What is a CEO and When Do You Fire Him (or Her)?

Over the past 2 months, I’ve been working more and more with VC firms looking to replace the CEO in one of their portfolio companies. 

First, you should know I really hate the CEO or any “C” level title in small companies.  And by small I mean less than 150 employees.  I love it when I meet someone and they  give me their card with the CEO title and after 30 seconds of discussion you realize they have 4, 5, or 6 people.

What is the role of a CEO?  What “stuff” does a CEO do in small companies?  How much strategic work do you think these people actually do on any given day to justify their title?  I bet it’s close to the big goose egg. 

In my opinion, any person who has CEO on his card and is less than 150 should fire himself from that position, because it’s obvious they don’t get it.  The person at the top needs to do everything – from helping in development, to working the floors at tradeshows, to marketing the company at every opportunity.  The strategic stuff is part time at best. 

When I speak to investors, shareholders, or VCs about replacing their current CEO, they always have a similar message – We knew it needed to be done a long time ago, but we kept waiting because ______________  (fill in the blank with a ridiculous reason such as “we thought if she left, the company would be in big trouble.”)

The question/topic/discussion of whether a company can afford to let go of the chief comes up often.  What never ever comes up, is whether a company can afford to keep the chief?  Often, the CEO in question has missed targets, missed product dates, overspent – and keeps revising the goals downward.  And the board still hangs on even when it’s clearly the CEO’s plan to begin with.  So why doesn’t the other shoe drop?

 Most people seem to feel it’s a combination of guilt, fear, and anxiety that keeps the guy on top for months or years after it’s time for them to move on. 

In the last company I was at, the founder had been in place as the CEO since the company’s inception in 1997. In 11 years, the company has burned through over 10 million dollars, and has turned a profit one time in those 11 years.  So why is he still there?

I bet that if and when the other shoe drops, the board will say it should have been done a long time ago.  In spite of the information they receive each month on the company, and with all of the explanations about missed targets,  nothing ever changes.  My only guess is that the board is too close to him personally, or maybe they just can’t fathom that they made a bad decision by letting him stay this long.  

I just don’t get it.  If the chief needs to go, then the chief needs to go – and the sooner the better for everyone, especially the employees.

~ by lschwartz on April 3, 2008.

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