What Should A CEO’s Role Be?

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by Tim Fulton, Vistage Group Chair

I was asked recently to describe the role of the Chief Executive Officer (CEO) of an organization. As I considered the question I realized that there were at least six that came to mind. I am sure there are more. Here are the six roles of a CEO I described:

Casting Director

I believe that staffing a small business is much like casting a movie or a play. No matter how good a screenplay is, if the cast is not strong, the production will be a flop. Small businesses are the same way. You can have a dynamite business plan, but it’s the people who make it successful.

Jim Collins, author of Good To Great, said it best: “You must get the right people on the bus, wrong people off the bus, and the right people in the right seats.” This may be the most important role of the CEO.

Scorekeeper

I attended my son’s baseball game recently and encountered a very interesting (and frustrating) situation. The game started and it became apparent right away that nobody was operating the scoreboard. No record of balls & strikes, runs scored, or outs recorded. Initially, this did not seem to be a big deal. However, the game progressed, innings passed, & runs were scored. As spectators, we were totally in the dark. We didn’t know who was winning or losing, what stage the game was in (inning), or even what the batter’s count was. The players were just as ignorant about the status of the game as we were because they depended upon the scoreboard as much as we did. Where was the scorekeeper?

How many small businesses are run without a scorekeeper? I believe that there are many. Employees work hard, just like the baseball players, never knowing the results of their efforts. Just as it doesn’t make sense for the baseball scorekeeper to only keep score for himself, it also doesn’t make sense for the business owner to keep his own score and not share the results with his key stakeholders.

Designer

I often share the story of a sculling coach whose team was unable to win any races until he took the time to lift the racing boat out of the water and discovered that the boat had a fatal design flaw. I believe that it is the role of the CEO to oversee the design of his/her business and than make sure that periodically that design is reviewed to make sure it is still working.

Michael Gerber, author of the best-selling book The E Myth, suggests that while designing our business we should assume that it is the first of ten thousand (10,000) locations. What does that mean? I interpret that to say that we should seek out a design that can be replicated and one that ensures the highest level of consistency of performance. Gerber also suggests that we should design our business as if we were designing a game. The game has rules. There must be a way to win the game. The game must be fun. We shouldn’t design a game for our employees that we are not prepared to play ourselves.

Chief Fun Officer (CFO)

Have you ever seen a business that was having fun that wasn’t also very successful? I believe that the two go hand in hand and that ultimately the CEO is responsible for making that happen. Let me be clear: I do not believe that the CEO should do this at the expense of his ability to lead. The CEO does not need to also be the CEY…Chief Executive Yuckster; responsible for making everyone laugh.

The CEO should make sure that employees have the opportunity for fun as it contributes to their performance. Examples of this might be celebrations (birthdays, anniversaries, etc), toys in the workplace (ping-pong, foosball etc.), or just looking for opportunities to be light-hearted. Laughter or even a smile can do wonders in a high stress/high performance work environment.

Storyteller

Leadership guru and Vistage speaker, Don Scminke, shared a leadership model with one of my groups that really made sense to me and my members. He suggested that the results we seek from our employees are a direct result of their work behavior. Their behavior is driven by their beliefs. Their beliefs are a result of the “story”. What story you ask? Our story. The story of your business. There exists a story within every business. Sometimes more than one. The story might be a positive one, thus resulting in great organizational results. Or the story may one of doom and gloom, and hence, performance suffers.

I believe that the CEO is responsible for developing the right story for their business and then communicating that story at every opportunity. In fact, each CEO should have three stories to tell at any given moment: a story about the past, one about the current situation of the business, and maybe most importantly, a story about the future. Consider this, as a young child; how did we learn about life? Most of us did through stories. Not just stories from books, but also stories from our parents, our grandparents, and our friends. At an early age, those stories most certainly impacted our behavior and most likely still impact our lives as adults. Stories are very powerful communication tools…

Race Car Driver

I believe that so much of what a successful CEO does today is managing velocity. Customers want everything faster. The pace of business today is much quicker than ever before. Hence, the CEO needs to be able to accelerate his/her business accordingly. Vistage speaker Ole Carlsson suggests that “the CEO must have his hand on the gear shift at all times prepared to up shift or downshift at any given moment”.

Likewise, the CEO must know when to pull his car over for a quick pit stop when necessary. That’s time to fuel up (cash infusion), check the tires (employee performance reviews or 121 meetings) and check under the hood (planning meeting). One speaker said recently that “changing a business is like changing a flat tire on a car…doing 60 miles an hour”. Not even a racecar driver would attempt that feat.

What have I left out? I’m sure there are several more traditional CEO roles that you find yourself in at times. Which role are you most comfortable in? Which role are you most uncomfortable in? What role is most needed in your organization today? Sometimes it’s better to be asking the right questions than always looking for more answers.

Don’t Gamble on Employee Selection

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by Tim Fulton

Employee selection. No two words frighten small business owners more than these two.

Why is this? Maybe it’s because the selection process can be so time consuming. Maybe it’s because the process can be so costly. Maybe it’s because we are never quite sure we know how to select the right person for the position.

I believe that the main reason so many small business owners and managers dread the thought of hiring new personnel is that they have made bad decisions in the past and the thought of duplicating such decisions brings terror to their hearts.

Why is it that despite our good intentions, we still make bad decisions in selecting new employees?

The reason is simple. We usually base our decisions on the wrong set of information. This fact became very evident to me recently in talking to a small business owner. Bill had just about sworn off hiring any more new employees as a result of the horrible experiences he had experienced recently in trying to fill several vacant positions.

Predicting future performance

Bill had owned this small retail business for five years and had always struggled in hiring new employees. I asked Bill on what basis he made a hiring decision. His response included such common factors as appearance, communication skills, and past experience. He than shared with me that his most important factor in hiring a new employee was his ability to predict their future behavior and performance in that particular position.

I was glad to hear that Bill used such a criteria for hiring. Experts tell us predicting future performance is quite normal and a good practice in the selection process.

I than asked Bill on what basis he was able to predict such future performance. He responded that he would often times ask hypothetical questions such as, “If you were getting ready to close the store and a customer entered and demanded that you stay open for the next thirty minutes while she browsed for a future purchase, what would you do?”

Bill also suggested that he tried to determine applicant’s work attitudes and moral values during the interview. That information, he felt, was important in trying to predict future work habits.

Bill felt that despite getting great information asking such questions, for some reason many of his new hires did not perform the way he had imagined during the interview. In fact, several of his newly hired employees turned out just the opposite of what he had predicted during the selection process.

Hiring is Similar to College Football?

In talking to Bill, I also found out that he was a huge sports fan. He loved college football and confided to me that he was known to place a wager on one or two games a week. In fact, he bragged to me that he had earned enough money last year from betting on football games to pay for a recent week-long vacation to Florida for his family.

I asked Bill what he contributed his betting success to.

He responded that he had become very good at predicting the outcomes of games almost to the exact point spread. He was able to do this by studying each team’s past performance in close detail. He would watch replays of their last games. He would scrutinize their statistics. He would research how the teams had played under like circumstances in past years.

In simple terms, Bill had created a science of predicting football game outcomes by looking at past performance.

I asked Bill if it was possible to draw a parallel between predicting winning football teams and predicting the future behavior of a potential employee.

At first Bill had a confused look on his face. He was having a difficult time correlating the process of picking football game winners with the selection of productive employees. Slowly, a grin emerged on his face as he realized the connection between the two processes.

“Are you saying that I should pick my employees the same way that I pick my football games?” he asked.

“Absolutely.” I responded.

A New Approach to Hiring

All of a sudden Bill experienced a huge awakening. He considered that he would never bet on a football team just because the coach talked of winning such a game. He would never pick a team to win just because of their apparent work attitude or values. In picking his teams, he predicted future performance based on past behavior under similar circumstances. It had always worked. Why wouldn’t it work in selecting new employees?

Of course it would.

Not only will it work for Bill, but it will work for any business, large or small. Research has conclusively shown that the only way that we can accurately predict an employee’s future behavior is by looking at their past behavior under similar circumstances.

Why is this so? Because behavior can be measured, it can be evaluated, and it can be changed. To the contrary, attitude is difficult to measure, evaluate, or change. Which one would you want to use to predict future performance?

If an employee has a history of satisfying customers in similar situations as your workplace would require, you can bet that that same employee would continue at that same level of performance under your supervision. Likewise, if an applicant has had negative experiences in the past, you can rest assured that he or she will repeat that behavior in a future position.

So the formula is simple: we select employees on the basis of predicting their future performance as a result of their past behavior under similar circumstances. This formula has been tested many times in many different situations and has always provided the best means to acquiring great employees.

I received a call from Bill last week. He had hired his first new employee using this new philosophy and he was certain that this young lady was going to be a star employee. In fact, in just a week’s time she was setting a new standard for outstanding customer service for the other employees.

Bill was ecstatic. He couldn’t wait to hire his next employee. He is also enjoying football this fall. He is certain that this will be a profitable season.

Tim Fulton a business coach and CEO of Small Business Matters, a leader in small business coaching and development. Learn more at www.smallbusinessmattersonline.com.

Why Do You Run a Business?

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by Michael Iverson

I recently met with a long-time entrepreneur who expressed growing frustration with the state of his business. He complained that his work hours are longer than ever, yet his profits are shrinking. So, I asked him: “Why do you do it? Why do you run a small business?”


The question seemed to surprise him. Despite his dissatisfaction with the recent financial performance of his business, it was obvious that he had not given much thought to the alternatives. As he answered, it became clear that running a business is more than just his work. Being a business owner is part of his self-identity.


I have had this conversation with several clients over the years. Each one has the skills, talent and determination to succeed in another line of work. I ask them to spend a few minutes thinking about why they started their businesses and to write down their reasons. The lists often include:

  • Earn a decent living.
  • Be my own boss.
  • Feel a sense of accomplishment.
  • Provide jobs for family members and/or friends.
  • Be an active part of the local community.


When my client created his list, I asked how many of those reasons remain valid today. The discussion that followed revealed the owner is not happy about what he earns, his frustrations have overtaken his sense of accomplishment and the family members and friends have retired or moved on to something else. In other words, many of the reasons are no longer valid.

Evaluate the risks and rewards

For this particular client, the rewards of ownership no longer outweigh the risks. Several of his key employees earn a better living than he does, yet the risk of personally guaranteeing sizeable business loans is all his. I am sure many other business owners find themselves in the same position.

The greatest risk of all, one that many business owners willingly take, is putting all of their eggs in one basket. An entrepreneur often puts all his financial resources, as well as all his time, into the business. Should the business fail, there could be severe financial impact.

Weigh the alternatives

Once a business owner is able to view the situation objectively, he may ask himself: “Why am I working 80 hours per week, putting all of my eggs in one basket and earning just 10 percent on my investment? I could get a well-paying 40 hour-per-week job, invest part of it in the stock market, and live better by working fewer hours and having far less stress.”


But, it’s clear there is a tradeoff. If running a business is something that really gives you pleasure, if you have fun doing it and you are earning a decent living, you may not want to give it up. You may be willing to sacrifice some elements of your personal and financial lives to continue doing what you really enjoy. Getting up and going to work is not “work” but rather fun and I happen to be making money at it too!


One way to figure out if you are at the point of change is to enlist the help of an advisory board–a group of individuals from different business backgrounds who have experience running and supporting a business. Look for our upcoming article about the ins and outs of an advisory board.