Founders and entrepreneurs can be very successful starting their businesses, but scaling them often requires the support of other professionals. Why would a company need support with their C-Suite? Are business owners and CEOs not capable of making decisions and leading the business on their own? What does engaging a professional CEO, COO, CFO, or other C-Suite executive (CXO) really do? While many business owners and CEOs can make the tactical decisions about the business today, they often need to engage outside professionals to drive future growth and take their companies to the next level.
Professional CXOs bring a wealth of knowledge, experience, training, and education that current company leaders may not have. The job of these executives is to strategically partner with the founder, owner, or other business leader to accelerate the growth of the business and increase enterprise value.
CXOs may get involved in all aspects of the business as they analyze a company’s core processes, identify any weaknesses or potential areas of improvement, define key performance indicators, create detailed forecasts, manage cash flow and possible funding needs, and so on. CXOs can also monitor employee performance and morale as they consider different organization designs and overall business models for a company to maximize its longer-term growth potential. Most importantly, good CXOs work with business owners to develop strategic plans that drive operational and financial strength and accelerate a company’s growth. The CXO’s role is as both guardian and champion of business value.
Let’s look at two common – and critical – executive positions you may need to consider: Chief Financial Officer and Chief Operating Officer.
Chief Financial Officer
The Chief Financial Officer is much more than an accountant, bookkeeper, or controller. CFOs are strategic partners for their owners/CEOs. CFOs sit at the highest level of the financial management pyramid and oversee all the company’s financial functions. They regularly get involved in other aspects of the business too.
Good CFOs are strategically focused on the big picture and the future, with the short and long-term goals of the company in mind. They analyze the company’s processes, define and monitor critical KPIs, identify weaknesses and potential areas of improvement, create detailed forecasts, manage cash flow, and manage any funding needs. Good CFOs also assess the company’s business model to maximize growth potential. CFOs work with their business owners and CEOs to develop overall financial strategies for their companies. They develop comprehensive strategic plans to accelerate and effectively manage growth based on the company’s goals as well.
As Jim Schleckser of Inc. CEO Project stated, “In the early days of growing your business, you’ll need to hire a bookkeeper or a controller to manage your books. But as you grow and scale your business, you might eventually need to bring on a CFO. The mistake to avoid making is thinking is that your controller will make a good CFO. Odds are, they won’t.”
Chief Operating Officer
Similarly, adding a Chief Operating Officer brings value to your team in several ways. Most notably, COOs free up their CEOs. Small firm CEOs usually handle all the company’s executive functions, including overseeing daily operations and future strategic planning. It is nearly impossible, however, to work “on the business” while you are working “in the business.” COOs, then, can assume responsibility for daily operations so that their CEOs can focus on strategy and growth.
COOs execute the business strategy. COOs improve communication and operational effectiveness. CEOs are often visionary and know where they want to take the business. Communicating that vision in terms that the team can understand and having a plan they can execute is not always a CEO’s strength. Good COOs, then, bridge that divide by interpreting the CEO’s vision, developing a strategic plan, creating functional workstreams with individual roles and performance metrics, and holding the team accountable. COOs maintain the alignment between daily operations and the longer-term strategic vision of the company. The team also benefits though from having this clear direction and guidance on what they need to do to be successful.
An often-understated benefit of having a COO is that they provide business continuity. At some point, whether it is on their terms or forced by outside circumstances, CEOs leave their organizations. In the case of small companies where the CEO is the “face of the company,” it is crucial to have a busines continuity and succession plan in place. COOs often provide the bridge that allows business owners/CEOs to retire because they provide the leadership and infrastructure required to keep the business going even when the CEO is not there.
Having a COO on your team can bring these benefits and much more. The best COOs complement their CEOs. The time to engage a COO is often when the CEO has difficulty managing the team, or when the CEO is spending too much time on daily operations and not enough time on strategy and future growth and planning.
For most privately owned companies, hiring a full time CXO is an expensive proposition. That’s why many might not consider this level of C-Suite support. Outsourced CXOs, however, are readily available and can offer tremendous value without the added cost of that six-figure salary. Many organizations find success with fractional, part-time, or temporary CXOs. This approach affords the organization and the owner/CEO the opportunity to utilize a professional executive without the commitment or obligation of hiring a full-time executive.
Are you struggling to scale your business? Do you have the right team to get to the next level? Confused about how to create even greater value in your business, or when to position your business for sale? Give us a call at 310.589.4600 or email me directly for some additional thoughts on how best to grow your business with the right executive team. You can also visit the Executive Coaching page of our website for more information on how we regularly enable business leaders to address their greatest business challenges and increase the value of their businesses.