How a CEO is like the Galápagos Islands

 

Having recently facilitated a discussion with Deepak Taneja at the Pillar Venture Capital Unconference for early stage CEO’s made me thank about how my role as CEO evolved as I led companies ranging from 15 to 1,200 employees.  I needed significantly different capabilities, behaviors, and time allocations to be effective in different size organizations.

As a company grows finding the right level of detailed involvement is a challenge.  Early on it is necessary to be involved in every customer sales cycle (in an enterprise business), whereas in a much larger company, doing so would require all of the CEO’s time (or more).  This would bog down sales cycles by forcing them to be single threaded through the CEO’s availability.   Recruiting is similar.  At first, the CEO should meet every candidate to assess his or her fit with culture, ensure only A players are being hired, and to help sell the candidate on joining the organization.  Later on, personal involvement might only extend to executives, hires made by executives, and exceptional key roles elsewhere in the organization.  Being too involved not only creates a bottleneck in a rapidly growing company but also can be disempowering to others involved in the recruiting process.

As a company grows the primary time horizon of focus changes too.  In the early stages where the company is struggling to ascertain product/market fit and to stretch limited capital as far as possible, the time horizon of focus for the CEO could be as short as a month.  When Demandware was at $300M, the primary time horizon of focus was at least three years.  One way to tell if you have succeeded in shifting your focus to a longer time frame is to ask “if I was gone from the company, would it continue to function almost as well without me in the shorter term?”  I always felt the answer should be “yes” if I was doing my job most effectively.  In order to succeed at continuously shifting your time horizon longer as the company grows, you need to consciously manage your time.  If your company is growing, a year into the future you will be doing many things you are not doing now (because a company 50% larger requires more and different things to be done by the CEO).  No matter how hard you are willing to work, there is a finite limit (I have never heard of any CEO who works more than 168 hours per week).   If you are struggling with this, as many people do, force yourself to figure out which 10% of your time is least important to the success of the company so that if you had to take on 10% more or for some reason could only work 90% as hard, what you would stop doing.  Then, even if you are currently capable of handling that final 10%, assign the responsibility for it to someone else.  You will probably feel (many times justifiably so, sometimes not), that you can do it better, but you will need to give it up anyway as you grow, and learning to do this in a planned and disciplined manner is important to evolving with the company’s growth.

How employee perceptions of you are formed changes significantly too.  At smaller sizes the perception is primarily based upon people knowing you and directly seeing you in action (in meetings, in 1-1 conversations, with customers, etc.).  At a larger size, other than when you present to large groups of employees, only a minority of the employees will form their perceptions of you based upon direct observation.  Instead those perceptions will be formed based upon a combination what they hear from others, how they perceive you spend your time, and broadcast communications from you in the form of presentations, emails, etc.  You will have much less control over those perceptions and it is more difficult to ensure that employees in general really know your priorities.   Yet, it is vital to that they do know them.  Accomplishing this requires being very thoughtful about how you spend your time, especially when it is visible to many employees and likewise being very thoughtful about all of your broadcast communications (I always neurotically edited and often rewrote emails that were to be sent to all employees even though we had some great writers who would draft them).

When I began my tenure at Demandware, there were about 90 employees.  Since I have always genuinely cared about customer success, I believe it was pretty easy for those employees to perceive that was an important priority since I interacted with many of them and they were able to directly perceive how I spent my time and what I thought was most important.  In my last year as CEO when our employee base approached and then surpassed 1,000 people, the mechanisms by which I could be sure people knew that customer success was an important priority had to be different.  For example, we had an annual customer survey and, each year, the results of those surveys would be summarized by a cross departmental team, shared with the company, and then the cross departmental team would meet for 2 hours each month to review progress on the key problems identified in the survey.  I made it a point attend those meetings regularly, not because I could (or did) actively contribute to the meeting (and I could certainly have used the 2 hours elsewhere), but so that people could see that I thought what they were doing was very important and that customer success was an important priority for me and the company.

Finally, during our discussion, one of the participants articulated a framework for different stages of a company’s growth that also shed light on the evolving role of the CEO.  In this formulation, there are three distinct stages (although they do overlap a bit) consisting first of finding product/market fit, followed by a scaling phase after fit is ascertained, and then as scaling slows down at a much larger size followed by an optimizing phase, where the focus shifts to efficiency of operations and bottom line growth.  Since a CEO’s focus should always be on what is most important for the company it would shift as the company moves through those phases.  These shifts would require different tasks, time allocations, and capabilities to remain most effective at each stage.

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