What a Good CEO Does: Three Things

Last Updated Sep 8, 2010 3:23 PM EDT

What a Good CEO DoesOne of the most endearing and important qualities that uniquely defines us as humans is the way we pass on what we've learned to subsequent generations. Fortunately, that doesn't just happen in families. It happens in business, too.

And while one person's experience may be the next person's nonsense, there is the occasional rare gem to be cherished and passed on. Fred Wilson, a VC who's been around a while, has decided to share some advice he received almost 25 years ago from another VC. Who knew VCs could be so ancestral?

Anyway, the advice is the answer to the question "What exactly does a CEO do?"

As a sign of the tough economic times and other recent events, the jaded and sarcastic among us might respond with a satirical point of view:

What a CEO does (the satirical POV)
  • Has an inappropriate relationship with a marketing contractor, gets caught, gets fired, walks away with $35 million and a sweet job at his friend's company. (Mark Hurd, former CEO, HP)
  • Presides over a spectacular environmental disaster, promises to clean it up, whines about the toll it's taking on him, tells congress he wasn't involved. (Tony Hayward, former CEO, BP)
  • Fuel the subprime mortgage bubble, hedge against it, get bailed out, pay out record bonuses, document all of it in emails. (Loyd Blankenfein, CEO, Goldman Sachs)
I can go on and on with this trip down memory lane, but we've probably heard enough CEO bashing to last us a good long while.

Anyway, according to Wilson, here's What a CEO does (the VC POV)
  • Sets the overall vision and strategy of the company and communicates it to all stakeholders.
  • Recruits, hires, and retains the very best talent for the company.
  • Makes sure there is always enough cash in the bank.
According to the elder VC, CEO's should delegate everything else to the management team. Wilson, on the other hand, who uses these metrics to evaluate CEOs, says that, while good CEOs often do more, he doesn't believe you can be a great CEO unless you do these three things well.

Now, I've worked for and with a lot of CEOs over the past 20 years or so. Some of them weren't terribly good at their jobs. A few were. And while I think Wilson hit the nail on the head, I think it needs to be qualified and expanded on a bit:

What a CEO Does (My POV)
  • Sets the overall vision and strategy of the company and communicates it to all stakeholders. Doesn't pull it out of his you-know-what, as many do, but derives a unique value proposition from an ongoing strategic process.
  • Makes sure there is always enough cash in the bank. Sets, oversees, and drives the operating and financial model for the company, including profit, expense, and growth targets.
  • Recruits, hires, and retains the very best talent for the company. Ensures the management team is motivated, aligned, and held accountable to achieve the company's strategic and operating goals.
If a CEO doesn't do those three things well, he's not a good CEO, IMO. I'll reserve "great" for CEOs that actually accomplish great things. So, is this what your CEO does? Any VCs, CEOs, executives, or directors like to weigh in?

Image of Steve Jobs and Bill Gates CC 2.0 via Flickr user Joi

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