The Role of the CEO

What is the purpose of a business?  According to management guru Peter Drucker, a business exists for only one reason: to find and keep customers.  Without customers, there is no reason for a business to create products and services, build factories, or hire employees. Without customers, a business cannot generate the profits that will keep it alive and functioning.  

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     In the 1970s, Nobel Prize-winning economist Milton Friedman took Peter Drucker’s dictate one step further arguing that the sole purpose of business is to maximize profit for its shareholders.  Although originally a follower of Friedman’s theories, former General Electric CEO Jack Welch switched his position two decades later stating that, “shareholder value is the dumbest idea in the world because it should be a result, not a goal, and short-term profits should go together with long-term value.”

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     Today, the idea of  long-term value has morphed into the idea of conscious capitalism, a self-regulating business model that requires a company to be accountable, not only to its shareholders but to its employees and business partners as well as to society at large. 

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     How is the CEO's role aligned with a business's purpose?  Is the role of the CEO preordained by the strategies and objectives of the company he or she leads?  Or is it the CEO’s personal beliefs and values -- derived from their background, education, and experience -- that define and shape the company?  Is the CEO at the helm deciding in which direction to steer the boat?  Or have those coordinates already been locked in?  Is the CEO a proactive leader or an executive caretaker?

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     According to Harvard Business Review, most CEOs are able to recite their mission statement word for word.  Yet less than 20% have a strong sense of individual purpose with regard to the organization they oversee.  From my perspective, this lack of purpose comes from a lack of understanding as to the true role of the CEO: what the CEO does and doesn’t do.  If this is true, then there is much work to be done.

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A CEO Does Three Things

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     One of the great venture capitalists of the last 30 years is Fred Wilson. He founded Flatiron Partners, one of the first internet-focused VC Firms, as well as Union Square Ventures. Possessing a genius for spotting a company-based concept that will attract millions of active users, Wilson has led investments in digital enterprises such as GeoCities, Twitter, Tumblr, Etsy, and Uber. 

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     Once, before initiating a search for the CEO of a portfolio company that was in trouble after the abrupt departure of the Founder, Wilson sought advice from a veteran of the Boardroom. “What exactly does a CEO do?” Wilson asked the more experienced man almost rhetorically, looking for something that would help his candidate search. 

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     He wasn’t disappointed as the man answered without hesitation: “A CEO focuses on only three things. Sets the overall vision and strategy of the company and communicates it to all stakeholders. Recruits, hires, and retains the very best talent for the company. Makes sure there is always enough cash in the bank.” 

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     In this book, these three ideas are represented by one word each: Culture. People. Numbers.  Properly focused, a CEO does these three things and nothing else. Everything that distracts from these should be delegated to someone else. Every task of every day should relate directly to improving one of the pillars of this Trinity.

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     When CEOs of small organizations hear this prescription, they often reject it out-of-hand, scoffing, “That would be great but right now I’m too busy doing what I have to do to survive.” Of course, there is validity to that assertion. After all, startup CEOs who spend all of their time navel-gazing about the ideal culture, or the best possible hire, or what charities they will support once the profits start rolling in, won’t be very successful. 

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     But let’s state the obvious. Being the CEO is hard; it’s three times as hard as the next hardest job in the organization. A good CEO takes the credit for nothing and the blame for everything. Everyone else in the organization has a right to candor, rapport, and a good night’s sleep while the CEO forgoes each of these for the benefit of the long-term mission. A CEO is always alone; that’s the joy and the hurt of it. As Hollywood’s Gordon Gekko declaims in a memorable scene from the film Wall Street, “You win some, you lose some, but you keep on fighting … and if you need a friend, get a dog.” 

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     Perhaps things are not quite that dire, but the fact remains that being a CEO means being able to combine two tools that no one else can access: Focus and Perspective. Brad Whitchurch, the CEO of infection control company SealShield, defines his role this way: “It’s my job to keep the forest in view while tending to the trees.” In other words, focus on the tasks at hand but do so with an awareness of how those tasks affect the overall health of the business.

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     If the CEO fails to focus on the three things that matter most — culture, people and numbers—does it mean that the three will go unattended? Unfortunately, no. Aristotle said it best: “Nature abhors a vacuum.” Left alone, even a parking lot will break apart and sprout weeds that one day will grow into a jungle. The same process is at work in our organizations.  If we allow a vacuum to form— a place where executive action does not exist—it will be filled by others, and rarely with the beliefs, actions, and behaviors that lift an organization to new heights. 

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     A CEO’s greatest challenge is to tune out the noise by leaving secondary matters to others. Keeping the proper perspective and focusing on the Trinity of culture, people and numbers generate results that can’t be achieved otherwise. To accomplish this feat, though, the CEO must form the requisite intent.