September 1, 2022

How to manage executives as a first-time CEO

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How to manage executives as a first-time CEOHow to manage executives as a first-time CEO
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Editor's note: 

TLDR: Top tips for managing an executive team

An executive’s job is to focus on taking strategic risks, whereas non-executives should focus on tactical execution.

Executives should identify two to three major initiatives per year that are large enough in impact to shape the direction of the company and enforce great execution against those initiatives.

Do not hire a consensus candidate. You’re much more likely to pick an effective executive when the decision to hire that person is non-consensus.

Executives often fail when they don’t produce a structured plan and instead jump immediately into a medley of initiatives without a coherent plan.

Ask executives across all divisions to produce their plans at the same time. You can then review and edit together as a leadership group to understand what each executive is focused on and understand how all of it rolls up to the higher-level plans for the business as a whole. They must succinctly describe their vision, operating plan, metrics, roadmap, and resourcing needs.

Check in regularly with executives to evaluate progress against the plan that they produce.

When a startup has enough momentum to raise enough capital ($15–20M in the bank), they eventually reach a phase where they need to hire and onboard their first executives and build an executive team. That’s usually when they have tens of millions in capital and the founder needs to offload responsibilities to functional experts, such as a VP of product, engineering, operations, sales, and so on.

The type of business model you have and sector you’re in will ultimately determine the type of executives your company needs most. For example, if you’re building a marketplace startup, you may need to bring on a CRO to build supply and demand. Or if mission-critical infrastructure is needed, such as the real-time services required to support products like Uber and Lyft, it’s essential to have a CTO and VP of engineering in the executive ranks very early in the life of the company.

As a first-time founder, assuming you’ve recently hired a few key executives, how do you manage those executives effectively? It turns out that managing an executive can be quite different than managing an individual contributor.

What should executives focus on?

An executive’s job is to focus primarily on taking strategic risks. Each year, they should identify two to three major initiatives, large enough in impact to shape the direction of the company and enforce great execution against those initiatives. This is in contrast to non-executives, who you want to be focused primarily on tactical execution.

A simple analogy explains it best: An executive’s job is to swing for home runs. An individual contributor’s job is to go for base hits. Because of the fundamental difference in role expectations, managing an executive also requires a specialized approach.

In this article, I outline the process of successfully onboarding and managing a new executive and an executive team. This executive strategy memo template gives executives a framework for describing their key strategic initiatives (their home runs), why they chose those initiatives, the resources needed to pull them off, and what success will look like as a result. As an added bonus, this tool can be used to aggregate strategic plans from all executives, which will then inform your overall operating and financial plan for your business.

Don’t hire an executive ‘consensus candidate’

Before we jump in, let’s talk about what to look for when hiring an executive.

Rule #1: Don't look for a consensus candidate. In other words, don’t aim to hire the person who's perfectly agreeable and willing to go along with what everyone else thinks and whom everyone else likes. You’re much more likely to pick a great executive when the decision to hire that person is non-consensus.

A consensus hire is someone whom everyone finds nice, agreeable, and low risk. Sure, we all like working with people we enjoy being around and who behaves amenably. But the risk with an agreeable executive is that person might not take the risks required to hit a home run. Instead, you’re looking for someone with non-consensus ideas because they’ll have the appetite for risk that’s required to sometimes change the outcome for your business.

With non-consensus executives, you kind of love and hate the person. Not because they’re a terrible person void of integrity who treats people poorly, but because their approach is risk-seeking and that introduces discomfort. You don’t necessarily like all of their ideas and suggestions. Some you really dislike. But a few open your eyes and make you think, “Hmmm… I hadn’t thought about that, but that sounds like a big opportunity.” These are the sorts of executives you want to hire. They are willing to go against the grain in some situations and move forward in the face of uncertainty because there may be a large payout that comes from taking a calculated risk.

Again, you want an executive who swings for the fences. They may only be right three out of 10 times, but the three things they're right about could lead to a step-change improvement in the performance of the company. Perfectly agreeable consensus executives are much less likely to produce the same outsized benefits because they don’t take enough risk.

A simple tool for managing executives

Once you've hired a non-consensus executive who has a tendency for taking intelligent risk, how do you onboard that person and set them up for success? I recommend using a straight-forward template that requires the executive to succinctly describe what their operating plan will be.

Firstly, the executive should do their 30-day review where they reach out across the organization to learn as much as they can. After concluding this 30-day lay-of-the-land exercise, then they come back to the founder/CEO and say, “Here’s my plan.”

Ideally, what they come back with is a strategy that has two to three major initiatives that they believe are important, along with a list of success metrics and resources they need to get it done. For instance, they may need to hire/fire or make head-count changes. They may need a budget for tools or services to lean on, including agencies or consultants. In summary, they lay out the initiatives they think the company should undertake, the resources they would need to pull it off, and the outcomes they envision if those are successful. Just as important, they need to provide justification as to why those initiatives matter.

From that vision document, they will work with their teams to develop a roadmap to accomplish that strategy.

Example of an executive strategy memo

Download this executive strategy memo template here

Your role as CEO managing executives

As the CEO, your job is to make the mission and vision of the business clear so you’re pointing your executives in the right direction. It should be clear to the executive what the business should look like in two to three years. As long as they understand that vision and you’re very clear about the overall direction of the company, the executive should be able to put together their strategy.

There’s no better tool for forcing clarity of thought than long-form writing, which is why I’m a fan of the two- to three-page memo. The process of writing, editing, and revising are required to arrive at the utmost clarity.

Once they’ve produced the memo, you now have a simple tool that can be used in these ways:

  1. The goals, metrics, and resource requests can be run up the flagpole to inform the overall financial and operating plan of the business. For example, if the VP of marketing indicates that she'll need $300,000 of annual marketing budget, two full-time hires, and $50k for marketing tools, then that information will flow through to the financial plan.
  2. The executive has a clear strategy that can be shared with the rest of the people in their organization and they can work collaboratively in putting together the road map to execute on the strategy.
  3. As the CEO responsible for managing executives, you have a mutually agreed-upon performance plan. Basically, the executive has described what he/she will accomplish in the next six–12 months, which gives you a playbook for assessing how well that executive is doing. It’s effectively a mutually agreed upon performance review plan.
  4. As a founder/CEO, you can do this with any executives on your team. Timing-wise, I recommend once a year for annual planning purposes. If you have your executives on product, marketing, finance, etc., all produce their plans at the same time, you can then review and edit together as a leadership group to understand what each executive is focused on and understand how all of it rolls up to the higher-level plans for the business as a whole. Then, with that data, the head of finance can produce the financial plan that factors in the head count and cost needs across all those functions in a bottom-up fashion.

Companies can choose a different cadence (quarterly, for instance), but the purpose is to be thinking big and long enough that you produce room for iteration. That’s critical because as a startup, things change all the time. If the window of time is too short, you’re unlikely to be thinking big-picture enough.

An example of an org chart of a growing SaaS startup

Common pitfalls to avoid

I’ve seen this process go wrong in a couple of ways. The first happens when the executive does not produce a structured plan and instead jumps immediately into a medley of initiatives without a coherent plan. They start by doing five–10 different things in parallel and have emphasized busy work versus focusing on the largest points of leverage for the company. The rest of the organization sees and feels that lack of clarity and they have a hard time understanding why they are working on certain projects, and how it all fits together in terms of the direction of the company. And they’re definitely wondering why this person is in charge.

The other failure mode is the agreeable hire who isn’t willing to take risk. You’ll have a very clear sense of this as soon as you ask the executive to draft their strategy memo. You may find that all of the initiatives laid out are too incremental in nature. Not enough risk is being taken and as a result, the impact of their stated initiatives is quite small. For this reason, it’s sometimes useful to have an executive candidate write this type of strategy memo as part of the interview process. You can feed them background context on the business and then ask them to produce a memo to assess their clarity of thought, ability to think through execution nuance, and how risk-seeking they may be.

Parting thoughts

I’m a believer in early and often communication with executives at least once a week. Check-ins should be rooted against their plan. For example, if they say they’re going to build three new product lines and they need to hire 20 engineers, two product managers, and two designers to pull it off, I would know that the biggest bottleneck is hiring. So each week, I would say, “What are you doing on recruiting?” And if it’s one to two months in and I don’t see them building out a team, I know I need to be focused on helping them recruit. Or, worse, I may be working with a bad hire that I’ll soon need to replace.

As an early-stage company, you might just have one or two executives. You may only be able to execute one or two initiatives in parallel as a company since the engineering team is 5–10 people But that’s ok. Your strategic plan would be very simple. In this case, the memo format is even more helpful since it is forcing clarity of thought down to one or two initiatives since that’s all the organization can support.

If you have too many initiatives, you’ll spread the team way too thin and be slow to execute with a very small head count. So it’s OK for an executive strategy to just be focused on one thing for the next six months. If you pick the right targets and dogpile resources into them, that’s when you produce the most output for the business, and with this memo format, you’ll have a simple tool you can use to make it happen.

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