In this explanatory episode, Scott Ritzheimer, Founder of Scale Architects, shares when and why to step down as CEO into level 6 ownership. If you’re in stage 5 wondering whether it’s time to exit the CEO seat or if you still have more to give, you won’t want to miss it.
You will discover:
– What it takes to intentionally prepare a successor while thriving in level 5
– Why stepping down too early without a clear vision for what’s next usually fails
– How to evaluate if your vision truly requires you to move from CEO to owner.
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 going to take on the fantasy that pulls founders out of their seat as CEO or CVO too early, and it’s this idea, this belief that real freedom means owning and not running. And for some, that’s true. For some, it’s time, and that means going from level five to level six, and it’s going to be beautiful, but for many, that’s just not the case. And we need to figure out what the difference is between the two, and that’s what we’re going to talk about today. Because before you step out, before you step down, before you bring in someone else to take over as CEO or leader of your organization. Organization, you need to make sure that you’re doing it because of your vision. Otherwise, you’ll end up stepping out, and like plenty of other founders, finding very quickly that you want back in.
And boy, can that get ugly! That can hurt a lot for you and others, and we don’t want to do that. So, how do we know if it’s time to step down? Should you really step down as CEO? Well, if you listen to the previous episode, you’ll know one: this is part of a series, and and so you’re probably up to date there. If you haven’t, and you haven’t checked out the first part of this series, you’re gonna want to go back and do that. So head down to the show notes and go back to just just episode one of this series, this should you really series, and you’ll get a lot of context for what we’re talking about here. And when we say things like level five and level six, you’ll know what we’re talking about. You don’t have to watch everything between here and there, so it’s not like you have to watch nine episodes.
You just go back and watch that one, come back to this. It’ll make a ton of sense. So that’s the disclaimer. However, if you did happen to watch the previous episode, which some of you might have, or or listen to it, then you’ll know that you’ll know my two criteria for whether or not a founder should be CEO of their organization, and those criteria are: one, you have a compelling vision for a better future for your organization. You know where this thing can go, and and that’s not inherently true. When you look at folks who are who are leaving their time as as as CEO, they struggle with this. They technology is changing, the industry is changing, and usually for reason number two, which we’ll get to in a second, they they just don’t see it like they used to. Maybe the the the the challenges of change in the past are getting in the way, or they’re just reaching a season as a leader where they’ve got other things that they want to do, or they they just don’t have the energy to pursue it anymore, which is number two, and that is, even if you have a clear vision, you also have to have the energy to do it because this is what a lot of people get wrong about the CEO role.
The CEO role is not an own and not run role. The CEO role is a running your organization role. Now it’s not managing every single detail. It’s leading the executive team, but that’s a full time job. It’s not even necessarily busy in the busy season. You might be busy in the off season, like GMs are in sports, you might have a different flow, a different schedule, but it’s it’s a full time job to be a good CEO or chief visionary officer (CVO) for your organization, and that takes a lot of energy. And for a lot of founders who are who’d be listening to this, where this episode applies to them. Let me just say this: this episode applies to founders who are in level five. So that means you already are acting as CEO. What does that mean? It doesn’t mean that your business card says CEO.
Scott Ritzheimer
It means that you have other at least one other executive on your leadership team, and you are the chief executive. It means that you have an organization that’s big enough to require at least two executives, which is generally going to be somewhere north of 50, and could be up to 1000s. And so it’s a big range, but the game is largely the same in that window from a personal standpoint. Point so we’re talking about chief executives who have other executives working for them and need other executives because of the size and complexity of their business or nonprofit. We’re not talking about disillusioned leaders who just want out because they’re tired and they think they’re the problem in the organization. We talked about that and it can feel very similar. So, if you’re wondering, hey, is this quite a fit, or maybe I don’t quite have 50 people in the organization, or maybe I’m right at that line, but I’m not quite sure, go back and listen to the episode before this one, and you might find some more answers there.
Because this episode that we’re talking about right now is really only relevant for those who’ve gotten past the previous episode, chosen to go past, I should say. And so, what we’re talking about are folks who are in the CEO seat. They’ve been in the CEO seat for a while, usually 510, maybe 20 years, and they’re now starting to question what’s next, what what comes after this, and they’re thinking about an exit. I hear this all the time. I don’t want to be doing this when I’m 65 I don’t want to be doing this when I’m 70. I don’t want to be doing this when I’m 85 Doesn’t matter what the number is. It just matters that you don’t want to be doing it anymore, and and that’s helpful. That’s usually where this internal conversation starts, but a really bad reason to leave being in an organization’s CEO seat is because you’re trying to get away from something, and so the fundamental question here as to whether or not you should step back is less to do with are you tired of what you’re doing, even though that’s a big part of it.
We’ve already talked about it, but it’s actually secondary to what are you going to do next? Because if you’re really tired, and so you leave the CEO seat because you’re really tired, but you never actually decide what you’re going to. You don’t actually have a vision for what you’re going to do next, and it’s not golf gallivanting and grandkids. Like there’s a time for that. You’ll enjoy that, but that’s not a purpose. That’s a that’s leisure, and and so what has to happen here is you’re deciding should I be CEO should I step down you have to decide not should I step down but what am I stepping into you’ve got to have a vision for the next level you’ve got to have a vision for level six and the difference between level five and level six is you step from owning and running the business in a kind of singular focus in level five to owning but not running a portfolio, where you might have your business as part of that portfolio, you might sell it, you might have real estate as part of the portfolio, or other businesses as part of the portfolio, or stocks and bonds, or whatever else, NFTs.
Does anyone do NFTs now? But where you’re not like a day trade investor, but you’re a portfolio owner, where your income is not tied to your hours, it’s tied to your return on assets. That’s what level six looks like. We’re not running a bunch of businesses; we’re owning a bunch of businesses potentially, and that’s actually a really cool place to be when you’re ready for that. When the vision that you have can’t actually be satisfied by one organization, and or you don’t have the energy to to keep this going, and and that’s what’s going to give you the best step into level six. So before you think about stepping down, what you really want to think about is what you’re stepping into, and so let’s unpack these two options: either you know stepping down and out, or stepping up and continuing to thrive in level five. Let’s start there.
Scott Ritzheimer
Reasons why level five might be the right level for you. One, we’ve already talked about the prerequisites, but again, this is not like a brand new startup. This is a an established organization, brand new and established, make it sound chronological, which isn’t necessarily true. This is a a complex, scaled organization. It needs executives. It needs a competent visionary at the helm. And so, if if you’re cool with that, if you’re ready to lead a an executive team, if you are ready to entrust them with making decisions with you and for you, as opposed to executing your decisions for you, the way that I like to think about this is this. CEO, especially once they they really transform into the CVO, the Chief Visionary Officer, which is which is a better fit for most founders. CVO is responsible for a couple of things: one, having that vision and the energy to pursue it; two, building the team that can make progress toward that vision. Three, resourcing them effectively and holding them accountable to how they use those resources. And what that looks like in a practical sense is, as CVO, as chief executive, you are largely concerned with doing the things this year that are necessary for next year’s success, or the year after that, or 20 years after that, it’s a very future-focused role, and so you’re working hard in the current, in the present, but not so that you can hit this year’s revenue target, that’s your executive team’s job. Your executive team’s job is to hit this year’s revenue target, to hit this year’s production targets, to hit this year’s profit targets.
If you have a CEO that works for you, it’s their job. If you have a COO, it’s their job. If you have an executive team, it’s their jobs to to manage all those things. Your job is to make their job of doing all those things next year easier by what you focus on this year, by what you help develop, by how you provoke them to innovate, and how you prepare them for change. And so, if you’re ready to focus on next year stuff and you have the energy to do that. That’s fantastic. If you can trust your team with leading this year, that’s fantastic. If you have a, if you have the ability to attract and retain, to coach, to to coordinate, and I said this earlier, but it’s worth repeating. And hold accountable your team of executives. So being CEO really is about how well you lead your executives, and that starts before they start. If you’re a really crappy CEO, then great executives aren’t going to come and want to work for you, or even if they do, they’re going to leave pretty quickly after. So you’ve got to you’ve got to attract and retain, and be able to coach and encourage and hold accountable the people who are going to lead your organization to your vision.
That’s that’s really what we’re talking about here, you in level five, you have to have the discipline to do what needs to be done for the future of the organization, even though it’s not urgent. This is a real challenge for folks that are used to being driven by the urgency of earlier levels. You have to be able to recognize what is important. You have to be able to prioritize in order of importance and not urgency, and you need to be able to self motivate you and motivate your team to do the important things despite all the urgent stuff that you’re feeling, or the boredom that you might feel from time to time, and you need to be willing to do all that full time. And so, really, so long as you have that vision and you have the energy to pursue it, and you’re willing to develop the skills to see that out, you should stay in that level five seat for as long as you can. Now that doesn’t mean that you just assume that you’ll be there forever. In fact, the a a a sound move from level five to level six is usually about a three, four, or five year process. It doesn’t happen overnight because it takes time to develop the next leader who’s going to take over after you, and so you want to stay in that level five.
Scott Ritzheimer
Even if you want to get to level six, you want to stay in level five for as long as you can, so that you can give yourself time to intentionally make progress toward the conditions that are required for a successful move to level six. What are those? You have to. Here’s the. I call it the secret of succession, but succession is not about finding someone else to fulfill your vision for the organization. It’s about finding someone else that you trust with the vision of the organization, someone you trust to change it, and it’s that person that’s going to really lead the organization forward, instead of it slowly dying once you’re gone. And so you need some time to create that. And if you have that person and you know what you want to go to next, you’re an ideal candidate for level six. If. You again have a vision, but it’s bigger than what your organization can accomplish, or different from what your organization can accomplish. And you’re ready to give that your best energy, then that’s a great indication that you might be ready for level six. If you’re willing to trade the control of having your hands ultimately on the wheel to the better but harder way to lead by influence, then you might have matured to the point that level six is going to work really well. If you would rather invest in others’ dreams than chase your own, right?
If you’d rather leverage other people’s not just time-you’ve been doing that for a long time with your employees-but to leverage others’ vision, then you you might be ready for level six. If you would rather if you’d rather see someone else’s vision come to pass, is what I’m trying to say here. And so, the again, this is this isn’t simple. I’m not I’m not trying to oversimplify this for you, but the reality of it is, is you you you need to start with, what does your vision demand? Because your vision is either going to demand that you you really double down and go all in on leading your organization, and in that time finding a great successor to lead it beyond what you can do, or your vision will compel you to jump fully into something else. Now, when I say fully in, fully in in level six does look different. Level six is not a full time job for most people. In it’s usually somewhere in the ballpark of 20 to 30 hours. But what level six is is it’s highly intentional, and it also requires a great degree of discipline. So, if you have those things, you’re ready. You’re ready to step down, not because you’re running from something, but you’re running to something. Then you’re likely going to be a great candidate for level six. So that’s it. That’s how you choose.
Do you have a vision for the organization? Do you have the energy to pursue it? If not, then do you have a vision for what’s next? If not, then you need to start working on that, and you need to start working on a successor who can take over after you. And as you get those pieces to fall into place, it’s going to unlock the ability for you to step out of level five as that chief executive and into level six as the true owner, where you don’t have to focus on one organization anymore, but you can shift your focus to many, and it’s an immensely rewarding and satisfying season. So that’s it. It’s the difference between level five CEO, level six owner, and what we’re going to talk about next time is a an even blurrier line, if I’m completely frank, but an even more meaningful one, and that is that owner is not the pinnacle. Owner is probably what you’ve been fighting for for most of your careers, probably as far as your vision has gone to date. But there’s actually one step further that you can take if it’s right for you. We’ll talk about what that is in the next episode and whether or not it’s right for you. And until then, know that your time and attention mean the world to us. I hope you got just a little bit more clarity out of this conversation than you had before. And I cannot wait to see you in that next episode. Take care.
Scott Ritzheimer
Hey everyone, Scott Ritzheimer here. 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/