The five stages of CEO leadership

The role of a Chief Executive officer (CEO) changes a lot during a company’s growth. Understanding these transitions is key to a successful tenure as CEO in a fast-growing company.

Written by Eivind Bergsmyr, Partner at Viking Venture

Humans are fascinated by superhumans, meaning those individuals who can perform at a level far above the average person. This is valid within sports and entertainment, but also within leadership. Bill Gates, Steve Jobs, and Mark Zuckerberg all grew the companies they founded from zero to billions of dollars in revenue and became management rockstars.

Unfortunately, many Founders and CEOs cannot repeat this success because they don’t understand or cope with the fact that different stages require different skills and leadership styles. This article describes the different capabilities needed to lead efficiently at different stages.

The team lead

In a newly founded company or a start-up, the founder often takes the CEO position and gathers a small team of very dedicated people around him or herself. The founder is typically more like a team lead for the first 10 to 15 people, and many activities center around him or her. As the CEO, he or she knows everyone well, both internally and amongst the customers. The limited complexity of the company at this stage makes it possible to run at high speed with minimal structure and formalism. The leadership style is often informal dialogue and discussions, and the decision-making often depends on the founder’s gut feeling.

The project lead

When the company grows beyond 15 to 20 people, the founder cannot engage in every detail and becomes more of a project lead. This form of leadership requires a more formal structure. Where you put in place plans and hold meetings to make decisions and let information flow. Still, an individual is able to engage in most of the business.

It is not uncommon for the founder and CEO to put much of their energy into either sales or product at this stage. As a project lead, the CEO is no longer the center of the team, but more the team’s outcast. Instead of solving most problems, the leader must enable the rest of the company to solve problems. Some degree of delegation of tasks must be in place to scale at this stage. However, important decisions still reside with the founder.

The small company CEO

When the company reaches somewhere around 30 employees, things change again. The business gets too large and too complex for one person to keep an eye on everything. The need for middle management becomes unavoidable. The CEO does not know everyone as well and must learn to lead effectively through other leaders. Therefore, the CEO must emphasize recruitment of middle management as well as planning, setting direction, communicating, and reporting to a higher degree. Some founders might find this stage painful. They are used to solving any issue at their own capability and pace, but suddenly, they have to rely on others and accept that they solve issues differently and at a different speed.

At this stage, efficient leadership is more about what you, as a leader, inspire and direct others to do than what you can accomplish yourself. Letting others shine and grow might be difficult and sometimes even painful. The ability to install efficient and clear company structures with little overlap becomes a differentiator.

Employees usually are at their best when they have clear objectives and intimate knowledge of the decision processes. A good CEO is loyal to the management structure put in place and does not allow informal personal connections from the early days to influence decision-making and priorities.

The medium-sized company CEO

When the number of employees approaches triple digits, the company is definitely medium-sized. Sophisticated IT systems are already in place to monitor and manage the operation. Staff managers lead topical areas such as Finance, HR, legal, IT, and Security, while functional heads are responsible for sales, customer success, and development. Different business units might be in place with their own staff and functional heads.

The CEO should focus more on strategy and longer-term planning than being involved in the day-to-day operations. A new level of abstract thinking is required to be an efficient CEO. The CEO might find him or herself at a distance from the people who used to be an integral part of the work-life just a few years earlier. Stakeholder management takes up more of the workday. The pressure from external parties might increase.

The large company CEO

There are almost no limits to how big a company can become. Walmart has surpassed 2 million employees, while Amazon is at 1.5 million. The flip side of increased size is always the increased complexity. The capabilities that made a founder a great CEO at the earlier stages differ significantly from those needed to be efficient and successful at this size. Stakeholder management might be increasingly complex when you need to relate to internal and external parties, including government and political powers across the globe. No single person can oversee all this alone, and the ability to work effectively with and through several highly qualified second and third-level managers is crucial for your own and the company’s success.

Conclusion

This article has shown that the role of the CEO changes through the different stages of company growth. The ability to handle increased complexity levels and to constantly learn and adapt decides whether a founder successfully can go the way from a start-up to a large global player. Being conscious about how the role and requirements change is a prerequisite for a successful journey. However unfortunately, it is not always sufficient. Understanding your capabilities and motivation might help you decide whether you are the right CEO for the coming stages, or whether you should recruit a new individual to lead the company through the next step.