Imagine a person going to the theatre. When he/she arrives, with enough time ahead, then sits in the chair and is expectantly waiting for the play to begin. In front, the stage with a large red curtain that separates the audience from other reality.Until the performance begins, he/she continues to watch the curtain and spends the time observing the stage, looking at the people around, evaluating the capacity of the room, taking a look at the neighbour in the next seat, losing the gaze contemplating the architecture of the theatre, chatting with someone, getting lost thinking in something else, dreaming, checking the time in the watch…
Meanwhile, behind that curtain there is another scenario in which different things are happening, and all escape our senses. Many years of intense work, the preparation of the scenery, the list of suitable accessories, moving ropes and pulleys, the technicians checking and coordinating lights and sound, the tailors and costume designers making the final touch to the garments and accessories that have been meticulously made, the makeup for the characterization, the mind concentration of the actors, the musicians retuning the instruments, the adrenaline of the team when the moment approaches…
All this, and much more, is what we do not see. Usually we did not even think about it from our spectator seat. And that is what happens with the function of the CEO, it is behind the red curtain, behind the stage. Today I raise that curtain for you to better understand what a CEO does. Because this role is vital in the business world and should better known.
The CEO of a company is sometimes extolled and others reviled, but rarely understood. As always, society creates topics, labels, instead of studying, listening, observing… a label is always easier than the effort of analysis and own conclusion. In this way, humans very easily mark a label on relevant people, countries, companies, institutions and also roles, such as the CEO.
What I have been able to verify is that very few people know what a CEO does, and to be honest, it is also true that many CEOs find it difficult to explain what they do in their company. A good friend of mine, CEO of a well-known multinational company, once told me that after more than a year in her new position that her husband asked her: “What exactly do you do?”. I know her husband and he is an intelligent person too, but this is a good example that shows that when you leave a more specific role, like a CFO o CMO, and you become a CEO, questions quickly rise up in the surface.
What does CEO mean? It is an Anglo-Saxon acronym, Chief Executive Officer. In Spanish, although the term CEO is already commonly used, it is also known as CEO. And what is a CEO? Very simple, the top executive. Who does it depend on? Above it is the Board of Directors and its president. And then, what is its function? While the board deals with corporate governance, the CEO deals with executing the strategy. Therefore, it becomes the bridge that unites the Board with the organization, that is why this role is so vital and unique.
So far, everything is academically understandable. But do we really know what it does? And therein lies the crux of the matter. What it does, in capital letters, is DECIDE. You must make the most important and also the most difficult decisions of the company. Their decisions are never neutral, and they have a great impact on all the company’s stakeholders. In fact, their decisions are what will make the company successful or not, survive or disappear.
In the collective mind, the CEO has been granted an aura of success, it is even an attractive term that enhances the symbology of power. And there are CEOs who have been paradigms in business life, admired like Steve Jobs at Apple and Jack Welch at General Electric, or recently Jeff Bezos at Amazon and Elon Musk at Tesla, to name just a few. These people, with their positions as CEO, are celebrities known throughout the world, which gives more fame to the role of CEO and, consequently, you find many people who by imitation effect call themselves -in their companies- CEO. You only need to look at social networks, such as LinkedIn, and realize it. But beware, the vast majority are not CEOs.
So how do we know who, in office, is a real CEO? As I said, millions of people mistakenly call themselves CEOs, they are usually startup entrepreneurs, small business executives and consultants. No, they are not CEOs, although they are very noble professions. A CEO does not designate itself, instead he or she will be appointed by a board of directors, and this must be stated in his powers and in the description of his functions. Because a CEO should not have a single administrator in a company, but a board of directors with its president, and that is what medium-sized companies of a certain size and all large companies have. This is important, in order to really know who actually performs that function and who does not.
Going back to the question of what the CEO does, if you do a survey, common answers will be things like ‘leading’, ‘being the boss’ and some funny guys will say ‘the ugly guy of the company’. And most people respond give a short answer with a range of infinitives such as sell, manage, lead, decide, communicate… Using verbs is closer to what a CEO does, because all is about execution, but without a doubt they are still very vague descriptions that do not detail the work that is actually carried out, nor do they give the dimension of the burden or responsibility. That list of infinitives could be applied, for example, to a commercial for a small business and they would be just as valid. Developing the idea furthermore, below you will see what would be the common idea that someone would have of a CEO, that is, what is seen on the outside, the tip of the iceberg:
And there we are left with what is on the surface. A CEO, as I have written at the beginning of the post, is the highest executive of the company, and therefore must DECIDE the most relevant issues.
An example of this crucial decision is the strategy and its execution. Something so important and at the same time complex where new decisions branch out in a network effect in which all decisions are interconnected. Beyond the strategy comes the matter of how to make it operational. This will come out with a series of questions that need to be answered by the CEO in detail: what, who, how, when, how much, why?
In addition, the CEO must evaluate different scenarios: what if… and in the case of… or if plan A does not work…? And once more, before taking decisions, you should know what the impact would be. All these decisions will CHANGE the company. Sometimes it would be a physical change and sometimes a chemical change. If the change is physical, the matter remains the same, but it transforms it into something new. For example, turning water from a solid to a liquid state, but it is still water. A company that sells a product continues with that product, but decides to change its distribution channel is a physical change.Other times it is a chemical change, that is, it modifies the substance, as occurs with the combination of sodium and chlorine, giving rise to a new material, common salt. In the company, it could be the development of a new product and service that, as a consequence, transforms the business model, the talent required, the way of working and even the corporate culture.
Therefore, the CEO is ultimately responsible for the CHANGE that will lead to either an evolution (physical change) or a transformation (chemical change).These decisions must be made in a limited time, with a lot of pressure since, in the meantime, it must continue to give positive results that allow growth and viability. But it is not enough to decide, then you must convince in what I call a ‘sandwich’ format, that is, from above, first to the Board of Directors and then from below to your entire team. Only in this way and doing it very well in both cases will you have chances of success.
And once everything is decided, approved and explained, you must EXECUTE IT. That is the most tricky part, since in all this many responsibilities and situations that the CEO must overcome come into play. And the success of the company depends on it. So what it actually does, and what’s under the surface, is much more:
In conclusion, the CEO has a very broad responsibility, not only for the strategy and its execution, but also to:
- Ensure the purpose, vision and fulfillment of objectives
- Prepare and carry out business plans
- Create good teams and lead the organization
- Manage communication effectively
- Legal compliance and risk management
- Motivate and give confidence to employees
- Take care of customers and the ecosystem of collaborators
- Ensure sustainability and positively impact the community
- Manage resources, material and economic, tangible and intangible
- Cultivate culture and make values live
- Report on the results of the company, draw up plans and act
One of the best CEOs in world, someone I really admire, is Marc Benioff. He said: “Just when you think you’re in control, suddenly everything changes and you find yourself in uncharted territory” (‘Trailblazer’ -The Wall Street Journal’s #1 book)For this reason, among the main skills of a CEO, I would highlight adaptation to change, but not only the adaptation of the CEO itself, but acting as a driving force throughout the organization so that managers and other staff adapt and are an active part of that change.
It must also have to be innovative and continue to create competitive advantages for the company. Always curious with continuous learning that allows him or her to update the knowledge according to the new times. And, of course, a mentor, a great transmitter and connector of people. And something that a CEO should never forget is that is the face and the voice of the company, and depending on the size of the company, there may be thousands, hundreds of thousands or millions of people who scrutinize the CEO every day. Therefore, exemplarity goes into the position and is responsible for reputation, that main intangible asset of immense value that makes the difference.
In Spain, there are thousands of excellent CEOs such as Gonzalo Gortázar at Caixabank, Antonio Huertas at Mapfre, Enrique Lores at HP, or José Antonio Álvarez from Santander, to cite a few examples, and, like them, many already lead global companies. If one day you want to be a CEO, or you are with one of them, I hope you have discovered what is behind the curtain and hope this post will help you to better appreciate the work they do.
Show must go on!