How Do You Measure Up to the Best CEOs?
The best chief executives understand why their company exists, rather than what it exists to accomplish. They create a crystal clear vision for their business and ensure it’s adopted at every level of the company. They identify new market opportunities and establish operational efficiency as the company scales… and the list goes on.
My point is this: Some CEOs have a handful of these important traits, but very few possess the entire package.
Keep in mind that it doesn’t really matter how big or small your company is. As the CEO, the fundamental principles of leadership, management, and operational efficiency apply across the board. Just look at CEOs like Steve Jobs, Larry Ellison, and Marc Benioff, who built their companies from the ground up, in two instances starting in their parents’ garage (Apple) or a humble San Francisco office (Salesforce.com).
And while they were all blessed with some natural CEO qualities (leadership, the ability to articulate and communicate vision, etc.), they learned a lot from their peers, mentors, fellow executives and advisors along the way too.
Here are some traits of great CEOs that I think are especially important.
Attracting, recruiting and motivating an outstanding senior team
In an expansion stage company, a founding CEO is often asked to be a lot of things. But at some point in a company’s growth, that jack-of-all-trades mentality has to end, because the best CEOs are really only as good as the people they’re able to hire to perform those jobs.
When a CEO is asked to identify, recruit, and motivate a talented senior team that can carry the business to the next level, it’s often a tipping point that either propels the company to new heights or sinks it to ominous depths.
But if you haven’t recruited and managed senior managers or executives before, you won’t know how to recognize them and you won’t possess the credibility to recruit them.
That credibility is particularly important, because when highly experienced or well-respected executives are asked by inexperienced CEOs to join their company, they’re going to look at that CEO and ask three specific questions:
- Do I want to work for this person?
- Is this CEO the right leader for this company?
- What am I going to learn from the CEO?
And unless the company presents a truly phenomenal opportunity, the best executives won’t sign on unless they get satisfactory answers to those questions
Creating and communicating the mission, vision and values
A company’s mission, vision, and values (also known as its aspirations, which you can read more about here) can be defined in this way:
- Mission: What a company is striving to be in the long term.
- Vision: How it can get there? What things need to be executed to accomplish the mission?
- Values: What does the company want to be known for? What kind of behavior should the business exemplify both internally and externally?
It’s an early stage CEO’s job to create AND communicate the company’s mission, vision, and value to their employees and customers. The best CEOs are able to clearly define those aspirations and ensure that everyone in their organization is working toward them. Any lack of focus or deviation from that path can welcome the temptation to pursue shorter term opportunities that only take the company off its long term course.
Building a highly effective and value-adding board of directors
In an early stage software company, a board of directors is less about governance and more about providing inspiration and mentorship to the business’s senior team. It exists to help a company establish itself in a market, hone its aspirations, and scale efficiently.
Of course, a board can’t do any of those things if a company’s CEO fails to attract and assemble a true value-adding one. Themore experienced, aware, and compelling a CEO is, the higher the likelihood that they’ll be able to attract exceptionally talented board members.
So what should an independent board member bring to the table? In my experience, they should fit into at least one of these three dimensions: industry expertise, operational expertise, and functional expertise. Of course, understanding which dimension best suit your company is just one small step. Identifying and recruiting that talent is the real challenge.
Making sure that the company is always optimally funded
As the CEO of an expansion stage technology company, it’s your job to strike a balance between accelerated growth and resource conservation. How can you maintain capital efficiency or profitability, while also allowing the business to achieve its ideal rate of growth?
To answer that question, a CEO needs to determine how to build a sustainable, scalable business that produces enough revenue to justify the cash it spends on sales, marketing, product development, and other common expenses — also known as creating capital efficiency. If outside funding could help accelerate growth and create profitability or improve capital efficiency, how much money does the business really need to accomplish its goals?
Put more simply, a CEO needs to be able to manage these three funding dynamics: don’t run out of money, don’t be desperate for money, and, of course, be profitable.
Gross margin documents the business your product is building, yet it’s often tucked away in a financial update while a medley of product metrics enjoy the spotlight.
The bottom line: Expansion-stage SaaS companies are well positioned to thrive in 2021.
Using data from this year’s Expansion SaaS Benchmarks Report, OpenView’s Dan Knight breaks down the three distinct components to fundraising.