The Product or Service Expert as CEO

By: Bob De Contreras

Introduction
Many mature companies are led by CEOs who are more engineer (also includes other creative and artistic backgrounds) by experience than skilled business persons. These CEOs have led their companies through the beginning years and found some level of success.

These CEOs have found that as revenues grow and employees are added, the organization begins to take shape and a management structure has developed. A more professional management approach is needed. At this point, the engineer (and sometimes even the seasoned businessman) often stumbles, steps aside, or is moved aside

This introduction leads to the question of what a founding CEO needs to do in order to become a more successful business person and CEO.

How Can the Engineer or “Artist” CEO Succeed?

The question of how the engineer can succeed starts with a simple, obvious answer – the person must want to succeed, recognize and admit to their shortcomings, be willing to change and able to learn business and personnel management skills. If these conditions are not possible, then the CEO should consider hiring a President with the skills required to run the company.

If the CEO is going to find success on his own, then here are some actions to consider that will start the process of building the required business skills in the CEO:

Hire a Coach. Classroom training will only begin to prepare you for the job of CEO. Hire a coach or mentor with CEO skills and experience to guide you and advise you in your transition to risk taker, manager, leader and profit maker. You need a mentor to help you see the forest for the trees and the best solution here is someone outside your company. Your coach should be someone who questions your answers, not answers your questions. You don’t want someone to tell you what to do and make decisions for you. You do want someone to teach you the management and financial skills you need to find success. Don’t forget that it’s your company – you make the decisions.

Advisory Board. Assemble an advisory board staffed with people who have the skills and knowledge that you don’t already have in the company. For example, a person skilled in personnel management and hiring practices, or a person skilled in market development and alliances. Then use the advisory board as a sounding board and source of alternative solutions to your issues.

Qualified Executives. Hire executives/managers with experience and knowledge in more than one area. For example, a marketing executive who also has experience in development or an operations executive who also has experience in sales. Then you need to ask for their advice and this is a hard one – you need to listen to and act on their advice. Use your experts as instructors.

Qualified Staff. Hire employees that are subject matter experts. Hire good people and get out of their way. However, don’t hire experts that don’t fit your culture. Everyone you hire must fit your company culture first – they must fit in. Ask for their advice and listen to it because they are closest to the issues and the clients. That means they have a better view on and ability to choose the best solutions. Use this staff to learn what’s important to your clients.

Qualified Accountant or CFO. The life-blood of your company is cash. Understanding your financial position, forecasting your revenue and expenses, planning for organic company growth, setting pricing and budgets are difficult for even the most seasoned CEO veteran. Hire a financial expert to help you learn how to make those financial decisions.

Birds of a Feather. You don’t have to reinvent the wheel. There are other CEOs out there that may have already solved a problem you are facing. Find them and use them as a sounding board. Joining CEO associations and business groups is a good way to meet other CEOs. Your coach (if you hired one) is a good source of contacts that fit your needs.

Responsibilities the Engineer and “Artist” CEO Should Avoid

There are several functions or responsibilities that the engineer CEO should avoid but seldom does. If you are an engineer CEO, you probably have some of the entrepreneur tendencies like thinking you need to make all the decisions. But, for example, how can that be correct when you don’t have marketing or finance knowledge? Here are some responsibilities or decision areas where the engineer CEO should avoid involvement:

Hiring. Human nature is to hire someone like yourself because you want to be around someone in your comfort zone. However, this is a problem. As an example, an engineer CEO who is looking to hire a marketing executive will probably hire an analytical, everything is black and white, engineer type – someone in their comfort zone. But, the marketing executive needs to be someone who sees things in a dozen shades of grey between black and white -- a person who asks what can be rather than what is.

Sales. CEOs think they are great sales people because they make a sales call on a prospect CEO and close the sale. Two CEOs get together and they are both bragging about their products. They understand each other, they share a bond and they agree to sell/buy. These CEOs never learn the sales process of needs development, vision of a solution, value justification, risk mitigation and contract negotiation. So, the CEO is ill prepared to guide sales or make valid decisions about sales programs, processes or investment.

Operations. The operations executive or manager role is a complex one. The responsibilities could include: liaising with clients, general administrative and sales support, business and personnel performance reporting, managing, motivating and developing a successful team. The engineer CEO attempting to complete these tasks is simply a “duck out of water.” The CEO should attempt to build these skills over time but they should be left to the trained and experienced executive.

Market Development. The market development executive or manager responsibilities include: Identifying target markets, assessing the existing sales organization and developing it as necessary, establish strategic direction, design lead generation strategies, and more. These are tasks the CEO does not have time to focus on nor, in many cases, the skills.

Success Through Balance

The engineer CEO must make a transition from specific technical or aesthetic skills to proficiency in all areas of the business. Communications, leadership and technological understanding are helpful, but in addition, these CEOs need the skills of financing, marketing and management.

The Engineer CEO needs to surround him/her-self with complementary and superior management who have the appropriate business skills and experience, to offset their own shortcomings and provide opportunity for self-development and heightened success.

Through it all, there is no substitute for desire, dedication and determination. These character traits, along with a good idea and a good team of people, can guide the engineer CEO in finding success.

The Product or Service Expert as CEO Case Study

By: Bob De Contreras

In this example you will read about two clients – an accounting firm and a national staffing company. Join us as we explore how a CPA and an entrepreneur take on the role of CEO.

An Accounting Firm

This “green eye shade” CEO is no ordinary CPA. She is a tax and business consultant. Her firm focuses on clients in one industry so that their specialization allows them to provide the best possible service to their clients.

When we first met her, she had 50% employee turn-over. The company had grown to six employees and was in the process of shrinking. The firm had a few clients that should have been “fired” because of slow payment, excessive demands on the firm or constant changes in their needs. Her employees were having a hard time satisfying client needs consistently and there was high absenteeism.

This was a profitable company and the CEO had earned several awards for herself and the firm. She hired us to coach her, help develop her CEO skills and guide the growth of her company.

In bullet form, here are some of the changes we helped her implement and the results:

1.   She was hiring the best skilled person for the job and overlooking fit in the company culture. We helped her hire for fit in the culture first, skills second and train internally to build the skills where needed. Turn-over was reduced to 20%.

2.   She couldn’t bring herself to fire an employee who was not performing. She always stepped in and took up the slack “saving” the employee. We helped her set goals and objectives for her staff and hold them accountable. She built a written record of their performance and was able to use it to help her see why she must take action and release the poor performers.

3.   She was continually distracted with opportunities to purchase and merge with other accounting firms. Each one ended in a no-go decision after the due diligence. We helped her cut down the distractions from these opportunities and she learned to shut them down before they ate into her precious time.

4.   She had a business plan but the marketing and sales plan portions were weak. We helped here enhance these plans and she was able to gain visibility in her market and grow the number of clients steadily each month.

This CEO made the decision to build her CEO skills by using a coach. She was willing to change and accept some of the tough decisions she needed to make. She was able to build on her soft side skills and build her business by making decisions she was not able to make before.

A Staffing Company

This entrepreneur CEO came from an entrepreneurial family and was following in his father’s foot steps. The insult to the injury, so to speak, was that his father-in-law was also an entrepreneur. This CEO was young and a graduate of a fine business school. Unfortunately, he had never worked anywhere but in the family business. Kindly, I have to say he didn’t know the first thing about a financial statement. Before we met him he had never fired an employee – even though several needed to be released for poor performance and one for embezzlement. In the fourth quarter of each year his business volumes were down and he had to borrow money from this father to pay expenses until business picked up again in January. He won new business by under biding the prices of his competitors. This was a five million dollar business with profits in the neighborhood of ten to fifty thousand dollars.

He hired us to help him with his business planning and to help improve profits. In bullet form, here are some of the changes we helped him implement and the results:

1.   We helped him understand sales and the sales process. With our help he started selling (something he had not done before) in the third quarter. The sales success he found has eliminated the fourth quarter revenue downturn for three years now. His father is very happy.

2.   He believed that he had to run and grow his company on cash from operations. We convinced him to get a credit line from his banker so he could better withstand the ups and downs in business cycles and fund his growth. The bank was happy to help and he bears less stress from operations now. The company has grown from 500 employee/contractors to 3,500.

3.   He didn’t have any financial checks-and-balances in place, so it was easy for an employee to embezzle. He didn’t have any insight into how the bookkeeping should be set-up. He was using Microsoft spreadsheets to track business. He hired an outside bookkeeper and she put a credible accounting system in place with the required checks-and-balances.

4.   We helped him with some financial analysis and proved to him that he could grow his profits by one hundred thousand dollars by simply raising prices by one percent and reducing expenses by one percent. To his credit he was able to take the risk, make the changes and find a new high in profits.

5.   This CEO was just not an organized or consistent business person. He had no process bones in his body and he kept falling into holes he’d fallen into in the past. So, we suggested he hire an operations executive to run the national operations. He agreed and asked us to help him find the right person. We recommended a person we knew well and for the past two years (after hiring her) operations have not been an issue. He’s happy because he hated it – she’s happy because she gets to run things.

Admittedly, this is not an example of an engineer or “artist,” but it is a clear example of a CEO who did not have the skills for the job, but was able to learn and get help to make the right decisions.

Brought to you by:                                                         [BACK]

            Bob De Contreras                                                  
            Rich Kramarik