• Rayce Rollins, Founder

What Does A CEO Do?

Let’s write a job description for a new Chief Executive Officer. To land the perfect candidate, our job post has to specify the Objectives & Key Results of the position, and then drill down into the details and deliverables required from a CEO. When it comes to running a business, there shouldn’t be any confusion around what a CEO ought to do versus what she ought to delegate on a daily basis.

Quick Sidebar for the visual learner: On the first episode of the Startup To Scale Up Show, we highlight the 3 Core Objectives of the CEO position. Rayce breaks down the CEO position for aspiring entrepreneurs and business owners who want to go from “working in the business” to “working on the business.”

The CEO’s Job is Grow Overall Profitability

The CEO’s job, simply put, is to grow the profitability of the company over the long-run. From time to time, the CEO will make investments and decisions that result in less profit in a given period, but the intent behind those decisions should always be to realize a healthy financial return for the business, given the risks associated with the investment. Profitable growth, therefore, is the best way — and I would argue the only way — to objectively measure the efficacy of the CEO position over the long-run.

“Profit is the most important metric in business because it’s the only metric that takes into account both the revenue and costs sides of the business.” ~ Herman Simon, author of Confessions of a Pricing Man.

That is not to say that I agree with The Friedman Doctrine, which advocates for pure profit maximization, void of any social responsibility at the corporate level. Businesses, and the CEOs’ who lead them, must deal fairly and honestly with all of its stakeholders (employees, vendors, customers, and with the community at-large). A distinction must be made between profit maximization, which has several seamy and exploitative implications , and profitable growth, which is the primary sign of a business’ health and sustainability.

“There’s no such thing as a good business that doesn’t make money.” ~ a guiding principle at Financial GPS

Profit is the metric, but what are the CEO’s primary duties?

In order to build a profitable business, the CEO must first build a highly engaged and enabled team. As Jim Collins, author of Good to Great, so eloquently wrote, “Good to great companies first got the right people on the bus — and the wrong people off the bus — and then figured out where to drive it.”

#1 The CEO’s first job is to build a winning team. Great CEO's make sure that the company is aligned from Vision to Values.

As you can imagine, team building is an ongoing process. Those individuals who helped the organization get to $1 million in revenue, might not be the right people to get it to $2 million. Some employees let their skills atrophy — thereby rendering themselves useless for the current role. Some employees take offers at other companies, leaving voids that need to be filled by coworkers or new hires.

Business is a very fluid human institution that is constantly changing and evolving as employees join and leave the company. The CEO must maintain unity and company-wide alignment throughout seasons of growth, change, and even through turnover. The CEO does so by clearly and consistently communicating the company’s vision to values statements (and by living them by example, too)!

The right people are on the bus, now what?

Peter Drucker, the legendary management consultant and business theorist said that “ because the purpose of business is to create a customer, the business enterprise has two — and only two — basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.” source: Practice of Management by Peter Drucker

In the Practice of Management, Peter Drucker gives us the final two duties of the CEO role. Let’s dissect them one at a time, starting with innovation.

#2 The CEO’s second job is to foster a culture of innovation at the business model level, which permeates through each one of core business functions — operations, marketing, and finance/admin.

A business model, as defined by Alex Osterwalder, describes the rational of how an organization plans to capture, create, and deliver value. In his book, Business Model Generation, Osterwalder provides a tool, called the Business Model Canvas, to help us visualize the 9 components of a business model (shown in the diagram above).

Simply put, the CEO’s job is to foster innovation across each of the 9 components of the model. By innovation, I mean that the CEO should find more efficient, more convenient, and more enjoyable ways to address a customer’s needs and wants through ___________ {insert business model component}.

#3 The CEO’s third job is marketing.

“The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. “ ~ Peter Drucker

This Drucker quote really captures the essence of real marketing. Imagine a scenario in which a company had complete customer omniscience -full knowledge of the customer’s needs, pain points, jobs-to-be-done, price threshold, perceived values paradigm, desired emotions etc. Now imagine that the company could craft, position, package, and present its products in a way that addressed all of these customer needs and wants. Such a product would do extremely well in the marketplace, right? The CEO should seek to invent such a scenario through the company’s on-going marketing efforts. Marketing is more than a department, it’s the spirit of business itself, which is why the CEO has to be chiefly responsible for the execution of it.

In conclusion, a CEO should focus on team building, business model innovation, and marketing. Everything else (accounting, graphic design, procurement, payroll processing, customer service, day-to-day operations etc.) must be delegated to other members of the organization. Lastly, the only way to objectively evaluate the efficacy of the CEO position — to truly judge whether the CEO is hiring the RIGHT people, truly INNOVATING, and properly MARKETING — is to peg the CEO’s performance to the overall profitability of the company.

#CEO #Innovation #VisionToValues #PeterDrunker

  • Grey LinkedIn Icon
  • Grey Facebook Icon
  • Grey Instagram Icon

©2019 All Rights Reserved 

Philadelphia, PA | New York City, NYC | hello@FinancialGPS.co