When does a company need a ceo

Despite common belief, a Chief Executive Officer (CEO) isn’t always the idolized leader of a large, multi-national corporation. They also aren’t always the founder or owner of a company. While that is the case some of the time, the truth is that the CEO position is very dynamic, and can fit a variety of different business models. Below we’ll explore the differences between the two, and when having a CEO may be the best method of leadership for your small business.

The Difference Between Business Owner, Founder, and CEO

A business owner or founder is the person who starts a business and takes it from planning to stable operation. They have recognized a market for a specific venture, and they take advantage of the opportunity. In the initial stages of the business, they assume full responsibility for its health, and will usually reap the profits.

The Chief Executive Officer may also be the founder of the company, but more specifically, they’re the highest-ranking company manager. Their responsibilities are high-staking, as they assume liability for the success and financial livelihood an organization. Because of their high-rank, they also have the authority to make critical decisions about the course of the company.

The CEO and the founder, when they’re not the same person, collaborate on the core mission and fundamental values of the company. They oversee all aspects of the business in order to ensure that operations run parallel to that mission.

When a Small Business Owner Should Hire a CEO

The decision to hire a CEO is typically done with a lot of tact and strategy. In cases where small businesses are looking to scale up, it may be entirely appropriate and even encouraged to hire a CEO. If your business fits any of the following criteria, a small business CEO may be the right move:

You Don’t Have Critical Business Experience

Turning your unique craft, skill or trade into a paid career doesn’t always mean you have avid business expertise. Usually, it just means that you have expertise in your unique offering. Hiring a CEO with vast business experience allows you to pass off critical decisions relative to strategic operations, and develop new strategies to help drive your bottom line.

You Want to Have a Specific Focus

As a small business owner, you wear a lot of different hats that can often pull you away from favorable business activities. If you’re an owner or founder who wants to focus on one facet of the business such as operations, marketing, or production, it might be worth it to hire a small business CEO to manage all the other critical areas.

You Want to Scale But Have No Time to Innovate

Small business growth relies heavily on innovation and strategic expansion. Owners and founders often spend so much time working in their business, that they have virtually no time to work on their business. Hiring a small business CEO allows you to rely on someone else to formulate strategies for growth. Additionally, they can help coordinate critical action to help your business scale.

How to Hire a CEO

In a world where we’re connected to virtually anyone in the world through the power of technology, the biggest challenge in hiring a CEO lies in looking in the right places and hiring the right one. Here’s how:

Seek Professional Assistance

There are multitudes of different entities that specialize in finding and vetting the right candidate for you. If you could use a little help, consider partnering with an organization that can help. Applicant tracking systems (ATSs), such as Greenhouse, JazzHR, Breezy HR, or Google Hire, can be extremely helpful in the recruitment process, and can feed candidates’ information into HR software if/when they’re converted into employees.

Use Your Network

If you’re a business owner, you’ve likely interacted with other like-minded business professionals. Put the feelers out there by mentioning to your connections that you’re looking for a CEO, and don’t be afraid to ask for input from people who’ve been in similar situations. LinkedIn is a great place to join group discussions or view resources.

Plan for the Future You Want

Get all the necessary materials ready to onboard your ideal candidate, including your story, your core mission, and your main values. This person will be learning about your business from a completely fresh perspective, so be sure to have a plan that will effectively integrate them as the small business CEO.

Bottom Line

Although CEOs are commonly seen as the top of a large-scale corporate ladder, a small business CEO may be the right choice for the progression of your business that you envision.

At what point does an Owner/ Founder call themselves a CEO (or do they really have to)

-         Is it when they undertake the responsibilities of a CEO?

-         Or is it when the company achieves a certain level of revenue or employee size?

By definition, a CEO is the highest-ranking executive in a company, they are the main point of communication between the board of directors and corporate operations. They are also the ultimate strategic decision-maker and responsible for the overall success of the company in terms of growth and profitability. In most large corporate entities, the CEO will report into a board of directors, however many entrepreneurs do call themselves a CEO without a BOD, so are they right to be a “chief” of other officers?

This is an important point to highlight as many use the title of Founder/Owner and CEO interchangeably. Arguably this could imply a misunderstanding of the role to others instead of increasing perceived superiority, or is it used as a strategic tool that can help grow and upscale a business as well as increasing stakeholder respect?

We do agree that it seems to be a grey area among many who have opposing views when the title of “CEO” can be appointed.

The Credible Coach team decided to do some research to understand. We spoke with an array of business Owners/ Founders and CEOs to understand when they believe someone qualifies as a CEO and at what stage was this incorporated in their company.

We’ve summarised a few of the key thought processes below:

1. It’s rarely for egotistical reasons that a CEO is appointed in start-ups as there is support that it can be good for the business. Customers, prospects, media, and recruits like to talk to the “CEO”, (the perceived ‘Big Cheese’). Feedback indicated the use of the title enabled them to engage with key people quicker and more effectively. The title can also be used to negate potential hostile gatekeepers to potential future customers and corporate enablers.  

2. The title of CEO should be appointed when a company has recruited around 10 or more employees, as it was believed this was the tipping point that warranted the role and responsibilities of a CEO.

3. Some used the title of ‘Founder’ until the business was around 5 years old and then moved to the CEO title.

4. Some believed that holding a CEO title doesn’t matter to anyone other than investors stating that most customers had little interest in titles, however, investors like to know as it identifies who in charge of day to day operations.

5. An opposing view was also put forward that is can often be more beneficial to investors, especially institutional investors, to keep the title of Founder instead of CEO. It was suggested that Founders tend to be far more passionate and committed to companies than CEO’s.

6. Some didn’t really understand why the title of CEO is perceived as higher standing than Founder. As one respondent put it; ‘I’ve known quite of few Founders who have fired the CEO, but I can’t recall the reverse ever happening’    

7. Some thought that if you’re in a start-up and want to grow quickly then you should ALWAYS call yourself a CEO. This is because it ingrains confidence and internalises the titleholder with the responsibilities. Hunger and drive for success will also help fuel commitment plus the old adage of ‘the best way to get a job is to do doing the job’ comes into play.

It also signposts leadership, giving clear signals to; partners, customers, stakeholders, and enablers that you are the ultimate decision-maker. 

Finally, it facilitates clear unambiguous titles in the event that certain external investment facilities are part of the financial structure of the business. Although the term Founder still works in these situations Owner clearly wouldn’t be accurate. 

Inconclusion, the fact that the best qualified most suitably experienced person should be the CEO of a company is undoubted, however, if that person happens to be the Founder or Owner do they really need the title or is it really just an ego trip title? 

Opinions expressed by Entrepreneur contributors are their own.

Are most CEOs just pretenders? Management consultant Steve Tobak certainly thinks so. In his article awhile ago  -- Why Most CEOs Are Frauds --  he laments the trend of so many people giving themselves the title of “CEO.” He wrote: “I’m being a bit facetious, but you know what I’m talking about. A position that used to be reserved for a real corporate officer with an executive team, a board of directors, an organization to run and mega responsibility has been hijacked by every freelancer and wantrepreneur on Earth.”

This begs the question: When is a CEO a "real" CEO? Here are some specifics.

Related: Why Most CEOs Are Frauds

I believe the CEO job starts when the organization reaches about 20 employees. Prior to 20 employees, the job resembles more of a product management role. CEOs at this stage are trying to develop a viable product and generate some revenue. The real CEO position begins when there is a complete organization with all the major functions in place. This transition typically starts at 20 to 30 people and by 50 people there is a distinct full-time CEO role.

At this point, the CEO must stop acting in an individual capacity so much – pitching in where needed to write code, make a sale, develop copy, etc. – and start being the leader of the entire organization. This entails five key CEO responsibilities: creating and owning a vision, making decisions that impact multiple functions, providing the resources needed across the organization, building a culture, and delivering performance.

Some believe that, in order to scale the company, founding CEOs will need to be replaced at some point with a “professional” CEO. I do not necessarily believe this is true. While different stages of a company require different skills, founders can make the leap and are often the best people to grow the company.

An entrepreneur who has the skills to be an effective CEO at 50 to 100 people can certainly adapt and remain as CEO. Many founding CEOs have led their companies to the Fortune 500. Just ask Mark Zuckerberg, Larry Ellison, Bill Gates, or Jeff Bezos.

Related: 10 Bad Habits You Must Eliminate From Your Daily Routine

The single biggest factor that determines whether or not a given founder can be a permanent CEO is whether they can make the all-important transition from being a specialist to a generalist. Too many CEOs revert to their comfort zones -- the specific areas where they excelled as an individual contributor -- and ignore other parts of the business. They fail to take a balanced approach across the whole business.

The two most common backgrounds for early stage CEOs are sales or technology. Those who cannot make it as a CEO are the ones who spend too much time in those areas or others, taking on a “Super VP” role in their organizations. For instance, they spend all their time in sales trying to land the big deal, and don’t care as much about the other areas of the business.

If a CEO spends the majority of their time as a Super VP, they risk undermining their executives wile failing to evolve and tackle the unique challenges of the CEO role itself. Jim Schleckser, author of “Great CEOs Are Lazy,” says CEOs must find a way to get out of this Super VP or “player” mode. They need to bring in systems as well as talent to execute the same things they would do as individual contributors.

Related: Spanx CEO Sara Blakely on Writing Your Billion Dollar Story

As Tobak said in his article: “Chief executive officer is not a dumb title. It’s a real job. A real career. A real profession. And it takes vast experience, knowledge and hard work to achieve what used to be the pinnacle of the corporate world.”

However you got the title or if you aspire to have it, being a CEO is not something to be taken lightly. Understanding the CEO role’s unique responsibilities is paramount. Another key to success is to never stop learning. Some of the best CEOs are those who constantly increase their knowledge and skills in service to their organizations.

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