Startup CEO: Who's Your Boss?
[Editor's note: The INOV8 blog welcomes back IA adviser Jeff Amerine, who authored the Techpreneurship series in this space for years and is the former director of Technology Ventures at the University of Arkansas. He continues to teach entrepreneurship classes at the UA's Walton Business College and recently devoted more time to his Startup Junkie Consulting of Fayetteville.]
By Jeff Amerine, Startup Junkie Consulting
Few opportunities rival the exhilaration and challenges that come with being a CEO in an early-stage venture.
Startup founders choose this path for a variety of reasons. Some seek to solve major problems. Others view a startup as a faster means of achieving success as defined by wealth. Many just don’t quite fit into corporate culture and fashion themselves as mavericks.
Over time, some serial entrepreneurs begin to contemplate their legacy. They may want to genuinely focus on changing the world, i.e. they hope to transition from success to significance. Other startup founders decide to launch their own company to “be their own boss.” I want to explore this last motivation a bit more.
So, here’s my assertion. No CEO of a successful company of any size will ever “be their own boss,” because CEOs always have three equally important constituencies: their customers, their team members and their shareholders.
The CEO’s job in any major decision or strategic initiative should be to understand the impacts their choices will have on their customers, their team and their shareholders. Conflict arises when decisions are made that attempt to optimize the outcomes for one of the stakeholder groups at the expense of the others. Such optimization may have short-term gain at the expense of long-term success.
For example, customers brutally punish CEOs that forget that they must deliver a product or service that delights. A lack of responsiveness to customers, failure to innovate and reductions in quality intended to improve margins all too often result in an immediate and potentially lasting negative reaction from the “customer boss.”
On the other hand, CEOs, who by their actions treat talent as a commodity, face a similar fate in the long run. Only through an empowered team will the company continue to delight and retain their customers. Companies such as this typically exhibit high turnover that acts like a cancer eroding the ability to attract new talent. The “talent boss” not only votes with their feet; they will tell everyone they know about their treatment.
Finally, CEOs that neglect the shareholders’ interest do so at their own peril. Such actions can result in removal of the management team by board action, shareholder activism or simply the elimination of any future investment possibility. Some startup CEOs exude a sense of “investment entitlement” that overlooks the fact that investors had to work hard for the money they bet on the venture and the CEO. The “shareholder boss” can ensure a startup CEO never raises money again in that zip code, or maybe any other.
The CEO must constantly maintain balance and harmony between the interests of the “three bosses” through a commitment to purpose-driven, servant leadership. Keeping the potentially conflicting agendas aligned should begin with a clear and regular communication to customers, team members and shareholders the answer to the “why” question.
Starting with “why”, i.e. the defining purpose for the existence of the venture, can bring clarity. Decisions and strategic initiatives that don’t align with the venture’s purpose should be avoided. Clarity and consistency of purpose sets the foundation for a winning culture.
In 2006, Mark Fields of the Ford Motor Company attributed a quote to management guru Peter Drucker, “Culture eats strategy for breakfast.” Regardless of whether or not Drucker actually said it that way, the startup CEO can maintain harmony and alignment with the “three bosses” by ensuring the venture’s defining purpose informs critical decisions while equally considering the interests of all.
Regardless of your motivation for launching your venture, realize you likely have three very important new bosses that must be served if you plan to succeed. Always remember you work for your customers, your team members and your shareholders.