Latest / The Start, Scale & Succeed Podcast / Should You Really Hire a Professional CEO with Scott Ritzheimer (stages 4,5) - Ep. 413

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Should You Really Hire a Professional CEO with Scott Ritzheimer (stages 4,5) - Ep. 413 · The Start, Scale & Succeed Podcast

0:00
Scott Ritzheimer: Hello, hello, and welcome, welcome once again
0:03
to the Start Scale and Succeed podcast, the only podcast that
0:06
grows with you through all seven levels of your journey as a
0:10
founder. I'm your host, Scott Ritzheimer, and today we are
0:13
talking about the hardest level there is, and we're actually
0:19
going to talk about the worst escape route that founders reach
0:23
for. If you're just joining us, we are about halfway through a
0:26
series. We are also halfway through the journey that we all
0:31
go along as founders, and that means we are in the belly of the
0:36
beast. If you missed episode one in this Should You Really
0:40
series, you're probably going to want to check that out. It's in
0:43
the show notes below. Just a few episodes ago, don't worry, you
0:46
don't have to watch all the episodes between here and there.
0:49
Just go back and catch that one before you come here, because
0:51
it's going to help set a lot of context for what we're talking
0:54
about. When we say things like level four and level five and
0:59
level nine or niner, we won't say that. Just level four and
1:01
level five is what we're talking about here, so check that out if
1:06
you haven't already, or if it's been a minute, because we're
1:08
doing these little ways apart until you might have forgotten,
1:11
but what we're talking about here is yes, level four, and I
1:16
call this the disillusioned leader level, now that doesn't
1:21
mean you have to stay a disillusioned leader. In fact,
1:24
nobody wants to stay a disillusioned leader. So, if
1:29
you're in that mode again, this is full-time founder, you have
1:35
usually at this stage more than 15, more than 2020-five,
1:39
employees, but not quite 50 or more, so we're again in that
1:43
kind of messy middle. Technically, you're a small
1:46
business, but you don't feel like one anymore, and but you're
1:51
still not technically a big business, and so in so many ways
1:55
we're just kind of stuck right in the middle. You have a bunch
1:59
of leaders, and you can't do it all yourself anymore, but you
2:03
can't quite trust them to do it all, because there's some
2:07
fundamental flaws there, even though you love them to pieces,
2:10
things just aren't working quite the way that you want them to.
2:14
This disillusioned leader moments really hard, but again,
2:17
we don't have to stay there, so we have two paths forward, and
2:23
the topic of this episode is going to be the third path that
2:27
most people reach for that isn't actually a path at all. What are
2:32
the two valid paths? Let's hit this first. The two valid paths
2:35
are one, you learn to thrive in this leadership level, and this
2:41
is where we go from being a disillusioned leader to being
2:46
what I call a contented leader, and we'll talk a little bit
2:50
about what that is here in a moment. The other one is you
2:53
still have to become a contented leader, you still have to do
2:56
some of the work of that, however, the other option is to
3:00
keep going from there, so you're going to tackle this level with
3:04
the express purpose of getting to level five, and level five is
3:09
the chief executive level, and for the vast majority of those
3:15
that I know that are in level four, that's the way to go, and
3:20
that's really interesting, because most founders actually
3:26
tried to do the opposite. Most founders at this stage are
3:30
disillusioned leaders, and so they, they used to think that
3:36
they had the golden gut, they just knew how to smell out
3:39
profit, they used to think that they could make whatever
3:44
decision they needed to make and find a way to make it happen.
3:47
They used to think that their business would keep growing when
3:50
they kept adding people. They, they used to be under the
3:54
illusion that somehow they had figured it out. And while we
3:59
might sit here and think, well, shame on you. Of course, it's
4:01
not all of those things. That's not the truth at all. It's
4:04
actually, it was exactly all of those things, or those
4:09
illusions, as we talked about in an earlier episode, are all a
4:12
necessary part of getting to this point. And so, whether
4:17
they're proper beliefs or not, they were necessary beliefs to
4:21
get to where we are today, or necessary lessons that we
4:25
learned along the way.
4:26
However, you try and apply all of those, and it doesn't work
4:29
now in four, and it's, it's brutal, it's not pleasant. I
4:35
mean, the, you're, you're probably experiencing that, like
4:40
you, you walk in to work, and the only reason you're there is
4:44
because you own the place, like you would have quit a long time
4:47
ago if it wasn't your name on the sign out front, and and it's
4:54
not because everything's broken, it's not because everything's
4:56
bad, you probably have more revenue than ever, you. Might
5:00
especially at the beginning of this level have more profit than
5:03
ever, you have more people to help than ever, you have more
5:07
things to brag about with your, you know, CEO peer group, but
5:14
but you're dying inside, you're you find yourself trapped in a
5:21
prison that you start to realize you made, and as these
5:29
realizations are coming in, it's not uncommon. It's actually
5:33
quite normal for them to build to a point that they start to
5:38
make us wonder, wait a second, have I been the problem all
5:42
along? I've gone through all these different levels and
5:45
solved all these different problems, and none of that's it.
5:48
I'm here, and maybe it's me. Maybe I've taken this
5:54
organization as far as it can go. Maybe I need to hire a
6:00
professional CEO or executive director or another senior
6:04
pastor, if you're in a church, maybe we need a grown-up to run
6:10
this thing, is what it feels like, and in some sense you do.
6:21
There's a piece of that intuition that's true. The
6:25
problem is the chances of it working with anybody but you are
6:29
almost none, and there's lots of reasons for that. A professional
6:35
CEO won't save you, one, because even if you bring them in,
6:40
you'll probably hold so much control that they won't actually
6:43
be able to make the differences that need to be made. You have
6:46
to have the conviction to make those yourself, and if you do,
6:49
you might as well just do it, because founders figure stuff
6:51
out. Number two, any professional CEO that would be
6:58
willing to come in under those terms, would either have you
7:04
feel like they've been lied to because they thought they were
7:06
going to be in charge and they aren't, or they're not really a
7:10
CEO, they're really more like a COO, which would actually be
7:15
kind of the better outcome, because that's easier to fix,
7:19
but they're not the answer. Another possibility is you bring
7:25
just the wrong person in altogether, like if you don't
7:29
know how to be CEO of your company, how do you know how to
7:33
pick a CEO of the company? That's real. Like, how do you
7:40
interview them? Do you interview for someone that you like? Do
7:42
you interview for someone that's like you? Do you interview with
7:45
for someone who's not like you? What is the standard? Do you pay
7:49
someone else who's never been CEO of your company to tell you
7:53
what you need from CEO of your company, and again, or
7:58
nonprofit, or church, or whatever organization, the
8:03
chances that can work, don't get me wrong, but this, what this
8:08
is, there's this whole idea that you'll just step back, that
8:10
you'll step out of the way, and that some hero will come in and
8:13
save the day, is it's a false narrative, it's not true, and
8:18
folks in my line of work have breathed into this, because we
8:21
have this whole, like, if you're a founder, you're not a CEO. We
8:25
make it out like it's a wiring thing, like you, like piddly
8:30
entrepreneur, you're just, you're just flawed, and you
8:33
could never be CEO, and so you shouldn't be. I just don't buy
8:38
it. I haven't seen it. I'm yet to, I've worked with 20,000
8:42
founders. I'm yet to see one who genuinely desired to get to
8:47
level five and be CEO, who, with a little bit of help and enough
8:54
hard work, couldn't do it. It's not, it's not a wiring thing,
8:58
it's a skills gap, and even more than being a skills gap, it's a
9:01
desire gap, and that's the heart of this episode, because what we
9:05
really have to get to is, do you really want to be in a company
9:10
run by a CEO? Because if you do, you should be the CEO in way
9:16
more ways than we can discuss in this.
9:18
You're the ideal person to become CEO if it's even needed
9:22
in the first place, and that's what we're getting at, is does
9:24
this thing have to grow, does it actually have to scale. We've
9:28
got this whole kind of scale or die ethos in a lot of
9:31
entrepreneurial founder circles, and one, we mean all kinds of
9:36
things by scale, but when I'm talking about scaling, I'm
9:39
talking about going from 50 to 500 people, or I'm talking about
9:42
going from, you know, 45 people in one office to 250 people
9:48
across seven states. That's what scaling looks like. It's not
9:52
just growing, but it's, it's, it's increasing to whatever size
9:56
the market will allow, or you desire. It's being able to go
9:59
when it's time to go. It's being able to slow when it's time to
10:01
slow, and being in control of that, being CEO is about leading
10:06
through an executive team, and you know, whatever you call
10:09
them, you don't actually need an executive team with less than 40
10:13
people on your staff, it's like pouring jet fuel into an old
10:20
Volkswagen rabbit, like it runs on diesel. It doesn't, you can
10:25
put more powerful stuff in it, but it's not going to work. And,
10:30
and so, what we've really got to wrestle is, like, how big does
10:33
this organization need to be to fulfill your vision? If it needs
10:37
to be significantly bigger than it is right now, then yes, it
10:40
needs to be led by a CEO, and until you've been that CEO, it's
10:44
you, you're the guy, you're the girl. It's time for you to
10:48
submit to your own vision and get it done. And when you do,
10:52
you'll be awesome at it, you know. It'll be a little awkward,
10:55
little pig on roller skates action to start with, but you
10:57
can learn the skills of being a CEO, and the thing that you're
11:00
terrified of being CEO and being in meetings and being bored out
11:03
of your mind and reading PNLs, you got to do that for a time,
11:07
but when you get to level five, you actually get to graduate in
11:11
level five from being CEO, chief executive to being CVO, chief
11:16
visionary, and it's amazing, it's a brilliant fit for the
11:20
natural wiring of most founders, but you've got to go through a
11:23
process to get there, and, and that's where this whole
11:29
professional CEO thing undermines the whole process,
11:32
because it disallows you the opportunity to learn the skills
11:35
that you need to be an effective executive, and if you're not
11:38
going to be an effective executive, then who really is,
11:42
if you're not going to walk away altogether, which is generally a
11:45
mistake at this stage, because the organization is not ready
11:48
for you to walk away without taking a huge hit in its value
11:52
and your ability to cash out, and so what we've got to figure
11:57
out here is not, are you fundamentally flawed, can you be
12:01
a CEO? Should you go hire a professional? That's not the
12:06
question. The question is, does the vision demand a bigger
12:10
organization to achieve it? Do you have to scale your staff? If
12:15
you do, then yes, someone needs to be a CEO, and you don't need
12:19
to hire a professional CEO. What you need is to start hiring
12:23
executives. You don't need to put somebody in the top seat in
12:26
the organization, or let's be honest, pretend they're in the
12:29
top seat of the organization. You need to actually own that
12:34
position, and you need to hire your team of executives to work
12:38
with you. You cannot be chief executive if you have no other
12:43
executives, you're not chief of anything, and so to really be
12:46
CEO, regardless of what your business card has said since the
12:50
day that you started to be CEO, you've got to step into that
12:55
role yourself, you've got to have other executives, and so
12:59
that's really what's on offer here is it's not about hiring a
13:03
professional CEO to come in and save the day. It's about you
13:06
recognizing what your vision demands, and then stepping in to
13:08
fulfill the need of the organization to fill that
13:11
vision. Now, that leaves us again with two options, and
13:18
there's a third, in that you could go back and make the
13:20
business smaller. Sometimes that happens, but we're not going to
13:22
talk about that in this conversation.
13:24
You can, you can push forward and become that CEO, or you
13:30
might find that's not necessary. You don't need a professional
13:34
CEO, and you don't need to be CEO. You just need to learn to
13:38
thrive where you are right now. So, what are some reasons that
13:41
that you could do that, some of the circumstances that might fit
13:45
some of the the the things that you might want to do. Well,
13:50
here's how you can get a sense of whether or not level four is
13:54
right for you, whether whether you even have to figure out all
13:57
this stuff of getting to level five in the first place. First
14:00
one's obvious. You can hit your vision with an organization
14:03
that's somewhere in the 25 to 50 people range. It's not, you
14:08
know, and those are flexible, but it's not massive. There's
14:11
not like seven layers of middle management. It's just you and a
14:15
handful of leaders rocking and rolling with a closely knit
14:19
group of people. And what's cool about this level is that you can
14:22
know everybody on your team, now you won't have the same degree
14:25
of relationship with everybody, but when you get past this and
14:29
you're walking through the halls of your company and someone has
14:32
been hired that you've not even met before and they've already
14:34
started and worked for you for months and you've never met them
14:37
because they're part of a different part of the
14:39
organization, that's a weird feeling, and you know, level
14:43
five, that's fine. You don't have to deal with that weird
14:46
stuff here in level four. If the market that you're competing in
14:53
fits a team of that size, that's great. It's real difficult to
14:57
dominate a national or global market with a. With 40 or 50
15:00
people, that's a real challenge, possible in some really niche
15:06
domains, but not in most. If your revenue and margins can
15:14
sustain a leadership team and your frontline staff, so this
15:18
one you got to solve one way or the other, because it's only
15:19
going to get more expensive if you go to level five and need an
15:21
executive team, but sometimes we can get stuck, depending on the
15:26
industry, in this kind of middle ground where you haven't quite
15:29
reached economies of scale, but you have experienced some
15:32
diseconomies of scale. You're just kind of in between. It's
15:35
pretty efficient to run a small group in level three, where
15:39
you're driving it and you're out there doing it. It's pretty
15:42
efficient to run an enterprise in level five, but there's this
15:46
middle spot that just doesn't work in the industry. I see this
15:50
somewhat frequently in construction and in related
15:54
industries, where it's just, you can't work on projects that are
15:59
big enough to keep you busy, but you can't stay with projects
16:02
that are small enough and available, and it's a little bit
16:05
of a no man's land. So, there's just the market reality of,
16:08
like, can you actually run an organization on that size in
16:11
your industry sustainably? Otherwise, you have to just
16:15
muscle through it. The the other part of this is that you're
16:21
willing to continue to shoulder the decision making burden,
16:27
you'd be more comfortable making the call yourself at this level.
16:31
We have a leadership team, at least that's what we call it,
16:34
and again, you can call it whatever, but it's really a
16:37
group of people who are there to support us as we make the
16:40
important decisions, and, and that's great, if that's a fit
16:46
for you, you like them, you trust them to do what you've
16:48
decided, that can be a great, a great deal. It can also be
16:52
really hard to carry that weight by yourself for a really long
16:55
time, whereas with an executive team, you're actually creating a
16:59
team that's capable of making decisions without you, and in
17:02
fact probably makes most of the decisions either with or for
17:07
you, and and leaves you with just a few that you actually
17:11
need to make yourself. You can let go of daily execution while
17:19
still maintaining being in charge, and, and sometimes that
17:23
can be really tricky. Sometimes we'll be tempted to jump in when
17:27
we're that close to the execution, and, and for some
17:30
folks, they just can't resist, and so they have to get further
17:34
away from the front line.
17:36
I talk about the move of level five to be, you know, moving
17:39
from level four coach on the sideline to GM in the box.
17:42
There's a reason why the GM is not at the sideline, and a big
17:46
part of that is because they'd be tempted to interfere with or
17:49
make decisions that are not actually their job, and it would
17:54
change their perspective in a way that's not actually helpful.
17:57
So you're able to lead from the field level and not jump back in
18:02
and save the day more than you should. You don't need to scale
18:07
just for scale sake, like you can say no to even some good
18:11
opportunities if they're not the best one. And again, you're
18:14
willing to do that all under around something like 50 people
18:18
on your team, or the equivalent, and those are all like, if that
18:23
matches for you, then honestly, the best decision that you can
18:28
make is probably to stay in level four. If you were to try
18:33
and get to level five, you'd introduce more complexity than
18:36
that was necessary, you'd introduce more overhead than you
18:39
could get a return out of from an economies of scale
18:41
perspective, you'd add more risk, particularly financial
18:46
risk, to the equation than then you probably are willing to
18:49
handle, and the intensity of the game would go up in a way that's
18:55
just not pleasant. Now, How do you know if if it's time to move
19:03
forward, what are some signs that it's time to go to level
19:06
five? First one, obvious one, already said it, gonna say it
19:11
again. Your vision demands it. Your vision demands a more
19:14
complex organization than you can lead alone, and you've got
19:18
the energy to lead a team toward it, so the two requirements that
19:24
I have for level five CEOs really are this. If you're
19:30
saying, 'Hey, can I be that? Two criteria, you ready? First one,
19:35
do you have a vision for a better future for your
19:37
organization? If you do, that's that's number one, not the skill
19:45
to do it, not all the answers on how it's going to happen, but
19:48
just a clear vision on what you believe the organization can and
19:51
should become. Two, the energy to lead a team to figure it out,
19:57
not the energy to do it, not the energy to. Or the team on your
20:00
back and carry them all across the line, not even the energy to
20:03
coach from the sideline, but the energy to lead an executive team
20:07
toward it. If you have those two things, you are the ideal CEO
20:13
for your organization. You just are. And so, if you have those
20:17
two things, and your vision demands that, that better vision
20:20
demands that you scale beyond the current operation. Level
20:23
five is probably going to be great for you to get there. It's
20:28
going to cost you. You're going to have to throw out the founder
20:31
card. You're going to have to throw out the owner card,
20:33
because in level four we kind of walk around and everyone knows
20:36
we're in charge and everyone does what we say, for better or
20:38
worse, when you have an executive team, they're actually
20:43
paid to tell you no. Now they're paid for more than that, and
20:46
they need to accomplish more than that. But one of the
20:48
biggest things that an executive team brings to the table, that's
20:51
different from a leadership team, is that they make these
20:55
big decisions with you, and the only time that would be relevant
20:59
is if they're capable of disagreeing with you, because if
21:02
they would always agree with you, then there's no point in
21:04
having them with you, they're just redundant, and so if you're
21:07
okay with building an executive team that tells you no, and you
21:11
trust them to do that wisely, you might be suited for level
21:16
five. Now, what else we have here, we have the you We've got
21:23
the executive team. What else we have, the willingness to mature
21:30
personally, skillfully into the leader, the executive, and
21:37
visionary that your executives need you to be great executives.
21:43
Need a great leader. They need someone to inspire them to make
21:49
the right decisions and move in the right direction, and give
21:52
their discretionary effort, and come up with great ideas.
21:55
And so the limiting factor here is oftentimes whether or not you
22:00
have developed and matured as the leader that you need to be
22:05
in the way that you communicate, in how clear the vision is, in
22:09
how trusting you are with material decisions. All of those
22:15
are necessary requirements for executives to do their best work
22:18
for you, and so again I want to bring us back that the principal
22:24
question in this episode was, do you need to hire a professional
22:26
CEO, and if you're in level four, not level five, the answer
22:33
is no. The answer is no. Now you'll see in the next episode
22:40
that that changes completely in level five, because half of your
22:43
job in level five is actually find your successor, but that's
22:46
not a professional CEO, that's a, that's a replacement
22:50
visionary leader for your organization. So, we'll talk
22:53
about that in the next episode as we build on how to navigate
22:58
level five, but right here, when we're navigating level four,
23:02
you, you don't hire a professional CEO so that you
23:06
don't have to become an executive, that's not going to
23:09
work for you. You, you don't hire a professional CEO, but
23:13
then what you do is decide, does your organization need a CEO?
23:18
Does it need a chief executive? And the answer to that is, does
23:21
it need an executive team? Because an executive team needs
23:24
a chief executive, and and it needs an executive team if it's
23:27
going to scale any to any significant degree beyond 50
23:30
people, because the complexity and intensity of leading an
23:33
organization at that size is just so much greater than the
23:38
traditional leadership team or team of leaders can handle, and
23:43
so I'd be remiss if I didn't say level four is a hard level, it
23:51
really is. And if you're there and you're feeling beat up and
23:54
you're questioning yourself, you're not alone, and you
24:01
probably have some things that you need to work on, but that
24:04
doesn't mean that you can't do it. It's not a fatalistic thing.
24:08
You haven't reached your limit, you haven't reached the end,
24:12
you've just reached the limit and end of level four, and at
24:17
least the way that you're engaging with level four right
24:19
now, and so you've got to decide what you want to do about that,
24:22
so if you're willing to stay in the game, stay close to the
24:27
game, I should say, and own the hard decisions, and keep pulling
24:34
the organization forward toward your vision for it, then that's
24:37
great. Level four might be fantastic for you, and you can
24:41
really be a contented leader and lead that for a long time, if
24:46
you need to step forward, if you need to get to the next level. A
24:50
professional CEO is not going to do it. Learning the skills of a
24:53
CEO are going to be exactly what makes that happen for you, so
24:59
the. What it takes to get from level four to level five.
25:03
Hopefully, you've got some sense of which level is right for you.
25:08
If you are already beyond this question, you've already moved
25:12
into level five, or if you want to know what's coming next, then
25:17
the next episode is going to be fantastic for you, because we
25:20
are going to actually talk about and zoom all the way forward to
25:24
whether or not it's time for you to step down, and it's gonna be
25:30
a great exercise. It's gonna be a great conversation where we
25:33
talk about should you really step down. So that's all about
25:36
the transition from level five to level six. Hope to see you
25:39
there, and with that, you know your time and attention mean the
25:46
world to us. I hope you got just a little bit more clarity than
25:49
you had before this conversation, and I cannot wait
25:52
to see you next time. Take care. Hey everyone, Scott Retheimer
26:00
here. Thank you so much for listening to the Start Scale and
26:03
Succeed podcast. I hope this episode gave you exactly what
26:06
you need for the level you're in right now.
26:09
If you want to discover what level you're in, take our 10
26:12
question founders evolution quiz for free@foundersquiz.com That's
26:17
Founders quiz.com it'll pinpoint exactly where you are and give
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you tailored tips to move forward and reach that next
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level in your journey as a founder. If you got something
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out of today's episode, don't forget to subscribe, rate, or
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review. It helps us reach more founders like you, and let's be
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honest, it means a ton to me, my team, and all our incredible
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guests. So, keep starting scaling and succeeding, and I'll
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see you in the next episode.