What does a CEO do, anyway?

Business Explained, by Stever Robbins

---

At my first job, a 20-person computer company, the CEO sat in his glass-walled office while the rest of us busted our butts creating the product. I used to look at him and wonder, “What does a CEO do?”

Now that I coach CEOs, I know. Sadly, many of them don’t.

Many people confuse a CEO’s responsibilities with duties. A CEO is responsible for everything that happens in a company, even making sure the trash gets emptied. But if a CEO did nothing but empty the trash, we would say they were doing a poor job. We might decide to fire them, hire a janitor, and take the rest of what we were paying them and use it to buy snacks for the lunchroom.

A CEO’s duties are what the CEO actually does. Some things, they can have other people do. For example, the CEO probably hires a janitor to take out the trash, leaving them free to do more CEO-like things. And that’s where we find there are four duties that the CEO can’t delegate, either because of legal reasons, organizational reasons, or leadership reasons.

A CEO’s first duty is setting strategy. Strategy tells the company what business they’re in and how they plan to make money doing it. When Bill Gates decided Microsoft would make software, instead of being a dry-cleaning company, that was a strategic decision (although some people would say he took us to the cleaners anyway). When a CEO is sloppy with strategy, you end up with companies getting into all kinds of silly businesses, like steel companies buying chains of lingerie stores. When a CEO is good with strategy, everyone in the company knows what business they’re in.

Which brings us to the CEO’s next duty: building the senior team. All the executives report to the CEO, so it’s the CEO’s job to hire, fire, and manage the executives. From coaching CEOs, I would say this is the most important skill of all. When a CEO hires an excellent senior team, that team can keep the company running. That team can–and often does–even set strategy, though it’s the CEO who has the final “go-no-go” decision on strategy.

The CEO’s third duty is setting the culture of a company. Some CEOs encourage people to work together, treat each other with respect, and make the company a nice place to work. Other CEOs encourage competition, back-stabbing, and playing favorites. It’s not always a conscious decision, though. CEOs set culture by being role models. People watch them closely for cues. As children, we watched our parents. As adults, we watch our CEOs. The Vice-Chairman of a Fortune 500 company once told me that the most important tool he had was modeling the behavior he wanted.

A CEO’s final duty is capital allocation, a fancy way of saying “spending money.” Since the CEO signs the checks, they choose the projects that live and die. This is also why they can’t delegate strategy, because the projects that get money are the ones that determine the strategy.

To recap, a CEO is responsible for everything. But even though they are responsible for everything, they only have four duties that can’t be delegated. First is setting the company’s strategy. Second is hiring, firing, and leading the executive team. Third is setting the culture of the company. And last is writing the checks and allocating capital.

I hope you’ve found this a useful overview of a CEO’s job. For more details, visit http://www.SteverRobbins.com/articles/ceojob.htm.

The post What does a CEO do, anyway? appeared first on Stever Robbins.