CEO's Strategic Timing: When to Step Up or Step Aside

The title of CEO looks good on you, right?

Three letters that understandably give you a sense of accomplishment. And you’re right to feel that way, it’s a big deal! But let’s talk about the title, the responsibilities that come with it, and when it may be time to transition.

Founder vs. CEO

The titles founder and CEO are often used interchangeably with startups. And it makes sense because as the entrepreneur behind the business, you assume different roles and wear many hats, including the hat you’re probably wearing today, the CEO hat. However, if you’re taking on that role, you need a specific skill set that’s critically important in the early stages of your company.

These skills include:

• Strategic communication: As the face of your startup, you’ll be engaging with a lot of stakeholders, like employees, customers, investors and potential investors, and yes, the press. Setting the right tone for your company is crucial—giving and receiving feedback and engaging in difficult conversations are essential skills to navigating communications in your company.
• Effective time management and prioritization: There are only 24 hours in a day, no matter how much work you have to do. The key to success here is the ability to prioritize where to spend your time. Doing this maximizes productivity to help drive the success of your business.
• Energy management: Similar to time management, energy management is about prioritizing. In order to avoid burnout, balance work with rest both physically and mentally to give time to recover. As a business leader, your example sets the tone for others, so they too feel welcomed to have that balance.
• Team building: This isn’t simply about just hiring the right team (though that’s important), rather it’s about fostering a culture of psychological safety and empowerment. This mindset and atmosphere encourages innovation and growth, and in turn reduces the pressure on you as the leader to be solely responsible for driving the growth of your company.
• Personal development: A CEO should be a lifelong learner, always wanting to know more about their field. You, of course, won’t be an expert in everything you encounter—so investing in yourself by taking training courses in areas you are not as experienced will help you address your shortcomings. Remember, leading by example can often drive leadership effectiveness.

When to step down as CEO

Chances are that at some point of your founder-CEO journey, it’ll make sense for you to step down as the CEO. And a smooth transition is crucial, because making this move too late could have a negative impact on your business.

Sometimes it’s obvious when the founder-CEO needs to step down as CEO and other times not as much, but here are some key points to look at and be aware of:

• Stagnant Growth: Studies have shown that companies that offer an initial public offering (IPO) with a founder-CEO leader have an almost 10% higher valuation than IPOs with other leadership… but that additional value disappears after approximately 3 years. Be aware if you see that your business has hit the proverbial wall.
• Lack of clear direction: A CEO’s vision is crucial in setting and prioritizing goals. Confusion among employees may be a signal that it’s time for a leadership change.
• Insufficient business experience from CEO: Hiring an outside CEO with business experience can bring a fresh perspective and help your company develop new strategies and navigate market challenges and business landscape.
• The founder/CEO wants to focus on other things: As a founder, you may find yourself focusing on specific areas of the business, but the CEO needs to be able to handle all business aspects. Hiring someone as the CEO will allow founders to focus on their passion projects without sacrificing the company performance.

You’ve come this far as the brains behind the business and that’s something to be proud of and celebrate, but planning ahead for the betterment of your company is also something to be proud of. And the reality is that founding and leading a company are two different skill sets. While it makes a lot of sense for a startup founder to take a role as CEO when the company launches, it doesn’t necessarily mean they should be the CEO long term. Over time, companies change and evolve, so do the mindsets and motivations of their founders.

Knowing when your time as CEO is up takes confidence and pride, two assets you most likely have from being an entrepreneur. Take some time this week and reflect on your personal skills and the skills needed to be a CEO. Identify your own strengths, weaknesses, opportunities, and threats as the CEO with a personal SWOT analysis. And finally, set an ideal date on when you want to exit as the CEO and develop a succession plan where you will start to identify and onboard your replacement 18-24 months before this date.

Dig into your strong skill set and have an honest discussion with yourself and those whom you trust—ultimately this is your decision, but these tips can hopefully help guide you along the way.