I’m sometimes asked what makes a hired “professional” CEO different than a founder CEO.
The obvious answer is experience.
Some great questions to ask are: “What does experience specifically give a ‘professional’ CEO that is typically lacking from founder CEOs? Can the latter supplement that knowledge gap in some way to remain CEO without the typical downsides associated with a founder inexperienced in the CEO role?”
This is a nuanced and complex topic that can’t be covered fully in a single article. However, I will highlight one particular skill that tends to come with experience.
Experienced CEOs recognize data patterns that reveal under-appreciated opportunities and overlooked problems.
Let me give you an example from an entirely different domain. As a learning professional, I do a lot of cross-training in multiple business and non-business fields.
For the last two years, I’ve devoted myself to cross-training in the medical field as a wilderness first responder and search-and-rescue professional, and I’ve been working toward becoming an EMT.
When I first learned vital signs, I was very focused on how to take them and on memorizing what acceptable high/low ranges were for each. Once we covered the basics of each vital sign, we were taught how to interpret a combination of vital signs in the context of the overall clinical picture.
For example, if a patient’s pulse and breathing rate were both abnormally high, these two data points have enormous clinical significance.
One of the things I learned about vital signs is to always take a baseline set of vitals that can be used for later comparison. This allows me and those that later provide a higher level of care to a patient to do trend line analysis. This helps to determine if the patient is doing better or getting worse.
If the patient had just finished a workout, breathing hard with a rapid pulse would be expected (with both vital signs returning to normal in a few minutes after the workout ended).
If the patient had these same vital signs while sitting on the sofa watching Netflix and the vital signs continued to get worse, that would be of concern.
Your body pumps blood faster and breathes harder for a reason; a first responder’s or clinician’s job is to figure out why the abnormal vital sign is happening and how to address it.
Is the patient’s airway open? Is he getting enough oxygenation? Is there another reason behind this vital sign pattern? There are fairly standard protocols to assess each of these questions.
In the middle of learning about patient vital sign patterns, I had an epiphany. Something about the process seemed extremely familiar to me, even though none of the details were familiar to me.
I realized that the vital signs for a patient are really the exact same as key performance indicators (KPIs) for a business.
Ever since I worked with my first client at McKinsey 26 years ago, I always get a client’s current month KPIs/financial statement and at least a 12-month trailing history.
I want to know if different parts of the business are improving or declining. In business (as well as in medicine), a relationship exists between KPIs (and vital signs). When one metric goes up (like sales) and another goes down (like gross margin %), that means something. It has “clinical” significance.
The difference between an inexperienced CEO and an experienced one is that the latter has a much larger pattern recognition (mental) “database.”
They notice the opportunities overlooked by less-experienced CEOs. They also see problems that, to them, are as glaring as fingernails scratching a chalkboard, but that don’t seem unusual to the inexperienced CEO.
Every individual (myself included) has an upper limit to their skills. There’s a point beyond which it really makes sense to have someone else run your company instead of you.
However, you can raise that ceiling fairly significantly by supplementing what you might lack in terms of pattern recognition experience with outside resources.
The four most common sources of this expertise are:
- Board Members
- Value-Added Investors (who provide expertise in addition to capital)
- Experienced Executives to Run Functional Areas (e.g., VP of sales)
I’ve seen all four sources (often concurrently) work out well for an inexperienced CEO. I work in the first two roles as an advisor and board member. I often work with clients to recruit the right investors and seasoned executives, working alongside them once they are brought on board.
You don’t always need to hire a professional CEO to run your company. What you do need is to ensure that across your entire team of executives, board members, and advisors, you collectively have the same skills as an experienced professional CEO.