As the highest-ranking employee in an organization, the CEO takes responsibility for the overall running of the business. CEO stands for Chief Executive Officer, and they are responsible for the final decisions in any organization. You may find this position is referred to with different terms, which may include president, managing director, or chief executive.
What Does a Chief Executive Officer Do?
The CEO is responsible for the success of a business and is in charge of making the top managerial decisions in an organization. While they will likely have many employees and executives sitting underneath them, they’ll be the one who has the authority to make the final decision. A CEO will report to the Board of Directors, who they will share the company’s performance with. If you aren’t familiar with the Board of Directors, these individuals are elected to represent the company’s shareholders. The CEO may also sit on this board and could potentially be the Chairman of the Board of Directors. A CEO may be the founder of the company, they could be promoted from within, or be employed directly into this position. CEOs you may know include Jeff Bezos of Amazon, Mark Zuckerberg of Facebook, and Elon Musk of SpaceX and Tesla.
Why is a CEO so Important for a Business?
Without a CEO, businesses today would lack the guidance they need when it comes to managing their decisions. A CEO can turn around a business that’s struggling, thanks to the strategy and vision they bring to the organization. Companies often bring in CEOs from outside of their business, who are well respected within the industry. This then imparts confidence in the whole business and can completely change its trajectory. As they have the ability to make important decisions within a corporation and manage the resources they are using, they can change the profitability and success of a company within a short time.
The Responsibilities of a CEO
While the CEO is responsible for the company’s success, they will also work to create long-term strategies for the business. Their number one aim should always be to increase the shareholder value of the company. As far as their roles and responsibilities, these will vary between companies. In a small start-up, they are likely to take on a very hands-on role and be involved in the organization’s day-to-day operation. Whereas in a huge business, they will only deal with very high-level decisions. Further tasks will therefore be delegated to the departments within the organization and their management team. While there’s no set list of what a CEO must and must not do each day, these are some of the most common roles and responsibilities they are often expected to complete:
- Create short-term and long-term strategies for the business
- Communicate with the shareholders and public as the spokesperson for the company
- Lead the organization with its mission or vision
- Look for opportunities to expand the organization and keep up to date with the activities of their competitors
- Keep an eye on the other leaders within the organization and work to fill positions that may arise to create a strong executive team
- Setting goals for the business which can be measured over the upcoming years or during their tenure
- Considering the current risks that the company is facing and working to minimize these.
The Corporate Hierarchy – Where Does the CEO Sit?
While you may think the CEO is naturally at the top of the corporate hierarchy, some companies use a two-tier approach. Firstly, they’ll have the Board of Directors, and then secondly, they’ll have the management team, which includes the CEO. The Board of Directors is elected by the shareholders, and they ultimately have the authority to make decisions for the company. They are the ones who select the CEO and the Chairperson for the Board of Directors, and from there, they can choose their other executives. Key positions that work in support of the CEO include the Chief Financial Officer (CFO) and Chief Operating Officer (COO).
Are the CEO and Chairperson the Same Position?
No, it’s very important to understand that the CEO and Chairperson of the Board of Directors are two separate positions. However, in some businesses, one individual does hold these two positions. The CEO is an operational position in the business, whereas the Chairperson is invested in the shareholders of the company and their returns. The Board of Directors will only meet together a few times a year, whereas the CEO is involved in the company’s day-to-day running. In theory, the Chairperson could make decisions without the CEO, however, this only really happens when there are major issues within the organization.
In some countries, such as the UK, it’s not actually possible by law for the same person to be both the CEO and Chairperson. For many reasons, companies usually choose to separate these positions to avoid any potential conflict of interest. As the Board of Directors has the opportunity to change the CEO’s pay, this can be a very tricky situation when the same individual holds the positions. The same goes as far as their performance, and they are unlikely to admit they are underperforming in this position. For these reasons, many large companies today are opting to separate the two positions to offer an unbiased leader for the Board of Directors.
Qualities of a CEO
When it comes to hiring CEOs, there are certain qualities that you usually expect from an individual in this position. They should be able to inspire their team, from the entry-level employees up to their top executives. Communication should be one of their biggest strengths, and they should also be willing to listen to their employees and customers. Recognizing their employee’s hard work is something they should always do, and they should publicly reward high performers where possible. Finally, a CEO should always act with respect and good integrity, as they are often seen as the face of the company. While some individuals believe business and personal lives aren’t intertwined, it’s important to maintain a good image in this position in large public companies. CEOs generally have many years of management and executive experience before entering into this role.
Working as a CEO is a challenging role for anyone, but your day-to-day duties will vary depending on the size of the company you are working for. In smaller companies, you’ll likely be involved in the daily operations still, whereas in a huge corporation such as Facebook or Disney, you’ll mainly be responsible for the overall running of the company and the decision-making processes. With many years of experience in an industry, stepping into the CEO position can provide a new challenge for highly qualified individuals.
