Huge conglomerates and tiny mom-and-pop businesses don't have much in common. Still, there is one thing they both share: the individual at the very top of the hierarchy is the one person on whom the ultimate success or failure of the enterprise lies.
In large organizations, this person typically is the CEO. In small businesses, that role is often filled by the individual who has a controlling financial interest in the enterprise—otherwise known as the owner.
Despite widespread belief, a Chief Executive Officer (CEO) isn't always the leader of a massive multinational conglomerate. Neither are they the owners of an enterprise all the time.
In this article, we'll go over the differences between CEO and owner, reasons why you should hire a CEO, and the best way to hire one.
Let's get started!
What Is a CEO?
A CEO is directly responsible for the day-to-day operations, marketing opportunities, and the overall success of a company. They focus on the business's strategic performance, which means setting the vision and the long-term goals. This also includes finding ways to boost profitability, increase the company's stock price, and prepare the company for expansion.
Having a solid background in finance helps in the creation and management of strategic goals. Since the objective of most enterprises is to make a profit, a CEO should know how to ensure sufficient cash flow, invest the company's excess cash, and control debt.
A CEO generally needs to have a thorough understanding of how each company department functions. That's because they engage in big picture thinking. To effectively do this, they must know how all the parts fit together to create one well-oiled machine.
Excellent people skills are usually a prerequisite for the role. A company's chief executive must be able to communicate with, educate, and motivate the team members they lead.
You can find CEOs across all industries and company sizes. This is everything from early-stage enterprises with three employees to enormous global conglomerates with thousands of employees.
What's an Owner?
An owner is an individual who starts a company and takes it from the planning stage to a profitable operation. They recognize a market opportunity for a product or service and seize hold of it.
An owner can have full or part ownership of a business. If an individual owns 100% of a company, that person is its sole owner. If a business proprietor has a partner with equity in the enterprise, that partner is a co-owner.
Some business owners are actively involved, while others take a more hands-off approach. One business owner might choose to work directly in their business. Another might appoint a manager to oversee day-to-day duties.
In smaller companies, owners often don't have the financial resources to hire a CEO. That means that when a company is first getting off the ground, the owner typically is also the CEO, without actually having the title. In fact, they might wear even more hats, taking on the functions of CFO, CIO, COO, CMO, and perhaps even a few more C-suite titles.
Once the business gets big enough, the owner might decide to bestow the title of CEO on themselves. However, unlike a public company CEO that reports to a board, a CEO in a private enterprise who's also an owner answers to no one.
An owner doesn't even need to perform any managerial duties to be considered one. In fact, if an owner wants their business to reach its full potential, they must be willing to delegate responsibilities to others when the time is right. This means as their company expands, an owner should consider bringing in some C-level staff to ensure that all business functions get done as effectively as possible.
The Differences Between CEO and Owner
The CEO title is typically conferred on an individual by the board of directors. Sole proprietors and entrepreneurs get to be called owners because they own their businesses and all their financial resources.
Ownership is a legal status, meaning someone who holds most or all of a company's shares. On the other hand, CEO is a functional title with a day-to-day role, duties, and responsibilities.
To make this clearer, consider a publicly-traded company. The shareholders are the owners, and the CEO is an employee held accountable by the shareholders through the board of directors.
However, the two terms aren't mutually exclusive. CEOs can be owners, and owners can be CEOs. Also, a CEO isn't always accountable to a board of directors.
While you can be a part-time owner, you typically can't be a part-time CEO because being a CEO is usually a full-time responsibility.
An owner can play a passive role in a business or a direct one. Passive means staying in the background as they give their CEO guidance and advice. Direct is when an owner assumes some or all of the managerial functions. On the other hand, a CEO is almost always a direct role that involves day-to-day oversight as an operational requirement.
A CEO is frequently the public face of a business. In this role, they might give media interviews, speak at industry conferences, write articles for trade publications, and send motivational messages to team members. However, in some private enterprises, the owner might handle these responsibilities instead of the CEO.
A CEO gets a salary, while an owner doesn't. Instead, they get to keep the company's profits.
5 Reasons an Owner Might Hire a CEO
You're a Vision Holder
Maybe you're an owner that's exceptional at holding the company vision and keeping the team motivated. However, you struggle with completing the concrete steps that'll lead your enterprise to its highest levels of success.
This kind of owner is a visionary who would rather work on their business than in it. They detest the day-to-day operational details chief executives attend to and prefer to explore new ideas and possibilities for their ventures. If this describes you, consider bringing a top executive on board.
Hiring a CEO can free you to cultivate a sense of mission in your team members. At the same time, the chief executive would attend to all the organizational minutiae that keep a business afloat.
If it's Time to Scale Up
You might consider hiring a chief executive if you're an owner looking to scale up and you don't think you have the management chops to successfully do it.
This could be the case if you turned your unique skill, craft, or trade into a paid career without having a whole lot of business expertise. Somehow, through the sheer force of your passion, you were able to make it all work.
However, you probably don't want to rely on this native enthusiasm to fuel the next stage of your company's growth. Hiring a CEO with considerable entrepreneurial expertise will allow your company to make the kind of strategic decisions that ensure it achieves the growth you desire.
You Want Your Organization to Achieve its Full Potential
Another reason to hand over the running of your company to a CEO is when you know that your enterprise is capable of so much more than you alone can achieve. Maybe with your meager managerial talent, you're able to grow your startup into a $10 million company. However, a CEO with more significant experience and knowledge might grow it into a $100 million enterprise.
You Only Want to Manage One Part of the Enterprise
There might be one area of your organization where you excel, whether it's production, marketing, or operations. If this is true, you could hire a CEO to manage all the other critical areas while you focus on that one part.
You're Not Good with Numbers
Let's say you suffer from math anxiety to the point where you become paralyzed with fear when investors ask about complex numbers. In that case, this might not go over too well with them. That's because they need to be reassured that the person in charge knows the financials inside and out.
Hiring a CEO with a solid financial background can inspire confidence in investors, increasing the chances they'll fund your company.
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