What is the CEO'S role in a start-up and how to fulfil it

Day 12. December 2014 posted Stanislava Vabšek
How to make the quantum leap from having a garage hobby to professionally leading a start-up company with the least amount of stress and as efficiently as possible? Slovenian start-upper Aleš Špetič, co-founder of CubeSensors, had shared tested, straightforward and real-life advice for effective decision-making, delegating, reporting and navigating between the vision, cash flow and hiring, with the participants of the Start:up Geek House accelerator’s bootcamp on Tuesday.

Quantum leap

Besides building a product that’s interesting for the market, the second biggest challenge of each start-up entrepreneur is building the company as an organisation and leading it efficiently. “The path from working in a garage to leading business is a quantum leap for every start-upper. When it comes to this, we mustn’t forget that we’d tackled entrepreneurship in order to build a long-lasting business that generates income and that as a CEO, you have to be focused on three key areas of business,” is how Aleš Špetič started his lecture and sharing of experiences.

Three key areas: vision, staff, cash flow

Each CEO first has to ensure that a company has a clear vision and strategy, and then keep tirelessly explaining and introducing both to customers, investors, suppliers, employees… “Hiring, and sadly also firing, is never a pleasant experience and the second key task is the concern that the right people stay in the company. And the third one – enough money or a positive cash flow that ensures that business runs smoothly,” emphasises Špetič.

Only one should decide

“The only effective system for managing a lot of people is a dictatorship,” was how the lecturer opened the topic of joint decision-making, only half-joking. When making decisions in start-ups that have two or three equally important co-founders, only one of them should decide at the end, namely the CEO. The biggest favour that the rest of them can do to the CEO is that they give him their non-binding opinion and don’t “pester” him in case a decision turns out to be the wrong one. In the unavoidable chaos of leading a start-up, it’s significantly better to make three decisions, even if two of them are wrong, than make no decisions at all, is Špetič’s opinion. He gives advice about forgiveness as well: “It should never look like it’s personal. Even though you are forgiving from personal reasons, present the forgiveness objectively. On the internet, there is truly a lot of good advice concerning this. When employing new people, you should also follow the principle that nobody is irreplaceable.”

Three business functions: product, sales, technology

Much as the CEO has three main tasks, each start-up also has to have three main business functions covered – product, sales and technology. The person in charge of the product deals with it from the aspect of the users, collects feedback from them and on the basis of this feedback decides on the characteristics and priorities for further development. “In sales, you shouldn’t be frustrated that it mostly looks like you’re going from door to door. You should of course also be careful that the sales increase organically. In technological start-ups, you have to have someone in the house who knows about technology, understands it and follows its progress as well as makes final decisions. If you outsource this, it can cost you too much,” advises Špetič.

Delegating according to the RASCI model

As the business expands and the number of daily operations grows, not all decisions and tasks can remain on the CEO’s shoulders. According to Špetič’s experiences, the RASCI model has proven to be very useful in delegating. Following this model, each team member get assigned different roles while the CEO only appears in two – when he authorises or is notified about something. Other roles according to the RASCI model are the following:
  • the one who actually does something (Responsible – doer),   
  • the one who approves of a decision or a task (Accountable – approver),
  • the one who helps and participates in all this (Support – helper),
  • the one who controls or reviews whether everything is well done (Control – reviewer),
  • the one who is only informed about all this (Informed – Informee).

Don’t take monkeys from the shoulders of the employees

Špetič lists another recommended approach to delegating, this one being of an older date (published in Harvard Business Review in 1974) yet still massively read and appreciated – Management Time: Who’s Got the Monkey? We give two links to the article (Monkey Business and Who’s Got the Monkey) which advises company CEOs on how to stop taking the employees’ burdens, tasks and responsibilities to their shoulders.

“Burn rate” or how much money you spent monthly

When investors enter a company, it’s that much more important for theCEO of the start-up to start monitoring the key performance indicators (KPI). Various literature and internet sources offer numerous approaches for choosing and monitoring the optimal ones. Špetič warned the participants that they should not only have the financial KPI in mind, but also the operative and technical ones. “Choose five key ones that you will monitor. Amongst the financial ones, mostly keep in mind the positive cash flow and the so-called “burn rate” that’s connected to it, which is how much of the money provided by investors do you spend monthly,” is the advice from an experienced Slovenian start-upper to the SGH bootcamp participants.

Start-uppers aren’t employees

Before answering the question of how often and in what way to report to investors, Špetič first mentions a specific that he had noticed with continental investors that differs from the investors from the USA. The former namely frequently place themselves in the untrue role of company owner and treat the start-up co-founders as their employees, which sets everything in the wrong position. In this case, it’s best if you set a mentality that your company is an entity managed by an administrative board and you are reporting to the members of this board, advises the lecturer.

Don’t lose time and energy

Reporting has to be stable and systematic. It can be monthly or quarterly and should include not only KPI but also discussion of the current state of the company through three key points you prepare by yourself – background, discussion and recommendation. I myself never talk to members of the board individually but prefer to get them all in one place and report to all of them at once,” is the advice and experience that Špetič obtained in Zemanta and start-up CubeSensors.

They meet up on a weekly basis, for lunch and cake

What about team meetings and the time that the CEO gives to individual team members? And what’s the recommendation for whether the employees have to “hang around” the company or can do their job from home? “At CubeSensors, all team members meet up once a week. It’s then that we also have a cook in the company, who prepares lunch for us, while I bring cake, since I love to bake. If employees live outside Ljubljana, it’s enough for me if they show up in the company once a week. I wish to work with people I trust and who treat their work and potential mistakes responsibly,” explains the lecturer.

Hire on competency, fire on attitude

In order to avoid the situation in which employees would hunt him down on the hallways saying they urgently need him to sign something, Špetič has 30 minutes booked in his calendar each week for every employee and they settle everything during that time. “When a company has 10 employees, you can’t deal with everyone all over, but you have to know and understand what’s happening in the company and who’s working on what.” As for an optimal composition of the team and the tolerance level for “difficult” but productive individuals, Špetič states the “Hire on Competency, Fire on Attitude” rule, since start-ups simply don’t have enough money to hire superstars who don’t fit into the team. Instead, they should hire people who understand and know how to do their job correctly, while are at the same time aware that they will also be rewarded in case of success.
Communications and PR Start:up Slovenija
Izvedba: Mojdenar IT d.o.o.