October 25, 2005

Who is the right CEO?

Posted in CEO, management at 8:20 pm by scottmaxwell

One of the first questions that I get asked by companies that I am talking to is “who is the right CEO for the company?” I always get confused by this question (I am not sure why, given the frequency of the question), as there is almost always a CEO in place, and the CEO has generally been in place for two or more years by the time I invest. My view (which I recognize is different than many VCs) is that a CEO that has brought the company to the point I am willing to invest is the best CEO going forward. Many of them have not had the job before, but all of them have the passion, domain expertise, and customer and product knowledge, which I do not believe, can be replicated by hiring a new CEO. I also find that the CEOs that I invest in are likeable people, which seems to be aligned with the skills necessary to be a good CEO. My approach is to try to understand the CEO as much as possible by working with them over time. After a while, a profile emerges with strong spikes in certain areas and valleys in other areas. Once the profile is clear, and as the company grows, new senior positions open up that can then be filled by people who have spikes where the CEO has valleys. For example, if the CEO is not process oriented, we might find a senior CFO or COO that will augment the skill. If the CEO is more sales oriented, we might find a CTO that can balance out the senior skill set. Every so often, a CEO asks us to help find a replacement, sometimes before we invest, sometimes well after we invest. In all cases, my inclination is to try to carve out the role that the CEO wants (still probably the highest value person in the organization) and to launch a search that augments their skills (same basic approach, different title). This approach has worked many times over extremely successfully…

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5 Comments »

  1. Dan Cornish said,

    I have often found it strange how many VCs want to move the Founder/CEO out as soon as possible. Your view seems to me to very enlightened. Family run companies traditionally return much higher returns to investors as they have an attachment and responsibility to the founders to make the company survive. I suspect that Founder/CEOs have the same motivation to succeed and not screw up.

    Of course this attitude is really best for companies who plan to grow and not be quickly acquired.

    Your blog is a refreshing new voice. Welcome to the blogosphere. I have subscribed to your xml feed and look forward to further posts.

  2. ZF said,

    Often I think VCs decide this issue based on a management style they want to see. The result sadly and all too frequently is spectacularly bad decisions made down the road, in an apparently well-organized, deliberative fashion.

    Unfortunately this can easily happen in precisely those businesses where the VCs have begun to get cocky about the prospects for success. They start to think they can afford to indulge their style preferences, and they do.

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