Good CEOs Do Just 3 Things

Fred Wilson’s now classic post What a CEO Does, argues that a CEO really only needs to do three things:

1. Sets the overall vision and strategy of the company and communicates it to all stakeholders.
2. Recruits, hires, and retains the very best talent for the company.
3. Makes sure there is always enough cash in the bank.

At first glance, you might think this is an overly simplistic way to look at the role of a CEO in a fast growing company, but when you think about what you spend most of your time on, your activities probably boil down to one of these three things  —  or at least, they should.

From my experience building companies over the last 15 or so years, I want to share a few tips to get better at each of Fred’s three things. It’s important to keep in mind that like anything, the more you practice, the better you’ll get  —  especially if you’re a first-time CEO.

Setting the vision and strategy

• Don’t assume everyone in your company knows what’s going on inside your head  —  they don’t, so you have to communicate your vision and strategy until your employees (not just your leadership team) are literally sick of hearing it and can recite it back to you.
• When communicating your vision and strategy, don’t just talk about numbers and products. Tell your people why your vision and strategy are important to you, them, your customers and investors and show them how their role fits in.
• You understand the market, the competition and the rate of change better than anyone in your business  —  that’s why you’re the CEO, so you need to keep that in mind and realize that while you live and breathe your business, not every single one of your employees will.
• It’s best to have a regular cadence of all-hands meetings where you constantly discuss your vision, strategy and progress. This is especially important if you’re growing fast and/or hiring new people regularly  —  you want everyone in the company to be aligned and nothing does that better than hearing from you, their CEO.
• Try your best not to flip-flop between strategies too often. It’s inevitable that the market will change and you’ll want to zig instead of zagging, but try to limit a complete change in strategy to no more than once a year. The bigger your company is, the harder it becomes to turn the ship to go in the direction of a new strategy, meaning additional cost, complexity and confusion for your employees.

Recruiting the best talent

• It’s best to be actively involved in the recruiting process for roles you determine as critical. Whether that’s making the initial contact, jumping on a plane to meet a candidate, or conducting the final interview to sell her on your vision. Don’t delegate everything to your team. The best candidates are in high demand, and getting face time with you can be the deciding factor in where they go to work.
• Plan your new hires at least two quarters out if possible. There’s lead time to find amazing people, regardless of whether you have a strong network or not.
• The best people don’t take a new job because you have a great kitchen or a chef  —  they want to work in industry-defining companies with a big vision and huge potential upside where they can make an impact. Sell that possibility aggressively.
• As Ben Horowitz mentions in his excellent book, The Hard Thing About Hard Things, try to find someone who will be good for the next 18 months of your company’s growth. In 18 months you’ll be a completely different company, so there’s no point thinking too far beyond that.
• Focus on the person you’re hiring more than their resume. What makes them tick? What are they passionate about? Are they humble despite huge success in the past? What do they value and how do they handle tough situations? Skills can be taught, personalities cannot be changed.

Having enough cash

• If you raise money, it should last at for at least 18 months of bad times. In other words, if everything went to hell in a hand basket, have enough cash for that scenario, not the perfect scenario where your sales grow 500% in the next year.
• There’s a fine line between fast growth and spending too much money. You can grow fast while keeping your cash burn in check and it’s better to grow slightly less than having to fire half of your people because you’ve overspent and can’t raise another round of funding.
• Most fast growing companies spend a lot of money on sales and marketing without first proving ROI. Instead, test multiple channels with small budgets and when you’ve found a strong ROI (ideally 3x or more), scale that channel aggressively.
• If your goal is to build a big business that can be acquired or taken public down the track, focus your remuneration more on equity than cash, especially for executives  —  you want them to be aligned around creating future value which they can share in.
• The earlier you can understand where you’re cash efficient and where you’re not, the sooner you can fix those leaky funnels and spend your cash more wisely.

Of course, there’s a lot more to building a fast growing company than just Fred’s three points and my tips for each, but hopefully you find them useful.