Across all sectors and industries, CEOs face tremendous pressure. They’re often expected to create more profit with fewer resources and deliver more results in less time while meeting rising shareholder expectations. Yes, the CEO job is a very complex one. It is the most senior paid position in the organization. It is the position in an organization where the “buck stops”.
The CEO is the interface between the board of directors and the rest of the organization, and is accountable for the overall operations, financing, systems, and so on in the organization. The CEO is also the interface between the organization and the community. Most importantly, the CEO is the senior position in an organization that is accountable for the implementation of the organizations strategy.
So given all of this complexity, how can a CEO possibly be successful?
It starts with the understanding that an organization is a system. The purpose of that system, which we think of as an organization, is to transform the input and add value so that the value of the output is greater than the value of the input. We can diagram it as follows:
At first glance this may seem simplistic. In fact from the outside, from the consumer’s perspective, this system is a “black box”. The consumer doesn’t care what happens inside the organization, as long as the organization is operating within the values and norms of the environment. The consumer only cares about acquiring the output. But the CEO needs to care, because what happens inside the “black box” can mean the difference between success and failure.
The organization, as a system, exists within an environment. The environment defines many aspects of the nature of the organization: the competitive landscape, the nature and desires of the market, the economic climates, and so on.
Download the Full Resource
There is only one CEO per organization, so of course it is a different kind of role. But what makes this role so unique? Why is it critical to organizational performance? This companion paper to the 6 Key Functions of a CEO starts with the positioning of the CEO role. This paper will help CEOs and aspiring CEOs understand the complexity of the role and how it is so different from any other role in the organization.
The organization obtains Input from the environment in the form of resources: raw materials, investments, human resources. Coming out of the organization, into the environment, is organizational Output. These are the goods or services that are now available to consumers. The purpose of the organization (or system) is therefore to add value to the Input, by transforming it into Output that has a greater value than the combined Input.
The role of the CEO is to manage this system, and through that management, ensure that the organization creates more value than competitors or alternatives. This is the basis of strategy and strategy execution.
How does the CEO do this? The CEO needs to:
- Have in place a strategy and execute that strategy as effectively as possible.
- Create and manage the organizational systems that will support and enhance the work of the organization.
- Implement processes that ensure the right people, with the right capability are in the right jobs, doing the right things.
The CEO must decide amongst all of the tradeoffs that emerge by answering this question: what is best for the organization? At its heart, making these decisions is the accountability of the CEO, and the CEO alone. Certainly, the CEO will rely on subordinate managers for their expertise and recommendations. But at the end of the day, it is the CEO who is uniquely positioned to assess the trade-offs and decide.
