What is a Chief Executive Officer (CEO)?

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Definition:

A chief executive officer (CEO) is the top executive and decision-maker in a company, usually selected by a board of directors in a large company and considered the public face of the organization.

🤔 Understanding a CEO

The CEO is the highest-ranking executive in a company. They develop the company’s long-term goals and make sure employees work toward them. CEOs of startups are often more involved in day-to-day operations than CEOs of large companies. Successful CEOs usually have strong communication, management, and problem-solving skills. Becoming a CEO generally requires a degree in a business-related field and several years of experience in management. The chief operating officer (COO) focuses on day-to-day operations. The chief financial officer (CFO) manages the finances of the company.

Example

The CEO is the big boss in a company. Some CEOs of large companies are well known, such as Jeff Bezos, the CEO, and founder of Amazon. Bezos has set a vision for Amazon and has been making sure that his company is steadily progressing for the last 25 years. Other famous CEOs include Mark Zuckerberg of Facebook, Tim Cook of Apple (and Steve Jobs before him), Mary Barra of General Motors Company, Ginni Rometty of IBM, and Marc Benioff, co-CEO of Salesforce.

Takeaway

A CEO is like a baseball coach...

A baseball team usually has owners, which you could compare to the board of directors and shareholders of a company. They appoint the CEO, set expectations for the company, and decide if the CEO stays or goes based on performance. The CEO is like a coach since he or she decides how to organize the company to achieve its strategic goals. The players in the baseball team are like employees who are working on day-to-day operations based on the business strategies decided by the CEO.

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What is a chief executive officer (CEO)?

The CEO is the head of a company or corporation. CEOs are responsible for the overall management of a business. The shareholders and the board of directors usually select the CEO. In the U.K., the title of managing director is sometimes used instead of the CEO title.

The main job of CEOs is to provide strategic direction for the company and to make sure specific goals are met. They work alongside other top executives to establish a company’s policies and vision. A CEO is ideally a leader, a mentor, and a coach. The CEO governs company standards and growth plans while acting as a leader for managers, who then carry out those plans. CEOs can work in a variety of businesses, from small startups to corporations with thousands of employees. They lead public and private corporations, non-profit organizations, and even some government organizations. CEOs of corporations or companies typically report to the board of directors. They are responsible for maximizing shareholder value.

One of the advantages of being a CEO is a high salary. The average salary of a CEO in the United States is $804,147 as of October 30, 2019, according to Salary.com.

What are the responsibilities of a CEO?

Managing overall operations and resources is the primary role of a CEO, who is responsible for a company’s success. A CEO’s responsibilities and duties can change and depend on the organization and industry. But a CEO usually has the following main responsibilities:

  • Determining the vision and the strategy of the company. The CEO is in charge of developing high-level, long-term strategies and making sure that the company is going in the right direction.
  • Setting and modeling the company’s culture, values, and behaviors. The CEO needs to make sure that the company’s environment is one in which people can complete tasks and projects to the best of their ability to realize the company strategy. CEOs should motivate employees to work toward the company’s goals.
  • Building a senior management team. The CEO hires and leads the senior management team, who in turn hire and lead the rest of the organization.
  • Allocating capital to the company’s priorities. The CEO has to distribute resources in the right amounts to what’s most important, as this will play an essential role in determining the success of the company.
  • Making major decisions. CEOs sometimes need to make tough strategic decisions for the good of the company. They have to deal with bad news or problems, such as issues with customers or employees. They can ask for advice from the board of directors when appropriate.

What does a startup CEO do?

In larger, publicly-traded companies, the CEO position is more of a leadership, policy, and motivational role. CEOs spend a lot of time working on the company’s direction, but spend little time on managing operations. They can delegate certain duties.

Startup CEOs, on the other hand, must frequently take care of the day-to-day operations of the business. They often have to fill multiple executive roles and look after activities typically delegated to others in large companies, such as overseeing and managing the company finances. A startup CEO, like the CEO of a big company, needs to define the company roadmap and then share it with the team. CEOs of small companies have to make sure that their company’s strategic plan is well executed by building a strong team and motivating employees. Not running out of cash or resources is also vital to keep operations going. Ensuring there’s enough cash in the bank typically is the responsibility of the CEO until the company is big enough to hire a CFO.

What skills does a CEO need?

CEOs come in all shapes and sizes with different backgrounds. But successful CEOs share a few common skills and personality traits. Here are some of the main ones:

  • Good communication and social skills
  • Good with numbers
  • Analytical skills
  • Management and leadership skills
  • Ability to work under pressure
  • Good at anticipating and dealing with problems
  • Ability to learn fast and adapt
  • Creativity and flexibility
  • Patience and perseverance

Most successful CEOs are capable of extraordinary vision for the company’s future. They have to select managers who will execute the company’s plans efficiently. It is important to be able to direct and delegate tasks to those managers in the most effective ways. CEOs should be trustworthy, responsible, and transparent, so they serve as an example for the rest of the company and earn respect.

How to become a CEO?

If you look at a CEO’s job description, you will see that a CEO career typically involves a wide range of duties to help an organization reach its goals. Some of these professionals may work in specific areas of the company, like finance or human resources. If a CEO career appeals to you, you should know that there is no universal path to get you there. But there are certain steps that you should take to increase your chances of climbing the corporate ladder up to the top.

Step 1: Meet education requirements. The Bureau of Labor Statistics (BLS) has established that most CEOs have at least a bachelor’s degree. The degree is usually in a business-related field, such as business administration or management. Many aspiring CEOs choose to pursue an MBA or a master’s degree to increase their chances of becoming a CEO.

Step 2: Gain work experience. Most aspiring CEOs start at a low-level management position within a company and work their way up until a CEO opening is available. You must be ready to work hard if you wish to rise to an executive position, as you will often have to work long hours.

Step 3: Earn certification. This an excellent way to show your skills and to advance your career. Some professional certifications for CEOs could include:

  • Certified Public Accountant (CPA)
  • Project Management Professional (PMP)
  • Chartered Financial Analyst (CFA)
  • Certified Management Accountant (CMA)
  • Certified Manager (CM)

What’s the difference between CEO, COB, CFO, and COO?

Almost all publicly-traded companies have the same basic corporate governance structure. A company is owned by shareholders, who hold stocks in the company. There is a management team to run the company. This team often includes a chief executive officer (CEO), a chief operating officer (COO), and a chief financial officer (CFO). Under them, managers and employees take care of the production and delivery of products and services. The management team, including the CEO, reports to the company’s board of directors. Board members generally include shareholders and management. The chairman of the board (the COB) is the head of the board of directors.

Here is a description of the roles of COB, COO, and CFO.

Chairman of the board: The COB is an executive elected by the board of directors, who presides over the board’s meetings. COBs act as a link between the board and the upper management to ensure the company's duties to shareholders are being fulfilled. The CEO can act as COB. The average salary for a COB in the United States is $166,364 as of October 30, 2019.

Chief operating officer: The COO is usually considered the second in command after the CEO in most companies. COOs are in charge of the day-to-day administration and operation of the business. The CEO makes the business plans while the COO executes them. Usually, the COO reports directly to the CEO. The average salary for a COO in the United States is $464,586 as of October 30, 2019.

Chief financial officer: The CFO is generally responsible for managing the company’s finances. Duties may include budgeting, setting financial goals, and preparing financial statements. The average salary for a CFO in the United States is $376,261 as of October 30, 2019.

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