In this powerful episode, Scott Ritzheimer, Founder of Scale Architects, shares why hiring a professional CEO is rarely the answer in stage 4-5. If you’re disillusioned in level 4 wondering whether to scale with an executive team or if you’re ready to become the CEO yourself, you won’t want to miss it.
You will discover:
– What it takes to mature from disillusioned leader to effective chief executive
– Why a professional CEO cannot replace you stepping into the chief executive role.
– How to decide if your vision truly requires an executive team in level 5
Episode Transcript
Scott Ritzheimer
Hello, hello, and welcome, welcome once again to the Start Scale and Succeed podcast, the only podcast that grows with you through all seven levels of your journey as a founder. I’m your host, Scott Ritzheimer, and today we are talking about the hardest level there is, and we’re actually going to talk about the worst escape route that founders reach for. If you’re just joining us, we are about halfway through a series. We are also halfway through the journey that we all go along as founders, and that means we are in the belly of the beast. If you missed episode one in this Should You Really series, you’re probably going to want to check that out. It’s in the show notes below. Just a few episodes ago, don’t worry, you don’t have to watch all the episodes between here and there. Just go back and catch that one before you come here, because it’s going to help set a lot of context for what we’re talking about.
When we say things like level four and level five and level nine or niner, we won’t say that. Just level four and level five is what we’re talking about here, so check that out if you haven’t already, or if it’s been a minute, because we’re doing these little ways apart until you might have forgotten, but what we’re talking about here is yes, level four, and I call this the disillusioned leader level, now that doesn’t mean you have to stay a disillusioned leader. In fact, nobody wants to stay a disillusioned leader. So, if you’re in that mode again, this is full-time founder, you have usually at this stage more than 15, more than 2020-five, employees, but not quite 50 or more, so we’re again in that kind of messy middle. Technically, you’re a small business, but you don’t feel like one anymore, and but you’re still not technically a big business, and so in so many ways we’re just kind of stuck right in the middle.
You have a bunch of leaders, and you can’t do it all yourself anymore, but you can’t quite trust them to do it all, because there’s some fundamental flaws there, even though you love them to pieces, things just aren’t working quite the way that you want them to. This disillusioned leader moments really hard, but again, we don’t have to stay there, so we have two paths forward, and the topic of this episode is going to be the third path that most people reach for that isn’t actually a path at all. What are the two valid paths? Let’s hit this first. The two valid paths are one, you learn to thrive in this leadership level, and this is where we go from being a disillusioned leader to being what I call a contented leader, and we’ll talk a little bit about what that is here in a moment.
The other one is you still have to become a contented leader, you still have to do some of the work of that, however, the other option is to keep going from there, so you’re going to tackle this level with the express purpose of getting to level five, and level five is the chief executive level, and for the vast majority of those that I know that are in level four, that’s the way to go, and that’s really interesting, because most founders actually tried to do the opposite. Most founders at this stage are disillusioned leaders, and so they, they used to think that they had the golden gut, they just knew how to smell out profit, they used to think that they could make whatever decision they needed to make and find a way to make it happen. They used to think that their business would keep growing when they kept adding people. They, they used to be under the illusion that somehow they had figured it out. And while we might sit here and think, well, shame on you. Of course, it’s not all of those things. That’s not the truth at all. It’s actually, it was exactly all of those things, or those illusions, as we talked about in an earlier episode, are all a necessary part of getting to this point. And so, whether they’re proper beliefs or not, they were necessary beliefs to get to where we are today, or necessary lessons that we learned along the way.
Scott Ritzheimer
However, you try and apply all of those, and it doesn’t work now in four, and it’s, it’s brutal, it’s not pleasant. I mean, the, you’re, you’re probably experiencing that, like you, you walk in to work, and the only reason you’re there is because you own the place, like you would have quit a long time ago if it wasn’t your name on the sign out front, and and it’s not because everything’s broken, it’s not because everything’s bad, you probably have more revenue than ever, you. Might especially at the beginning of this level have more profit than ever, you have more people to help than ever, you have more things to brag about with your, you know, CEO peer group, but but you’re dying inside, you’re you find yourself trapped in a prison that you start to realize you made, and as these realizations are coming in, it’s not uncommon. It’s actually quite normal for them to build to a point that they start to make us wonder, wait a second, have I been the problem all along? I’ve gone through all these different levels and solved all these different problems, and none of that’s it. I’m here, and maybe it’s me.
Maybe I’ve taken this organization as far as it can go. Maybe I need to hire a professional CEO or executive director or another senior pastor, if you’re in a church, maybe we need a grown-up to run this thing, is what it feels like, and in some sense you do. There’s a piece of that intuition that’s true. The problem is the chances of it working with anybody but you are almost none, and there’s lots of reasons for that. A professional CEO won’t save you, one, because even if you bring them in, you’ll probably hold so much control that they won’t actually be able to make the differences that need to be made. You have to have the conviction to make those yourself, and if you do, you might as well just do it, because founders figure stuff out. Number two, any professional CEO that would be willing to come in under those terms, would either have you feel like they’ve been lied to because they thought they were going to be in charge and they aren’t, or they’re not really a CEO, they’re really more like a COO, which would actually be kind of the better outcome, because that’s easier to fix, but they’re not the answer.
Another possibility is you bring just the wrong person in altogether, like if you don’t know how to be CEO of your company, how do you know how to pick a CEO of the company? That’s real. Like, how do you interview them? Do you interview for someone that you like? Do you interview for someone that’s like you? Do you interview with for someone who’s not like you? What is the standard? Do you pay someone else who’s never been CEO of your company to tell you what you need from CEO of your company, and again, or nonprofit, or church, or whatever organization, the chances that can work, don’t get me wrong, but this, what this is, there’s this whole idea that you’ll just step back, that you’ll step out of the way, and that some hero will come in and save the day, is it’s a false narrative, it’s not true, and folks in my line of work have breathed into this, because we have this whole, like, if you’re a founder, you’re not a CEO.
We make it out like it’s a wiring thing, like you, like piddly entrepreneur, you’re just, you’re just flawed, and you could never be CEO, and so you shouldn’t be. I just don’t buy it. I haven’t seen it. I’m yet to, I’ve worked with 20,000 founders. I’m yet to see one who genuinely desired to get to level five and be CEO, who, with a little bit of help and enough hard work, couldn’t do it. It’s not, it’s not a wiring thing, it’s a skills gap, and even more than being a skills gap, it’s a desire gap, and that’s the heart of this episode, because what we really have to get to is, do you really want to be in a company run by a CEO? Because if you do, you should be the CEO in way more ways than we can discuss in this.
Scott Ritzheimer
You’re the ideal person to become CEO if it’s even needed in the first place, and that’s what we’re getting at, is does this thing have to grow, does it actually have to scale. We’ve got this whole kind of scale or die ethos in a lot of entrepreneurial founder circles, and one, we mean all kinds of things by scale, but when I’m talking about scaling, I’m talking about going from 50 to 500 people, or I’m talking about going from, you know, 45 people in one office to 250 people across seven states. That’s what scaling looks like. It’s not just growing, but it’s, it’s, it’s increasing to whatever size the market will allow, or you desire. It’s being able to go when it’s time to go. It’s being able to slow when it’s time to slow, and being in control of that, being CEO is about leading through an executive team, and you know, whatever you call them, you don’t actually need an executive team with less than 40 people on your staff, it’s like pouring jet fuel into an old Volkswagen rabbit, like it runs on diesel.
It doesn’t, you can put more powerful stuff in it, but it’s not going to work. And, and so, what we’ve really got to wrestle is, like, how big does this organization need to be to fulfill your vision? If it needs to be significantly bigger than it is right now, then yes, it needs to be led by a CEO, and until you’ve been that CEO, it’s you, you’re the guy, you’re the girl. It’s time for you to submit to your own vision and get it done. And when you do, you’ll be awesome at it, you know.
It’ll be a little awkward, little pig on roller skates action to start with, but you can learn the skills of being a CEO, and the thing that you’re terrified of being CEO and being in meetings and being bored out of your mind and reading PNLs, you got to do that for a time, but when you get to level five, you actually get to graduate in level five from being CEO, chief executive to being CVO, chief visionary, and it’s amazing, it’s a brilliant fit for the natural wiring of most founders, but you’ve got to go through a process to get there, and, and that’s where this whole professional CEO thing undermines the whole process, because it disallows you the opportunity to learn the skills that you need to be an effective executive, and if you’re not going to be an effective executive, then who really is, if you’re not going to walk away altogether, which is generally a mistake at this stage, because the organization is not ready for you to walk away without taking a huge hit in its value and your ability to cash out, and so what we’ve got to figure out here is not, are you fundamentally flawed, can you be a CEO? Should you go hire a professional? That’s not the question. The question is, does the vision demand a bigger organization to achieve it? Do you have to scale your staff? If you do, then yes, someone needs to be a CEO, and you don’t need to hire a professional CEO. What you need is to start hiring executives. You don’t need to put somebody in the top seat in the organization, or let’s be honest, pretend they’re in the top seat of the organization.
You need to actually own that position, and you need to hire your team of executives to work with you. You cannot be chief executive if you have no other executives, you’re not chief of anything, and so to really be CEO, regardless of what your business card has said since the day that you started to be CEO, you’ve got to step into that role yourself, you’ve got to have other executives, and so that’s really what’s on offer here is it’s not about hiring a professional CEO to come in and save the day. It’s about you recognizing what your vision demands, and then stepping in to fulfill the need of the organization to fill that vision. Now, that leaves us again with two options, and there’s a third, in that you could go back and make the business smaller. Sometimes that happens, but we’re not going to talk about that in this conversation.
Scott Ritzheimer
You can, you can push forward and become that CEO, or you might find that’s not necessary. You don’t need a professional CEO, and you don’t need to be CEO. You just need to learn to thrive where you are right now. So, what are some reasons that that you could do that, some of the circumstances that might fit some of the the the things that you might want to do. Well, here’s how you can get a sense of whether or not level four is right for you, whether whether you even have to figure out all this stuff of getting to level five in the first place. First one’s obvious. You can hit your vision with an organization that’s somewhere in the 25 to 50 people range. It’s not, you know, and those are flexible, but it’s not massive. There’s not like seven layers of middle management. It’s just you and a handful of leaders rocking and rolling with a closely knit group of people. And what’s cool about this level is that you can know everybody on your team, now you won’t have the same degree of relationship with everybody, but when you get past this and you’re walking through the halls of your company and someone has been hired that you’ve not even met before and they’ve already started and worked for you for months and you’ve never met them because they’re part of a different part of the organization, that’s a weird feeling, and you know, level five, that’s fine.
You don’t have to deal with that weird stuff here in level four. If the market that you’re competing in fits a team of that size, that’s great. It’s real difficult to dominate a national or global market with a. With 40 or 50 people, that’s a real challenge, possible in some really niche domains, but not in most. If your revenue and margins can sustain a leadership team and your frontline staff, so this one you got to solve one way or the other, because it’s only going to get more expensive if you go to level five and need an executive team, but sometimes we can get stuck, depending on the industry, in this kind of middle ground where you haven’t quite reached economies of scale, but you have experienced some diseconomies of scale. You’re just kind of in between. It’s pretty efficient to run a small group in level three, where you’re driving it and you’re out there doing it. It’s pretty efficient to run an enterprise in level five, but there’s this middle spot that just doesn’t work in the industry.
I see this somewhat frequently in construction and in related industries, where it’s just, you can’t work on projects that are big enough to keep you busy, but you can’t stay with projects that are small enough and available, and it’s a little bit of a no man’s land. So, there’s just the market reality of, like, can you actually run an organization on that size in your industry sustainably? Otherwise, you have to just muscle through it. The the other part of this is that you’re willing to continue to shoulder the decision making burden, you’d be more comfortable making the call yourself at this level. We have a leadership team, at least that’s what we call it, and again, you can call it whatever, but it’s really a group of people who are there to support us as we make the important decisions, and, and that’s great, if that’s a fit for you, you like them, you trust them to do what you’ve decided, that can be a great, a great deal. It can also be really hard to carry that weight by yourself for a really long time, whereas with an executive team, you’re actually creating a team that’s capable of making decisions without you, and in fact probably makes most of the decisions either with or for you, and and leaves you with just a few that you actually need to make yourself. You can let go of daily execution while still maintaining being in charge, and, and sometimes that can be really tricky. Sometimes we’ll be tempted to jump in when we’re that close to the execution, and, and for some folks, they just can’t resist, and so they have to get further away from the front line.
Scott Ritzheimer
I talk about the move of level five to be, you know, moving from level four coach on the sideline to GM in the box. There’s a reason why the GM is not at the sideline, and a big part of that is because they’d be tempted to interfere with or make decisions that are not actually their job, and it would change their perspective in a way that’s not actually helpful. So you’re able to lead from the field level and not jump back in and save the day more than you should. You don’t need to scale just for scale sake, like you can say no to even some good opportunities if they’re not the best one. And again, you’re willing to do that all under around something like 50 people on your team, or the equivalent, and those are all like, if that matches for you, then honestly, the best decision that you can make is probably to stay in level four.
If you were to try and get to level five, you’d introduce more complexity than that was necessary, you’d introduce more overhead than you could get a return out of from an economies of scale perspective, you’d add more risk, particularly financial risk, to the equation than then you probably are willing to handle, and the intensity of the game would go up in a way that’s just not pleasant. Now, How do you know if if it’s time to move forward, what are some signs that it’s time to go to level five? First one, obvious one, already said it, gonna say it again. Your vision demands it. Your vision demands a more complex organization than you can lead alone, and you’ve got the energy to lead a team toward it, so the two requirements that I have for level five CEOs really are this. If you’re saying, ‘Hey, can I be that? Two criteria, you ready? First one, do you have a vision for a better future for your organization? If you do, that’s that’s number one, not the skill to do it, not all the answers on how it’s going to happen, but just a clear vision on what you believe the organization can and should become. Two, the energy to lead a team to figure it out, not the energy to do it, not the energy to. Or the team on your back and carry them all across the line, not even the energy to coach from the sideline, but the energy to lead an executive team toward it. If you have those two things, you are the ideal CEO for your organization. You just are.
And so, if you have those two things, and your vision demands that, that better vision demands that you scale beyond the current operation. Level five is probably going to be great for you to get there. It’s going to cost you. You’re going to have to throw out the founder card. You’re going to have to throw out the owner card, because in level four we kind of walk around and everyone knows we’re in charge and everyone does what we say, for better or worse, when you have an executive team, they’re actually paid to tell you no. Now they’re paid for more than that, and they need to accomplish more than that. But one of the biggest things that an executive team brings to the table, that’s different from a leadership team, is that they make these big decisions with you, and the only time that would be relevant is if they’re capable of disagreeing with you, because if they would always agree with you, then there’s no point in having them with you, they’re just redundant, and so if you’re okay with building an executive team that tells you no, and you trust them to do that wisely, you might be suited for level five. Now, what else we have here, we have the you We’ve got the executive team. What else we have, the willingness to mature personally, skillfully into the leader, the executive, and visionary that your executives need you to be great executives. Need a great leader. They need someone to inspire them to make the right decisions and move in the right direction, and give their discretionary effort, and come up with great ideas.
Scott Ritzheimer
And so the limiting factor here is oftentimes whether or not you have developed and matured as the leader that you need to be in the way that you communicate, in how clear the vision is, in how trusting you are with material decisions. All of those are necessary requirements for executives to do their best work for you, and so again I want to bring us back that the principal question in this episode was, do you need to hire a professional CEO, and if you’re in level four, not level five, the answer is no. The answer is no. Now you’ll see in the next episode that that changes completely in level five, because half of your job in level five is actually find your successor, but that’s not a professional CEO, that’s a, that’s a replacement visionary leader for your organization. So, we’ll talk about that in the next episode as we build on how to navigate level five, but right here, when we’re navigating level four, you, you don’t hire a professional CEO so that you don’t have to become an executive, that’s not going to work for you.
You, you don’t hire a professional CEO, but then what you do is decide, does your organization need a CEO? Does it need a chief executive? And the answer to that is, does it need an executive team? Because an executive team needs a chief executive, and and it needs an executive team if it’s going to scale any to any significant degree beyond 50 people, because the complexity and intensity of leading an organization at that size is just so much greater than the traditional leadership team or team of leaders can handle, and so I’d be remiss if I didn’t say level four is a hard level, it really is. And if you’re there and you’re feeling beat up and you’re questioning yourself, you’re not alone, and you probably have some things that you need to work on, but that doesn’t mean that you can’t do it. It’s not a fatalistic thing. You haven’t reached your limit, you haven’t reached the end, you’ve just reached the limit and end of level four, and at least the way that you’re engaging with level four right now, and so you’ve got to decide what you want to do about that, so if you’re willing to stay in the game, stay close to the game, I should say, and own the hard decisions, and keep pulling the organization forward toward your vision for it, then that’s great.
Level four might be fantastic for you, and you can really be a contented leader and lead that for a long time, if you need to step forward, if you need to get to the next level. A professional CEO is not going to do it. Learning the skills of a CEO are going to be exactly what makes that happen for you, so the. What it takes to get from level four to level five. Hopefully, you’ve got some sense of which level is right for you. If you are already beyond this question, you’ve already moved into level five, or if you want to know what’s coming next, then the next episode is going to be fantastic for you, because we are going to actually talk about and zoom all the way forward to whether or not it’s time for you to step down, and it’s gonna be a great exercise. It’s gonna be a great conversation where we talk about should you really step down. So that’s all about the transition from level five to level six. Hope to see you there, and with that, you know your time and attention mean the world to us. I hope you got just a little bit more clarity than you had before this conversation, and I cannot wait to see you next time. Take care.
Scott Ritzheimer
Hey everyone, Scott Ritzheimer. Thank you so much for listening to The Start Scale and Succeed Podcast. I hope this episode gave you exactly what you need for the level you’re in right now. If you want to discover what level you’re in, take our 10 question founders evolution quiz for free at foundersquiz.com That’s Foundersquiz.com It’ll pinpoint exactly where you are and give you tailored tips to move forward and reach that next level in your journey as a founder. If you got something out of today’s episode, don’t forget to subscribe, rate, or review. It helps us reach more founders like you, and let’s be honest, it means a ton to me, my team, and all our incredible guests. So, keep starting scaling and succeeding, and I’ll see you in the next episode.
Contact Scott Ritzheimer
Scott Ritzheimer helped start nearly 20,000 new businesses and nonprofits and with his business partner started led their multimillion-dollar business through an exceptional and extended growth phase (over 10 years of double-digit growth) all before he turned 35. He founded Scale Architects to help founders and CEOs identify and implement the one essential strategy they need right now to get them on the fast track to Predictable Success.
Want to learn more about Scott Ritzheimer’s work at Scale Architects? Check out his website at https://www.scalearchitects.com/
Connect with Scott through his LinkedIn at https://www.linkedin.com/in/scottritzheimer/