When leading a new enterprise, one of the fundamental challenges entrepreneurs are faced with is understanding their executive responsibilities, and recognizing how they evolve over time.
For entrepreneurs, the difficulty rests in continuously adapting to the evolving needs of a company as it transforms from a startup to a mature business.
Overtime leadership responsibilities transform from managing the creation of the business to the stewardship of it's operations and strategic direction. To succeed over the long term, entrepreneurs must be nimble, take on new and more complex responsibilities, and recruit talented individuals to join their cause and assume key leadership roles.
Here, we examine how the executive leadership responsibilities evolve over time, how entrepreneurs can adapt to change, and how leaders can surround themselves with the right team to navigate their business as it grows.
Initial Executive Responsibilities
Entrepreneurs who assume the role of Chief Executive officer are broadly responsible for overseeing all of the activities associated with their company and reporting them on a regular basis to the Board of Directors.
However, before a company formally takes shape, entrepreneurs must address a number of initial items to properly lay the foundation of the business that will likely emerge.
The initial responsibilities of founders involve accomplishing the following key tasks:
1. Creating a solution in concept that solves a real customer need.
2. Incorporating the company to achieve the following benefits:
- To be taken seriously by prospecting investors & employees.
- The ability to secure banking services.
- To gain protection from personal liability.
- To pay less taxes as businesses are taxed on net income.
3. Assembling a team to develop the business solution.
4. Ensuring that early adopters have a positive emotional experience with the solution.
5. Recruiting a team to oversee the initial corporate functions including administration & marketing.
Entrepreneurs should be aware that form of incorporation can vary depending on the type of company and the solution it offers the market.
Incorporations can vary from a LLC, S-Corporation, C-Corporation, or a Non-Profit. Each form of incorporation has varying levels of qualifications and benefits that define the specific activity and purpose of a business.
Once a business solution has been created and begins to demonstrate real traction in the marketplace, founders must then shift their focus to the following key issues that define the corporate structure of the business.
A. The distribution of equity.
B. Establishing the company’s advisory board, and board of directors.
C. Identifying the key roles required for the business to properly function, and the needed level of prior experience.
D. Determining how many people are needed to fulfill the company functions.
E. Setting early milestones and developing a timeline to achieving them.
One of the main challenges entrepreneurs face as their business grows is awarding equity stakes to non-founding partners.
Generally speaking entrepreneurs are reluctant to offer equity. However to effectively align interests and secure the long term commitment of key individuals, and to at times compensate for lower salaries, offering equity is important.
Equity should not only be viewed as a form of ownership and a mechanism of control, but as a tool to motivate and unite stakeholders.
To facilitate determining how the company's equity should be distributed, founders should make the following considerations:
A. Who was involved in the discovery of the company’s solution?
B. Who was involved in the initial stages of establishing the business?
C. Which executive roles will substantially determine the ongoing viability of the company and determine it’s future success.
After the Chief Executive Officer, the most important executive roles of a company will differ substantially depending on the industry the business operates in.
For example, in internet and technology businesses the Chief Technology Officer can make or break the business and is therefore typically awarded substantial equity.
However, for manufacturing businesses the Chief Operating Officer is often valued above the other executive roles and awarded a corresponding level of equity. Similarly for a advertising agency, the CMO or Creative Lead will be awarded substantial equity because of their value to the company.
Building An Initial Team
Fundamental to launching a new business is choosing a group of talented and committed individuals to participate in the building of the company and the development of it's unique solution.
Typically, startups begin with between 3-10 individuals who divvy up the preliminary responsibilities of the company. Overtime, the essential roles that worked towards achieving the early milestones become the foundational functions of the business.
Founders typically assume the roles of chief executive officer or chief operating officer, and after achieving early milestones must determine what broad corporate functions need to be established for the company to succeed as it grows out of the startup phase.
For technology companies the most important initial functions may include:
Business Formation / Operations / Accounting
Software Development & Design
Marketing & Public Relations
For fashion companies the most important initial functions may include:
Business Formation / Operations / Accounting
Raw Materials / Procurement / Product Development & Design
Distribution / Ecommerce
For healthcare companies the most important initial functions may include:
Business Formation / Operations / Accounting
Product Research & Development / Testing
Intellectual Property / Legal Regulations / Compliance
No two businesses that operate in different industries will value the same initial corporate functions the same way, or pursue the same milestones.
The only preliminary function that must be properly addressed no matter the industry a company operates in is business formation, operations and accounting because these activities sustain all the other functions in a business.
For the business to succeed, entrepreneurs must recognize that the right people need to be brought in to handle the appropriate functional responsibilities. Corporations are not people, but they are made up of people.
The right person in the right role can define whether the business achieves it's milestones or misses them.
Delegation is therefore, a key component to successful leadership, and entrepreneurs are responsible for finding the right people and deciding how they can fit into the company.
When considering who to first implicate into a business, entrepreneurs should consider the following hiring tips:
Only onboard/hire individuals who can do their job better than you could.
Hire individuals with positive attitudes, strong work-ethics, and who enjoy collaborating. Fostering a strong sense of team spirit is essential for early stage companies to properly function, so it is important to bring on people who can work well with one another.
Only hire people who are intrinsically motivated by the mission of the company and the objectives the business aims to achieve. The early stage hires should feel aligned to the values and culture of the company. The best candidates are driven by purpose and impact, not money.
Onboard individuals who are effective communicators. Early on, the functions of the company broadly fall under the umbrella of problem solving. Everyone must be able to clearly communicate their ideas, define their positions and contribute to the strategy of the business. Early stage companies cannot afford people who keep to themselves and never contribute.
To make sure the executive strategy is being implemented properly, initiate a clearly defined objective system to take the performance of individuals and groups against the communicated goals of the business.
Early on people will be required to multi-task and creatively achieve the demands placed upon them. Leaders should not micromanage the team. Startup teams typically have a lot of autonomy as well as a high level of accountability. If someone is not performing according to expectations it will become clearly visible, and corrective action should be taken.
Company leaders should let go of people quickly if they fail to achieving their goals of it they perform poorly with the group. Never keep under-performers for more than 30 days because they can drag the whole team down and lower the standards for existing employees as well as potential hires.
A challenge entrepreneurs face early on is bringing on people who fit into the company culture.
People who are good cultural fits produce teams that are homogenous, which is efficient, and that is a good thing.
However, as a company grows it will need a diverse group of minds and talents to tackle the new and evolving challenges facing the business. Different approaches and perspectives are the best sources of innovative solutions.
Entrepreneurs should therefore be aware that the initial tendency to hire like-minded individuals who match the desired startup atmosphere and culture should be abandoned after the company achieves defined milestones during it’s formative years.
Company's who sustain their homogenous cultures often fail to innovate and adapt quickly enough to marketing changes.
Entrepreneurs must therefore recognize the moment when the practice of hiring for team fit must be abandoned for more open minded and experience oriented hiring practices.
To make sure that the best possible team is assembled, entrepreneurs should cyclically question whether they have the right people on their leadership team, and examine how they feel about each executive's day-to-day contribution to the company.
Whenever considering a potential executive hire and insecurities about their potential involvement emerge, slowdown the hiring process. Reflect on what the company really needs whether the potential hire matches and surpasses those needs.
Asking difficult questions early of potential executive hires can uncover differences of opinion and help avoid potential conflicts. It is important to keep in mind that an effective leadership team is one that operates like a team. The executive group should not be full of egotistical individuals or “start” employees who, while talented, never get along.
Entrepreneurs should not be afraid to pass on a talented individual or fire a committed leader if differences of vision and practice emerge, and leaders should not be keep on because they represent the only present option.
It is the responsibility of the CEO to constantly look for talented people and assess the human risks of the business in order to succeed over the long term.
Executive Responsibilities of Established Companies
When a company matures to beyond 25 employees after several years of operations, the executive leadership responsibilities evolve from focusing on the creation of the business, to ensuring that it’s ongoing operative functions yield positive economic results.
Simply put, the chief executive offer or company leaders transition from innovative creators to motivated stewards. Their primary responsibility becomes making sure the business is functioning properly and progressing in the right direction.
This is not to suggest that the creative drive of the CEO and company leaders should diminish. It simply implies, and correctly, that overtime the time and energy that was once spent discovering and creating a business solution becomes absorbed with managing the the operative functions of the business and defining it's strategy.
To ensure that a business continues to innovate, CEOs should recruit creative individuals who can lead the innovative processes. CEOs can and should participate in the innovative activities of their business, however it no longer becomes their primary focus once their company matures.
When a business achieves a level of maturity after successfully growing out of the startup phase, the responsibilities of the CEO transition to include managing the following items:
A. Representing the voice of our company
B. Keeping all stakeholders focused on key objectives
C. Building the company brand and elevating it’s awareness
D. Supporting and unifying business functions
E. Supporting product development
F. Keeping company costs low
G. Sustaining relationships with investors
H. Understanding the market and anticipating future changes
I. Maintaining measurable & reasonable goals
J. Hiring key or executive level employees
K. Filtering out the “takers” from the “doers”
L. Developing the accounting system (cash & eventually accrual)
M. Reviewing & improving the operating processes of the company
N. Implementing automaton where it be appropriately implemented
O. Reinvesting revenue into future product improvements
P. Reporting all company information to the Board of Directors
The CEO may not be directly responsible for conducting each of these individual activities, but they are responsible for overseeing their strategic implementation.
In this for this reason that effectively communicating strategic direction is among the most important responsibilities of the CEO. Without good communication abilities and habits, company policies can be misinterpreted, procedures ineffectively implemented and direction lost.
The objectives, strategies and goals of the CEO must be clearly communicated so that the people responsible for carrying out his/her plans understand the key objectives and how to carry out the plans.
The role of a good communicator is another important factor company leaders should consider when building an executive team. The executive team should be able to speak the same proverbial language so that each functional leader can to effectively interpret the direction of the CEO and then translate the plan into action.
A real challenge CEOs of mature businesses face is balancing the relationship between internal and external stakeholders, who often have very different interests and objectives.
Internal stakeholders are people within the company who typically serve under the CEO. Their interests are often the purpose of the company, the solution it creates, and the day-to-day operations of the business, as well as their current and future professional standing within the enterprise. Internal stakeholders are typically committed to improve what the business does and how it does it.
External stakeholders are people outside of the company, but who have influence on it's strategic direction. These include shareholders and board members. Their interests are typically focused on the economic performance of the business and increasing their influence on the direction of the company. External stakeholders are typically committed to repeating the greatest economic reward from the activities of the business.
In many cases the interests of internal and external stakeholders are aligned. However, there can be instances when the interests of each group of stakeholders are in opposition.
In such precarious periods, it is the challenging responsibility of the CEO to realign the different interest groups towards a common vision of what the business aims to achieve in the short and long term.
The best way CEOs can do this is by convincing all stakeholders of the strategy they are proposing and surrounding themselves with the best possible team to execute their vision.
Executive Leadership Roles
To support the efforts of the Chief Executive Officer, company founders typically establish a number of complementary executive roles to oversee individual functions of the business which include; finance, operations, marketing, technology, design and sales.
Each corporate function contributes towards the ongoing operations of the business and when harmoniously managed can propel a business to achieve great things.
It is the duty of each executive offer to provide their own perspective and talent to effectively managing their function according to the strategic direction of the Chief Executive Officer.
When building out their executive team, entrepreneurs should carefully analyze the general role & responsibility of each executive officer, which can be described in the following way:
The role of a Chief Operations Officer is to manage the tools and resources the company leverages to operate and cascade the executive strategy to the lower ranking staff.
The COO’s responsibilities include: implementing reward systems and coaching operative processes to align personnel with company goals, planning organizational requirements, maintaining & monitoring staffing needs, researching technologies and innovations to improve operative processes, and motivating employees to fulfill performance expectations.
The COO is typically the second highest ranking executive officer after the CEO because of their close involvement in every function of the business.
The role of the Chief Financial Officer is to manage the company's financial reporting, budgetary exercises. and define the financial strategy to the CEO.
The CFO’s specific responsibilities include the following items: managing the company’s cash, overseeing the investment and asset management activities, constructing budgeting, conducting economic forecasts, managing the accounting methods and practices, auditing the company to make sure it is financially in compliance with regulatory policies, sustaining good relations with financial institutions, generating financial policies and managing investor relations.
The CFO must be a financially talented individual who typically has acquired financial or accounting certifications. The CFO is also among the few individuals other than the CEO to regularly work with outside government institutions, and in such a capacity represents the business.
The role of a Chief Marketing Officer is to define and manage the company’s marketing and public relations strategy.
The CMO’s responsibilities include; communicating marketing goals, defining the advertising strategy, conducting market research, managing distribution channels, facilitating product development initiatives, managing sales activities and and developing pricing policies.
The CMO must connect a company with it’s customers. An in-depth knowledge about the company’s solution, it’s target customers and market is required to advertise the company strengths to facilitate growth.
The CMO must work closely with the COO to verify that the business solution complies with customer expectations, and to make sure that the distribution channels will work seamlessly with the product development team. The CMO must also work in close tandem with the CDO to make sure all of the companies visual elements are consistent and representative, and the CFO to make sure that the marketing budget is feasible.
The role of a Chief Technology Officer is to lead all technological efforts related to product development initiatives, and company processes.
The CTO is responsible for managing the following items: providing forward looking insights on future product development efforts, offer recommendations on the adoption of new technologies to improve the operative processes of the business, and assure that the business solution is properly engineered in terms of it’s architecture, design, code and functionality.
For software solutions, CTOs must manage product upgrades and ensure that the application works across device platforms and operating systems. They are also tasked with implementing and refine the engineering process to support product development efforts and ensure that the engineering team is focused on delivering on time.
The CTO works in close tandem to the CDO to effectively implement the aesthetic principle of the company, and the COO to make sure that proposed solutions can be effectively developed with the resources available to the company.
The role of a Chief Design Officer is to manage the visual design elements and brand of a company.
The CDO’s responsibilities include; consulting on product development and design initiatives, providing forward looking design insights on future product development, assuring that the solution is superbly and uniquely designed, and that the implemented designs meet device, operating system, and cultural standards.
The CDO defines, implements and refines the aesthetic philosophy of a company and creates design processes that supports the product development and marketing efforts.
The CDO typically works in close tandem to the CTO so make sure that solutions are consistent with the design standards of the company, and the CMO to make sure that all visual and promotional materials that represent the company align to the defined aesthetic philosophy of the business.
The role of a Chief Sales Officer, typically named the Senior Vice President of Sales, is to manage all of the sales efforts of the company, and consult on the current or potential future sales performance of the business.
The CSO is responsible for: providing insights on industry trends, managing customer relationships, ensuring customer satisfaction, leading customer service activities, and motivating the sales team to surpass performance standards and executive expectations.
The CSO works in very close tandem with the CMO to verify that sales pitches match the promotional materials and advertising efforts of the company. CSOs also work closely with the CFO to report on the economic results of all selling activities.
Central to a company’s operative success is not only being or finding an effective CEO, but also finding a great COO that compliments the CEO.
For entrepreneurs who need to fill the COO role, the task requires speaking the language of talented bureaucratic operators which typically involves communicating with numbers, facts and well thought out strategic plans.
Founders should not underestimate the value of a great bureaucrat because as a company grows the dull bureaucratic processes and policies that sustain businesses steadily accumulate.
Including a talented operator who naturally loves defining and improving bureaucratic process can substantially improve the likelihood that the company will achieve sustainable success.
For a company to properly execute the vision of the CEO and succeed over the long term, the entire executive team must sustain strong relationship bonds, communicate regularly and freely, and maintain a healthy culture of transparency and accountability.
Building a holistic team requires involving people with different personalities, so it is important that each leader take the time an energy to learn each others communication styles.
Because each executive leader sets the tone of their respective corporate function, it is important for the executive team to organize regular meetings to discuss updates on company activities, addresses organizational problems and policy issues, and to define strategic plans to improve the efficiency and harmony of the company.
One of the main challenges of creating a company, establishing a founding team, and of growing the core functions of a business is balancing the initial culture of teamwork with the eventual more hierarchical bureaucratic culture of strategic direction.
Early on the contribution of individual colleagues will substantially impact achieving early milestones which define the direction of the company. However, the growth of a company as time progresses reduces the impact of individual colleague because more people become involved in the day to day work to execute the corporate vision.
It is therefore important for company leaders to recognize the natural transition from leading as a chief collaborator to a chief executive. For some entrepreneurs this shit comes naturally, however for others it can be a challenge to properly manage.
Early stage CEOs are typically operations officers. They focus on designing the business solution and developing the operational methods that yield the most amount of value to all stakeholders.
These leaders can also be thought of as creation officers, relentlessly defining what the company is doing, and how it should go about doing it. Startup leaders are task gurus, but as a company grows they must transition their efforts to becoming effective managers and delegators.
CEOs of mature business shift their focus from creation to growth. They spend their time discovering new market opportunities, attracting new talent, clients and investors, supporting new business project initiatives, and overseeing the bureaucratic management of the company.
Leaders of mature companies can be thought of as business developers who explore new market opportunities where the business can compete, while at the same time searching for ways to improve their companies inefficiencies.
What remains true, no matter the size of the business, is that executive officers, and particularly the chief executive officer, must be people gurus. Company leaders should possess a high emotional intelligence and practice extraordinary communication skills to effectively inspire, motivate, convince and lead their teams.
Overtime executive leaders must become a savvy business developers and a talented people managers who embrace flexibility in all of their leadership practices to successfully navigate the business towards successful outcomes.
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