Select Page

As a business grows, so do the complexities of leadership and the essential skills requirements of the top team – a team comprising both the executive leadership (C-Suite) and the board.

Too often, the founders continue as they started – trying to do it all themselves – and find the company growth is constrained, the culture strained, and they become overwhelmed. Many, of course, are simply unaware of the various skills required as the company scales.

Good practice is for the CEO and the board to regularly review – at least annually, and more frequently if the company is growing quickly – the skills of the leadership and management teams to see what might be lacking and how best to attain these, whether through development of existing staff (generally a preferable option where feasible) or bringing in new expertise.

There can also be times when the company might choose to use outsourced resources for particular areas – perhaps while the identified internal candidate is undergoing training, if the role, though important, cannot justify a full-time executive, or as a temporary measure while finding the right permanent candidate.

So, what are these essential skills and roles in the top team?

These are split into Executive and Board roles for ease of reference: the executive team, of course, being those people with the responsibility for the day-to-day management of the business, and the board being those with the oversight of the business as a whole.  

 

Executive Leadership

CEO – the Chief Executive Officer is the person that carries the responsibility for the success of the business overall and is the only executive always appointed by the board. The CEO needs a wide range of skills and experience to effectively drive strategy and the implement the plans and policies to ensure the business meets its goals. All other C-suite executives report to the CEO, who will generally also appoint them, although the board may, depending on the memorandum of incorporation / articles of association, etc., of the business, be tasked with other executive appointments than just the CEO.

CFO – the Chief Financial Officer (Financial Director) is often the first senior outside appointment, unless the CEO has a financial background. Although this role used to be a purely technical one focused on budgets, cashflow control, reporting and ‘the numbers’ of the business, CFOs are nowadays expected to also be more creative and strategic with strong communication skills – working with the other parts of the business and looking at potential growth areas and the like.

COO – generally the organisation’s #2 executive, the Chief Operating Officer is responsible for the day-to-day operations and administration of the business. They should have complementary skills to the CEO, normally being more analytical and working with the metrics and KPIs of the business, but still being comfortable making decisions and recommendations even without having all the data they might ideally wish for. Ultimately, it’s a role about making things happen.

CSO / CMO / CSMO – as the business continues to grow, so the sales and marketing functions will need senior leaders. Until this point, of course, these functions will have reported into the CEO and/or COO. Whether the business starts with a CSO (Chief Sales Officer), CMO (Chief Marketing Officer) or combines them with a CSMO (Chief Sales & Marketing Officer) role will largely depend on the skills available within the CEO & COO team and the stage of development of the company.

Essentially, the CSO needs to understand how to lead sales teams effectively – this needs not only great communication & interpersonal skills, but analytical and administrative ones, too in order to set the processes for monitoring performance and rewarding the right behaviours. Working closely with the marketing team on promotional activities and the product team on products and services is essential here, so an understanding of these areas is important, too. It’s worth noting that top sales person does not generally make a great CSO.

A CMO needs a firm understanding of the company strategy and how to get the company in front of its defined (prospective) customer base, to be able to communicate this effectively to the rest of the company, of advertising and promotions, and of brand management in general, together with how advances in technology can best be utilised. 

CHRO – probably the next addition to the leadership team would be the Chief Human Resources Officer. The skills needed here, apart from great listening and communication ones, are the ability to define and set up the company’s overall talent strategy, including acquisition/hiring, development and retention and succession planning.

There are, of course, many other C-level roles as the company continues its growth, including Chief Information Officer, Chief Technology Officer, and others, depending on the nature of the business and its size, but these are beyond the scope of this article as they generally only apply to large organisations.

 

Board

There’s a common misconception that only big companies need a board of directors, or that they are the only ones needing outside (independent, or non-executive) directors.

Neither is correct.

Firstly, in almost all countries, any registered company needs at least one director, meaning there is automatically a board, albeit having just one member. However, most professional bodies, such as the Institute of Directors South Africa recommend at least the following guidelines:

  • At least 2 executive directors, being the CEO and the CFO (or equivalent person in charge of the finance function);
  • A majority of non-executive, independent directors, one of whom should be the Chair;
  • A proper balance of skills and expertise appropriate for the business, enabling the board to carry out its mandate effectively.

This, then, would suggest a minimum practical board size of 5 members for most companies.

For smaller business, this is generally a little impractical and in such cases companies should consider a minimum of 3 members, being the CEO, an independent non-executive Char and one other independent non-executive director. An odd number of directors is always recommended as it will enable board meetings to avoid often-acrimonious deadlocks on resolutions – something that frequently occurs when boards have just two members, both being the equal shareholders in the business.

For owner-managed start-ups with limited funding, even a 3-director board may not be feasible, but at least one independent non-executive director should be introduced as soon as possible – the costs can be surprisingly low, especially when the value of bringing this outside expertise to the business is taken into account.

It is also possible for companies to work with an advisory board of outside expertise rather than a fully-fledged statutory one with full fiduciary duties and many smaller companies start in this way.

The skills required of the various board members are very dependent on the nature of the business and the skills of the executive board members, but it should always be remembered that most countries have legislation that requires that board members carry out their duties ”with the degree of care, skill and diligence” that would ordinarily be expected of anyone in such a position of authority, so it is not something to be glossed over. It is strongly recommended, too, that the external (non-executive / independent) directors have a clear understanding of company law, and the duties and responsibilities of company directors.

But the main advantage of a properly constructed board is the considerable value it adds to a business (not just oversight) as the members will bring enormous experience and skill to the role, skills and experience the executives will be able to draw on. And remember, too, that companies with well-structured boards are viewed as being well governed and not only experience more sustained growth, but valuations up to 40% higher than the average.

 

A business with an executive leadership team having the necessary skills for its stage of growth, together with an appropriately sized board, whether statutory or advisory, and, preferably, a majority of independent non-executive directors will experience less risk, better sustained growth and higher valuation than other companies of a similar size in their market.

Does your top team have the skills and experience your business needs today? 

———–

I work with successful owner-led businesses to enhance their growth, profitability, cash flow and business value.

If you’d like to have a conversation about your business, executive and board skills and structure, or any other business challenges or concerns, book a free 30-minute call with me here. I’d be delighted to talk with you.

 

#BusinessFitness #Board #CEO #Culture #Excellence #Governance #Growth #Leadership  #Profitability #Risk #SmallBusiness #Success #Valuations #Winners  

 

P.S. If you’ve enjoyed this post and would like to subscribe to my blog simply enter your details here or drop me a note by pressing here.

If you’d like to learn more, you may find these related posts worth reading:

You might also find this paper from the Institute of Directors South Africa to be useful: GENERAL GUIDANCE NOTE – Board Composition, and this one from the Institute of Directors in the UK: Setting up a board.

 And this Forbes article: How Boards And Management Best Create Value Together