Start-up CEO vs. Expansion CEO

Most company founders embark on a start-up journey with aspirations to see the company through to greatness while maintaining the role of the CEO.  However, the role of startup CEO and expansion-stage CEO differ greatly.  They require completely different skill sets, and it’s extremely rare for a founder to have both start-up and growth-stage skills.  A majority of founders end up recruiting replacements to take over the companies they created.  There is absolutely nothing wrong with that. It is a common reality that accompanies the shift from searching for a business model to executing and scaling it effectively.

A founding CEO must be tactical, hands-on, gets stuff done, where a professional manager CEO focuses on the vision/strategy, building a senior team, and guiding the senior team to execution.

Navigating a company through the expansion stage takes operational expertise. You have to know how to recruit senior managers who have specific functional expertise, and you must be able to establish an operating rhythm that gets your growing team working toward the right goals. As your company transitions to the next stage, you must transition with it, and as you do you are faced with three paths.

1) Adapt to the New Reality

If you are dead set on remaining CEO, then you need to pick up the new skills needed to address the blind spots and manage your company’s expansion. That means you have to augment those skills that got you where you are now: your audacity to do something new, your passion to inspire others to take risks, and the tenacity to create and disrupt markets. In addition, you need to focus on managing through others (this one can be the biggest challenge) and developing a rhythm for your team.

It’s extremely rare for a founder to have both start-up and growth-stage skills, and it’s even less likely that you can pick them up as you go. So, consider whether you’d hire yourself to run your company now that you are expanding — chances are, the honest answer is no.

2) Assemble a Skilled Team

Another option is to surround yourself with an executive team that brings the growth-stage experience and expertise your company needs.  For most companies entering the expansion stage, a sales and marketing-focused COO is the right choice.  However, if you need more cover on overall operations, financial forecasting, and legal matters, then a CFO makes sense.

When it comes down to it, companies aren’t run by highly effective individuals; they’re run by highly effective teams. Most successful CEO’s will tell you to surround yourself with the best people possible who are experts in the areas you are weak in.  This will allow you to focus on your strengths.

3) Transition into a New Role

The majority of start-up CEOs recruit their replacements as the company grows beyond $15 million in revenue. It’s that simple, and it’s usually the right choice. Work with your board to bring on a new CEO and transition into a new role. Don’t let your ego drive an emotional reaction. Put the company first, just as you always have, and you will come to the conclusion that it’s the right decision.

Key to keeping the “Best Employees”

Employees leave their current job for lots of reasons. I’ve seen people leave for fabulous opportunities elsewhere. But often times the reason are more half-hearted.  A friend of mine recently switched between very similar companies, in essence, because the second company gave slightly more vacation days than the first.

While congratulating her on her new opportunity, I couldn’t help thinking, what a missed opportunity for her current company. When you add up the lost productivity from her winding down her employment, how long it will take to find her replacement and how long it will take that replacement to achieve something approaching this woman’s expertise, you could have easily granted her an extra week of vacation. Or two. Why didn’t her employer do that?

My guess is that her manager didn’t want to set a precedent. (I use to be that way) If she got three weeks of vacation instead of two, everyone else would want three weeks. It’s understandable, but it’s also a very limited way of thinking. For starters, so what if everyone wanted three weeks? In a small department, turnover is a huge source of stress. Avoiding it is worth trying to treat employees better than the competition does. And second, people and their performance aren’t all the same.

While vacation days were her particular source of unhappiness, other people might have completely different problems that would make them walk out the door. Some examples:

A bad commute. Not your fault, to be sure, but something you could improve with a policy allowing people to work from home once or twice per week.

Inflexible hour. A meeting that starts every day at 8 a.m. might interfere with a parent from dropping his children off at school. Since he can’t do that, he winds up paying for more childcare than he’d need otherwise, and this financial stress leads him to look at other job opportunities. Why not let people call in, move the meeting later or get over the idea that you need a daily meeting to establish that people are still doing their jobs?

A bullying co-worker or worse Boss. Yes, companies are supposed to do something about employees who pick on others, but it’s easier not to — until one of your best people leaves over the situation. Addressing that problem would have let you keep your talent and make life better for everyone else, too.

These are all fairly easy addressed pain points. The problem for managers is that your people often won’t tell you their particular source of stress — until you get a LinkedIn message from a team member and realize that it’s because their updating her LinkedIn account as part of their job hunting.

So how to find out? You can always ask. How are things going? Is there anything that would boost your already great productivity? What would make this a better place to work? What would make your job more sustainable and enjoyable? A smart manager who takes even a little interest in his/her people would have discovered this employees desire for more vacation days and figured out a subtle way to grant her what she wanted. That would have kept the office running smoothly — far more so than letting her leave in the hopes of not setting a precedent.

As a manager, how do you keep your best employees?

Trust Builds Great Employees

The glue that holds all relationships together — including the relationship between the leader and those they lead is trust, and trust is based on integrity.

When employees do not trust managers and leaders, various forms of organizational fallout are likely, including low engagement (people seem like they don’t care), high turnover and reduced innovation (no creative solutions or ideas).  Rebuilding trust isn’t easy, just as with customers who lose trust.  If employees don’t trust their boss or their boss’ boss, they begin to question how they fit in with the company and will have less pride in the organization overall.

Individuals can enjoy their work and have a strong sense of accomplishment, but Trust has to be present for employees to do go beyond the call of duty, to be innovative.  The more groundbreaking the innovation needed, the more trust must be present. Trust is built over time as people get to know each other.  Employees must trust that their co-workers and direct supervisors are competent (head trust) and will do the employee no harm (heart trust).

A single triggering event, such as a restructuring or other organizational change, can reduce the level of trust employees have in leaders.  As can other single events, such as a manager who takes credit for an employee’s work or lies to them.

Most of the time, trust erodes as a result of small subtle patterns of behavior that employees experience on a daily basis that go unaddressed. For example, working with peers who fail to prepare for a meeting, are slow to respond to e-mail or who gossip regularly. While they don’t get addressed, they don’t go unnoticed.  The result of such unaddressed behavior is that employees leave the company or, worse yet, they stay. They become the working wounded – they stay, they complain, they do as little as possible, eventually bringing others down with them.

The Reina Trust and Betrayal Model describes three main types of transactional trust:

• Contractual trust—trust of character. Do people do what they say they are going to do? Do managers and employees make clear what they expect of one another?
• Communication trust—trust of disclosure. How well people share information and tell the truth.
• Competence trust—trust of capability. How well people carry out responsibilities and acknowledge other people’s skills and abilities.

The key thing about transactional trust is that it is reciprocal in nature; you have to give it to get it.  There are specific, concrete behaviors that build trust.

• Ability: the manager’s ability to do their job.
• Understanding: displaying knowledge and understanding of employees’ roles and responsibilities.
• Fairness: behaving fairly and showing concern for the welfare of employees.
• Openness: being accessible and receptive to ideas and opinions.
• Integrity: striving to be honest and fair in decision-making.
• Consistency: behaving in a reliable and predictable manner.

So take a look at your employees, what does their behavior say about their trust in you.  If it doesn’t look good, take the steps now to begin the process of rebuilding trust.