10 Key Leadership Traits that are Critical for an Owner or CEO
Being CEO is much more about leadership than about being ‘smart’. Just because you can come up with a mathematical formula or a great technology or business idea doesn’t mean you have strong leadership skills, which is the main pre-requisite for being a CEO of anything. Now, if you are a ‘genius’ or ‘brilliant’ which are often code words in the trade for ‘socially challenged’, then it probably has to be a Google kind of genius that creates so much hype and value that you can call yourself CEO and Grand Master Ninja Smartpants and it won’t change the outcome, but that’s incredibly rare. If you didn’t create Google or cure some form of cancer, map the genome, etc. you probably aren’t a genius (no offense) or at least you aren’t a genius who can also be CEO. Management skills can be learned, but there has to be some genetic disposition to leadership. It may take awhile to show itself, but it’s either there or it isn’t – that’s my experience. Here’s the key leadership traits that are most critical for a CEO, especially of an early stage or growth oriented company:
1. Leaders take ownership, especially when things don’t go as planned.
If you’re hearing a lot of excuses or ‘coulda, woulda, shoulda’ at board meetings, that’s a red flag. CEO’s that are leaders accept responsibility for what’s happening and take action to do whatever has to be done. If we only had more capital, if these customers would only stop complaining, if our sales guys would just get some deals done,etc. I’m always amazed by CEO’s who refer to things that are under their direct purview of responsibility as being something that is out of their control, like an earthquake. You need more capital? Go get more capital or show me why I should invest more into your strategy. You need more customers? – Then go get more customers or find the right sales resources. You want to be in charge and have someone else risk their capital on your business? Then be in charge and own it fully. As an investor or board member, the second time I hear about any problem, it’s your fault. This isn’t an MBA class project and I’m not here to babysit. This also isn’t about throwing anybody to the wolves — it’s about an attitude. You don’t have to know everything or have every answer. In fact, as per my point below, I have no problem with anybody that reaches out for help or guidance. It’s the sense of entitlement that you have to watch out for, as if investors owe you a job and a successful outcome. When the CEO becomes the Chief Excuse Officer, it’s time to make a change.
2. Leaders are humble and treat everyone with respect, regardless of status and position.
There’s never a good reason to be cocky or arrogant, but if you are, you better have one hell of a track record of business accomplishments in the real world to back it up and you better be knocking it out of the park. Self confidence and assurance are great, but if you think you know more than everyone else because you are a smart guy or have an MBA, or because your dad is rich, then it’s only a matter of time before you find out otherwise, and I don’t want to pay for your education. I don’t care how smart or even how successful somebody is, if they aren’t any fun to be around and act like an asshole who can’t learn anything from somebody else, I don’t want to work with you. If you choose protecting your ego over success, then use your own money and you can do things however you want. The bottom line is I’ll take a sponge over a rock any day of the week. Leaders build the people around them up and take great pleasure in seeing others succeed and reach their full potential. They want to win as a team and the journey is as important as the destination. Life is too short to be around assholes.
3. Leaders make hard decisions
When you are bleeding cash and things aren’t going as planned, something has to give and it takes some fortitude to make tough decisions to save the enterprise if it’s worth saving. That can mean very difficult conversations with investors, creditors, suppliers, and employees, and not everybody has it in them. It’s not about being cutthroat or ruthless, it’s about protecting the company and its assets to live another day. I’ve seen companies spend their last million dollars of funding on paying employees who were adding no value to the business simply because the CEO didn’t have the heart to let them go and it ended up costing many more people a lot more money and heartache. Nobody wants to make those kinds of decisions and most people don’t take any pleasure in it, quite the opposite, but sometimes there is no alternative.
4. People naturally follow leaders
Everyone has seen it happen. Good leaders have a magnetism that draws other people into their game with excitement and enthusiasm, and that includes clients. They get better people on the team than they should at a lower cost because people believe in their vision and they want to be a part of it. If someone is only there for the money, it’s a matter of time before you run out of money or someone offers them more. Does your CEO inspire and energize everyone in the room? Do they have a real ‘presence’ when they speak? Are they likeable and self deprecating? True leaders can build talented and motivated management teams without giving away the bank and they can get customers on board who they have no business getting. When a CEO or CEO candidate gives a presentation, do people in the room feel full of energy and optimism or are people looking at their blackberries? A worthwhile litmus test.
5. Leaders are better under pressure
Just like in the Stanley Cup playoffs, real leaders step up their game when it counts the most. Early stage companies will have to overcome major obstacles and challenges to graduate to a stable, going concern. They may have to change their business model and product or service more than once. They’ll probably have to survive some cash flow storms, and they may have to grovel on their hands and knees in front of their biggest customer – whatever it takes. They most certainly will have to have some uncomfortable conversations with investors and management team personnel and employees at some point or another. It’s not easy being in charge. Just like in hockey, I think real leaders look forward to these challenges and embrace them, because it’s what separates them from everybody else – it’s their competitive advantage or gift. Leaders and good CEO’s want the ball when the game is on the line.
6. Leaders are good salesman
I’ve listened to many CEO’s give presentations to investors or seen them with customers and thought to myself, why is this person ever allowed out of their cubicle/lab/coffin? I’ve also heard many investors and board members say, ‘He’s a brilliant guy, but he’s just not very good with the customer and sales side of the business’. What other side of the business is there? HR? Technology isn’t the business. The technology enables the business model, but it’s not the business. You can’t be the CEO just because you know how to build a website or are a savant in Java Enterprise or cellular antenna design. Early stage and growth companies need sales and here’s a newsflash, 99 times out of 100 the best technology doesn’t win sales – the best sales and marketing wins sales. CEO’s constantly have to sell something to be successful. Themselves, the idea, the company, the product, – it never ends. You have to convince people to help you and follow you every step of the way – it’s that simple. That probably means they have to like you and would look forward to spending free time with you even if you weren’t a CEO or selling them a great product.
I’m not suggesting that CEO’s are hucksters who don’t have any technical understanding or business vision, but I am saying that if given the choice between a scientist who has no sales skills (which is really saying they have no persuasion and relationship skills) versus a fantastic sales person who can build relationships with C level executives, then I have to go with the sales guy, because he can learn enough of the technical side to be dangerous, or bring the scientist with him. A B2B company with technology and no sales is ‘disruptive’ or ‘visionary’. A B2B company with sales and no technology is called a lot more often, and then buys the better technology company out of bankruptcy.
We need look no further than Gilligan’s Island for evidence of this point. Of course the Professor was by far the smartest guy on the island and the only one that could make a ham radio out of coconuts and seaweed, but Skipper was in charge. Need I say more? I think not.
7. Leaders are multi-talented
Early stage companies can’t afford to have a lot of one trick ponies, so the key people on the management team often have to wear many hats, especially the CEO. CEO’s have to first and foremost be good at sales and relationship building (which is really what getting investment and customers is all about), they have to be good at leading and managing people, and they need a strong grasp of cash flow and corporate finance. I think they also need to have a clear vision of where the business has to go and the ability to get everybody drinking the same Chai Latte. For technology companies, they need to know enough about the underlying technology and development process to freely call bullshit in the face of delays, cost overruns or quality problems and to assess the abilities and effectiveness of the leadership in that department. Software companies often pursue functionality that nobody in the market will pay for because their developers find it interesting or that’s simply what they already know how to do. CEO’s need to have a rare combination of natural leadership ability coupled with strong quantitative and technical skills. Leaders also thirst for knowledge and personal growth, and try to learn everything they can that’s important to their business to help build sustainable competitive advantage.
8. Leaders respect other people’s money
CEO’s of companies that are funded in whole or part by investors, whether public or private, have a great respect and appreciation for the value of hard earned money invested in their company and they treat capital and investors as the lifeblood of their existence. Good CEO’s also appreciate how critical it is to have happy customers and a good reputation, and will not forsake the trust of early clients and investors as a stepping stone to the next big deal, a common practice of early stage companies that usually ends badly. Happy customers and happy investors is usually a very successful combination. In fact, it’s hard to imagine a successful outcome for any early stage company that doesn’t have both.
9. Leaders tell the truth
Bad news never gets better with time unless you are telling someone they are going to die, and they get hit by a bus before you get the chance, which doesn’t happen very often. Good CEO’s don’t sugarcoat the truth. They blend confidence and optimism with the cold hard reality of quantifiable results and customer feedback. They tell the board and employees what they need to know before it becomes a problem. If CEO’s always hold themselves to the same standard as an investor doing due diligence, then when an investor or strategic buyer comes along, there will be no surprises. The most likely areas to catch PinnoCEO in the act: Sales Pipeline, Revenue, Expenses and Cash Flow Projections.
10. Leaders are passionate about the business
If you don’t believe in what you are doing and that it’s better than what everyone else is doing, why would anybody else believe in it, including customers?
As an investor or board member, I’d focus heavily on these leadership traits in evaluating any CEO. I also think it is imperative that if you are a major investor (e.g. not an angel or relative, rich friend, etc.) that you have the ability to replace the CEO without resorting to some kind of warfare, because having someone steering the ship that will neither lead, follow, or get out of the way is an untenable situation.
Now I know what you are thinking. How are we supposed to determine if somebody has leadership abilities? Talk to their peers, investors, customers and employees. Look at their track record in leadership roles. Go out for a beer with the board and see what they are really like outside of a clinical boardroom setting. Have them give both a 15 minute sales and a 15 minute investor presentation using only information available from the company website and their own insight and research, but only give them 30 minutes to prepare. Good CEO’s know how to dance and think on their feet. Their confidence is infectious and makes it sound like they know what they are talking about, which on occasion can be more important than actually knowing what you are talking about. Invite at least five outside independent attendees that are not affiliated with the company or board to get their feedback. Ask some non-traditional questions from everybody at the end to avoid stereotypes and cookie cutter thinking and to encourage some lively discussion, e.g.
I would go in a foxhole with this person – Strongly agree, somewhat agree, etc.
I would let this person do my taxes.
I wouldn’t buy water from this person if I was on fire.
I would let this person watch my kids.
I would like to go for a beer with this person.
I would let this person fix my car.
I would let this person sell my house.
I would hire this person to invent a new product.
I would pick this person to be the captain on my football/hockey/zumba team.
If I needed somebody ‘taken care of’, I could call this person.
That last one was a joke – take it easy.
