Managing Director vs. CEO: What's the Difference?

A Chief Executive Officer (CEO) designs the overall strategy and creates the overarching vision of an organization. 

The two positions work hand in hand but are quite distinct. 

For a startup, it can be important to balance establishing a hierarchy of roles while simultaneously creating enough space to learn and grow into the visions established at founding. 

Depending on your startup's corporate structure, you might need both a CEO and Managing Director - read on to discover more about the descriptions and responsibilities of each role. 

Importance of titles and establishing a hierarchy 

Startup companies may want to think about titles at the outset. 

This can help you to set up your company in a way that strengthens it rather than enforcing divisions.

One way to think about it is to imagine the CEO as a visionary who sees what the company can become in the future. If the CEO dreams big and flies high, the Managing Director holds the rope's end, tethering the CEO to the ground. Both roles are necessary for the kite to fly - i.e., for the startup to fulfill its full potential. 

Startup work ethic

While both the CEO and the Managing Director have crucial roles to play within a new company, the company’s success is often dependent on more than just them. 

The work ethic of those choosing to work for a budding startup can be fierce, and overcoming the barriers that new companies face can be made all that easier by a group of tenacious and committed employees. 

Teamwork and collaboration 

As a startup continues to grow, employees' roles and responsibilities will likely shift along with the business' needs. 

However, no matter the role, the primary responsibility of every employee is to work as a team and move with collaboration towards small goals that will ultimately attain a larger vision. 

The blurring of titles and roles

With this highly collaborative work environment, it is easy for those working together on a project to have blurred roles, leading to confusion surrounding titles and duties. The Managing Director will oversee the project and assign specific tasks. Therefore, most of the responsibility in establishing company norms relating to titles and roles will fall to this more logistical position. 

Salary based on industry

In companies that have been active for decades, it is easy to correlate the responsibilities of a particular role with a title. For instance, an executive assistant at a large company can expect to perform some scheduling duties and secretarial duties for their direct supervisor. 

On the other hand, a startup requires everyone to be "all hands on deck," so an executive assistant might be doing additional and unanticipated work. In an older company, those extra tasks might be more compensated explicitly in the form of a bonus or raises. 

Still, in a startup, the expectation is that employees will work towards the organization's vision with fervor without expecting additional compensation until the business is fully developed. Loyalty is rewarded in startup business models. 

CEO roles and responsibilities 

The primary responsibility of a CEO involves:

• Immediate decision-making
• Developing a long-term strategy
• Developing organizational perspectives regarding crucial policy issues

The CEO speaks for the organization and is considered the primary figurehead of the company. Usually, the Manager Director reports directly to the CEO. However, the CEO also has higher-ups to report to - the Board of Directors, depending on the company's structure. Specifically, nonprofits are federally required to have organizational plans and oversight that stem from a diverse group of directors. 

Skills and Personality Traits Required  

Individuals seeking to claim the title and prestige of CEO must be versatile. A CEO will face internal and external pressures and be the primary point of contact for board members, senior team members, and the general public. Because a CEO is the company's public representative, that individual is responsible for remaining upstanding, instilling values, and boosting employee morale. 

Primarily, a CEO must be a visionary. A realistic yet optimistic attitude is required for a company to thrive and meet its goals. A CEO must inspire others with their creative vision. CEOs do lots of public speaking, particularly about their organization's mission, but a CEO must be willing to listen to others. Accepting feedback from colleagues will only strengthen the business and help a CEO make more informed decisions. 

Visions can only take shape with motivation, so the CEO must be motivated to move ideas forward. The CEO should be personally motivated, but they should be able to inspire others to pick up the mantle to carry the organization’s mission forward. A CEO must be a thoughtful and inspiring leader. 

Following an established path to success seems easy, but rarely is the job of a CEO that straightforward. Possessing the ability to adapt to a shifting business landscape will enable the startup to grow and thrive. 

Finally, developing and inspiring trust from your board, your employees, and the public is critical for a CEO to succeed in their role. A CEO who builds trust builds a strong organization. 

Education and qualifications

For a person to be eligible for a position as a CEO, at least a bachelor's degree and extensive business knowledge and experience are required. Often preference is given to candidates with a Master's in Business Administration (MBA). 

Experience can translate to schooling or defined educational qualifications. Still, when it comes to being a qualified candidate for CEO, it will be challenging to attain the role of Chief Executive Officer.

Managing director roles and responsibilities 

While a Managing Director works closely with the CEO, their daily responsibilities are more internally facing. The Director is responsible for a startup's day-to-day operations, staff oversight, and project management.

The Managing Director usually reports to the CEO regarding any progress or issues within the organization; however, the two often appear to be more like partners than boss and employee. As the company grows and develops additional divisions, each Director will likely report directly to the Managing Director rather than the CEO, which helps ensure consistency across the organization. 

Skills/personality 

A Managing Director role requires an individual to process specific delineable skills. A person who aims to be a managing director should have experience developing and implementing strategic plans. Additionally, since the Managing Director often communicates directly with both staff and the public, they should have strong speaking, negotiation, and presentation skills. 

To excel in high-pressure situations, an individual seeking this Director role will need to exhibit problem-solving skills and critical thinking. Additionally, since a Managing Director deals with employees, the individual needs experience working in human resources. 

Building a specific culture within an organization is vital for company morale, and usually, especially with small businesses, that responsibility lies with the Managing Director. 

The Managing Director supervises the performance and manages the success of different divisions. However, the role is not permanently solidified, especially in a startup situation. A Managing Director should be ready to act as a Swiss Army Knife, ready to tackle any problem at any time. 

Education and qualifications

Because a Managing Director role is a "jack of all trades," the educational and professional qualifications needed are diverse but include:

• A bachelor's degree in business, marketing, or a related field, but after a Master's degree, might be preferred or requested.
• Comprehensive experience as a managing director or years of professional work in a similar role.
• Proficiency in implementing strategic and business plans.
• Exceptional communication, presentation, and negotiation skills.

What’s the difference?

It is important to note that in some places, the title "Managing Director" is interchangeable with "CEO," which is why confusion often arises between the two. 

Especially with businesses facing international expansions, the lack of consistency across titles is challenging. For instance, a business' senior executives in the United States might vary from what occurs in the United Kingdom. Both might be different from what a Canadian company might practice. 

Generally, it is always safe to assume that the managing Director focuses more on logistical operations while the CEO is the public-facing visionary. As a senior executive moves through the international corporate space, understanding these shifts in title and responsibility can be easily understood by those working in the space.

Exceptions to every rule exist, so even within businesses in the United States, instances where the titles of CEO and Managing Director can merge. 

Usually, this combined position occurs when an individual is also the company's founder - so specifically, this happens as startups launch and begin their corporate journeys. 

For startup companies, it's crucial to balance the desire for establishing a clear hierarchical structure while maintaining the need for a collaborative and collegial atmosphere. 

Employees at every level who decide to dedicate themselves to the mission of a startup are committed to taking every step to ensure the success of the vision, so maintaining that work ethic while establishing seniority is vital. 

If you want to learn more about how to hire for your startup, no matter the position, contact us at Hunt Club.