Right CEO?

The Right CEO?

By Sanjay Anandaram

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Most entrepreneurs (especially wannabees) believe that they should naturally be the CEO of their venture because “hey, its my idea and my company!” Really? are you indeed the right CEO to steer your entrepreneurial dreams to success?  Entrepreneurial ventures are usually created in either or both of these ways: you get “THE BIG IDEA” and then decide to talk to some friends and colleagues to get them to join or, you together with some friends decide that its high time you “did something” and then figured out what to do. Sometimes, both of these happen in parallel. But whichever way the venture forms, the thing to remember what, according to most VCs are the 3 most important factors in a startup:  “people, people, and people”!  Lets talk about people. However, most startups don’t start with all-star teams. This team will need to be together through thick and thin and must share a common vision. Look for people who thrive on risk, are optimists, have integrity, have dogged persistence, have energy and enthusiasm. But make sure they pass the “chemistry test” with you – do you enjoy hanging out with each other? Share jokes together, go out for a drink together…? A single poor member can ruin a company – the road to startup heaven is littered with startups destroyed by tensions within the management team. Important lesson: If the chemistry isn’t right, the arithmetic will never work! You have to decide, and early on at that, who ought to be the CEO. Usually, good friends get together and do a startup. The chemistry is great, there is shared vision and commitment and there is no real decision making process or hierarchy. This works well initially but there needs to be someone who is more equal than the others. This is not as easy as it sounds as equity holdings in the company are a direct function of responsibility. So, another set of questions to ask yourself and of the (potential) team members: Are you willing to be replaced by more professional management if need be to help the business grow? Will you move aside if proven to be less than able? Are you open to hiring your own replacements? After all, your commitment must be to creating a successful business and you should be willing to do the right thing for the business. What is good for you need not be good for the company while what’s good for the company will always be good for you! All bottlenecks are at the top of a bottle! It goes without saying that the quality of the people -especially those at the top- determine the success (or failure) of a company. This much is well known and understood by all. And it is usually not the salaries that attract the best.  Attracting top talent to a startup is a function of several factors: the quality of the other senior executives, the investors, the advisors, the challenge on hand, the work atmosphere, and of course the compensation. The quality of the people around the CEO is a surrogate measure of the quality of the CEO. Often times, the initial team is created out of a few friends, colleagues and associates of the CEO. However, while all of this is wonderful, it is worthwhile to keep the following in mind while creating the team: - Loyalty is no substitute for competence. Usually, the team is picked by the CEO based on his/her sense of comfort with the person. “Why were you selected as the CEO? Who selected you as the CEO?” How would you respond to this question? - Culture of empowerment and Sharing. The best people want freedom to take decisions, to work in a professional environment, to be part of the success they’re helping to create.   Remember the fable about the goose and the golden eggs? Great CEOs are interested in creating and nurturing the geese that lay these golden eggs for the company; Also-ran CEOs are interested in the golden eggs. We all know what happened to the goose when the farmer and his wife focused on the eggs and not on the goose! 

What do you think?

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The article was first published in The Financial Express in 2006

3 Responses to “Right CEO?”

  1. Great post. Lots of really important points like

    ** If the chemistry isn’t right, the arithmetic will never work
    ** Loyalty is no substitute for competence
    ** CEO needs to be someone who is more equal than the others

    Having worked for two startups and started one of my own I can totally relate to what you said. CEO’s title is not only the most fancy one but the most responsible one, one has to lead from the front and lead really strongly n smartly

  2. Shadz says:

    Very well written, I am sure every CEOs’ or aspiring CEOs’ should have this maturity to be successful as professional and as an organization.

  3. Krish says:

    Very well put, Sanjay ! No one has the right to destroy shareholder wealth – not even the founders themselves! Getting them to own up is the most difficult part though.

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