I have to. Rushing to a solution quickly will greatly increase your probability of failure.
7. Hire people smarter than you.
Steve Jobs famously said, “A players hire A players; B players hire C players; and C players hire D players. It doesn’t take long to get to Z players”. If you are so insecure about your abilities as CEO that you hire weaker people who don’t threaten you, then you should not be CEO. I love robust, intelligent debate. I want executives who will challenge me and perhaps take my job. It’s not about you, so get over it.
8. Be authentic.
Are you self-aware? A VC once told me that there is a thin line between a CEO being visionary or delusional. We all have unique personalities with different strengths and weaknesses. Great CEOs have 2 or 3 traits in the top 95% percentile, but no traits in the bottom 5%. You are not going to radically change your personality and still be seen as authentic. Focus on improving your greatest strengths and weaknesses. If you don’t know your weaknesses, I guarantee you that others do and they will exploit them.
9. Stay calm.
Neuroticism is one of the most negatively correlated traits for good leadership. You, hopefully, have the best information in the company. If you show anger, anxiety, or instability, the rest of the company will freak out. You may encounter an existential threat that requires you to become a more “authoritarian” leader, but you still need to keep your cool. Be transparent, identify the root problem, and focus the company on solving it.
10. Be humble.
You don’t have to be right all the time, you just have to be right most of the time. My favorite company announcement was to share when a person proved me wrong. Your job as CEO is to make the company successful, not make you look good. The more successful the company becomes, the more humble you should become. Success too often leads to hubris and hubris leads to massive failure.
11. Set the best example.
Great military officers eat after their soldiers are fed. If you want people to work hard, you need to work even harder. If you want people to be frugal, you need to be frugal. CEOs that don’t set an example are viewed as hypocritical. Do you want respect? Then show the same level of respect to every person, no matter how junior. However, don’t allow people in the company to disrespect you because it will undermine your authority.
12. You run the company, not your Board.
The primary job of a Board is to hire and fire the CEO. The most successful Boards are where the CEO, along with executive consensus, present their plans. Your Board should also advise and consent on major issues, but you and your exec team drive the company.
13. Be inspirational.
Somebody is going to win your market, why isn’t it you? As the CEO, you need to be able to clearly articulate the problem you are solving, why your solution is the best, how big of a problem it is, and how you are going to win all of the customers and therefore the market. At DoubleClick, we had a competitor led by a very arrogant CEO who told his company that his goal was to drive our stock down to $10/share and buy us for $5/share. Not very inspirational. I told this story at a sales meeting and then said our goal was to build the best products to win all of their customers. Focus on how you are going to create value in this world, that is all that really matters.
14. Organize for the rule, manage the exceptions.
All organizations are bad so you have to pick the least bad organization. Ideally, you have one exec who is primarily responsible for delivering on a key initiative - you have “one throat to choke”. If everyone owns an initiative, nobody owns it. Avoid the dreaded “matrix org” that purports to solve all problems. Always choose an effective org over the mythical “efficient” org.
15. Over communicate.
My 360 review pros were, “great at communicating” and my cons were “terrible at communicating”. You have to be constantly communicating in many different forums; monthly updates, weekly meetings, quarterly reviews, one-on-ones, etc. Be transparent and truthful in your communication, don’t sugar coat risks or failures. It’s important that employees know why key decisions were made.