If you’re the owner of a small business, it’s more than likely that you’re also the CEO. The question we’re exploring here is “should you be?”
If you started your business a number of years ago, you became the CEO by default, whether you used that title or not. Somebody had to run the business, there was no one else to take on the leadership role. It had to be you. And you’ve been in this role ever since.
In those start-up days you wore a lot of different hats. And I wouldn’t be surprised if you still were. Some aspects of running the business you liked and were good at, others not so much. Sales, manufacturing, accounting, human resources, it all fell on your shoulders. You simply didn’t have any capable employees (or so you thought) to whom you could (should) delegate.
Fast forward to the present. The business is more established (I hope), revenues have grown, as has the customer base and the number of employees. You may have expanded geographically, perhaps even internationally. Over the years, the organization has become more complex with separate functions covering manufacturing, product development, finance & accounting, human resources, sales & marketing, to name a few.
As a result of the business getting bigger, the role of the CEO changed as well (or, at least, it should have). Less involved in the hands-on, day-to-day operations, less time in the trenches. But, more time focusing on the big picture and developing a vision for the company’s future and how to get there. More time spent on organizing, planning, directing, delegating, and strategizing. And, making sure the right people are in the right jobs and providing them with the training, tools, and opportunities to be their best. Or at least, that’s what you should be doing. Are you?
Are You the Right Person to Be the CEO?
Did your skills, attitudes, and mindset about the role of the CEO develop and mature as the demands of the business changed over the years? Has the way you function in the business evolved? Have you embraced the responsibilities and duties of this new role?
Or did you stay in your comfort zone, spending (too much) time on the work floor, putting out fires, very much hands-on, and basically doing the same things you did in the early days of the business? Are you still wearing all those same hats from the early years? How much of your time is devoted to creating a long-term path to growth vs. working on short-term operational issues? Are you neglecting your responsibility as CEO to be strategic and look at the big picture? If so, what is the impact on the business?
Perhaps you are the second or third-generation owner of a family business. When your predecessor felt the time was right, you were given the keys to the business. Because that’s how (most) family-owned businesses roll.
You may have taken over the business because you felt an obligation to a parent and the family legacy. But, do you have the same drive and motivation to run the business as the founder? Do you have the skills and interest? Perhaps you’d rather be doing something else entirely.
Business ownership does not automatically mean that you should be the CEO also. Ownership is essentially a legal status. It simply means that you hold most or all of the company shares. On the other hand, CEO is a functional title, with a day-to-day role, duties, and responsibilities. The functional org chart has a spot for the CEO, not the owner.
To make this contrast more clear, this about a publicly-traded company. The shareholders are the owners, and the CEO is a salaried employee held accountable by the shareholders through the Board of Directors. Of course, the CEO may hold stock or have stock options, but they would never have complete ownership of the firm.
Try to think of yourself as two different people: one is the owner, the other is the CEO. Granted, it is very difficult to objectively assume these two perspectives, but it’s necessary to create clarity about the roles and responsibilities of each position.
Now, put on your “owner” hat and ask these questions: “How is the CEO doing? Has the CEO been able to achieve the goals and objectives for the business set by me, the owner?” As the owner, are you able to objectively evaluate the CEO’s performance? Or are you giving the CEO a pass for not achieving the goals, just because the CEO is you? Answering this question with gut-wrenching honesty is far from easy. But it’s necessary in order to move forward and make the best decisions for yourself and the business.
The CEO’s Main Role
The main role of a CEO is to think strategically about the future of the business and work on long-term growth, financial performance, and viability. The CEO’s perspective should be at a high level, primarily strategic, no so much operational and in the trenches. The operational issues can be dealt with by capable managers to whom you delegate. This is not to say that the CEO ignores operations, but it should not be the singular focus.
You’re supposed to hire good people, create a strong management team, communicate the vision, set goals and objectives, and delegate. Then, get out of the way and let your team do their jobs.
Are you spending too much time putting out fires, working “in” the business, rather than “on” the business? If your daily activities revolve around operations rather than planning, organizing, directing, and charting the long-term course for the company, you should ask yourself: Am I really the best person for the CEO role? Or am I more comfortable in an operational role?
CEO vs. Owner – What’s Best for the Business
Take a 30,000-foot perspective, are you the best person to run the company at this stage? Are your skills, interests, and experience better used somewhere else in the company? Would a professional CEO bring the right mix of skills and experience to the organization to take the firm to the next level? Keep in mind that what’s best for the business is, ultimately, best for you, the owner.
Hiring a professional manager to be the CEO does not mean that you’re giving up ownership. It is possible to run a business without being the owner and you can own a business without running it. Nobody can take ownership away from you unless you decide to sell.
The new CEO could be another family member who has been with the business for years and who has the aptitude, education, and skills to fill the top position. Or perhaps they worked outside the family business for a number of years, got management experience, and now they’re interested in joining the family business, bringing new ideas, experience, and skills.
Another option is to see if there’s someone among your top-performing employees with the aptitude, skills, and experience to become CEO. Or, you could hire an outsider to be the professional CEO to bring a fresh perspective and new energy to the management team. You need to consider what’s best for the business. In the end, that’s best for you, the owner.
Keep in mind, a good CEO will take their fiduciary responsibility to the owner very seriously. They will run the company to the best of their abilities to meet your goals. Of course, good communication between the owner and CEO is critically important.
Hiring a CEO doesn’t at all mean that you’re turning your back on the business. As a matter of fact, it’s just the opposite. You’re bringing in someone more capable, more experienced than yourself in order to grow the business. And, thinking like an owner, that could be a very smart decision!
The Key Question – Ownership vs. Management
Which skills, experience, training, and aptitudes are needed to take the company to the next level? If you were interviewing candidates for the CEO position, would you hire yourself?
If you’re the person with those qualifications, great. But, if you’re totally honest with yourself, and realize that you don’t have what it takes to be the CEO, or you lack the interest, then it’s best for the business, and ultimately best for you as the owner, for a professional manager to step in and take the helm.
Something else to consider is how your exit strategy affects this management vs. ownership issue. If your long-term goal is to sell the company, you need to make sure that the organization can run without you. Otherwise, what are you selling? No one is going to buy a business if the most important person in the organization walks away after the sale.
What to Do Next
If you find yourself seriously thinking about your performance as CEO, there are a few things you can do to improve your skills and get a better understanding of what your role in the organization should be:
- Work with an executive coach – An executive coach can help you develop a better understanding of your personal strengths and weaknesses as well as which role in the organization is best for you, if any. Also, with the guidance of a coach, you can come to grips with the purpose of the business and what’s next. Insight into your personal goals and motivation will lead to the answer to the ownership vs. management question and a solution that’s best for you as well as for the company.
- Attend seminars or take some business classes – Through seminars and business classes you’ll be able to enhance your formal business and management skills and learn what it takes to grow a business. This could be the knowledge you’re lacking to become the CEO you always wanted to be.
- Join a CEO peer group – Learn from other CEOs and business owners who have walked this path before you. Their experiences will shed light on what you need to pay attention to, the options you have, and where the pitfalls are. You can learn from these executives how they dealt with a situation similar to yours.
In the end, you have to make a decision. After honest soul-searching, are you the best person to lead the company? If so, excellent and good luck. If not, hire someone else to run the business for you. Throughout, never forget, you’re still the owner.
What do you think, does being the owner mean that you have to be the CEO as well? Are you the best person for that job? Think about it, the business may thank you for it.