Responsibilities of the CEO
A CEO can (theoretically) take on any tasks or responsibilities they wish; indeed, some CEOs, particularly within smaller organizations, tend to be pretty hands-on with some corporate functions.
CEOs may gravitate towards certain functions like marketing or finance, depending on their professional background and expertise. The stage of the company lifecycle matters, too; for example, CEOs at earlier stage ventures may spend a larger proportion of their time fundraising than counterparts at more mature firms.
In practice, however, a CEO’s time and expertise are best spent focusing on a handful of really high-impact, core responsibilities. These include:
1. Setting and Executing Organizational Strategy
Decisions about new product lines, generating (and/or maintaining) competitive advantages, potential new markets, and mitigating risks or seizing on opportunities (among others) all fall under the purview of the CEO.
As with anything in an organization, they will rely on considerable data and input from senior leaders as well as direction and insight from the Board of Directors, but the CEO is the individual that has operational control over strategy and execution.
2. Building the Senior Leadership Team
Effective CEOs are able to attract top talent to their organizations. While they aren’t responsible for hiring or terminating every individual employee, they are responsible for building and overseeing the executive leadership team who, in turn, hire and oversee upper and middle management within their divisions.
The executive leadership team includes the CFO (Chief Financial Officer), the COO (Chief Operating Officer), and, depending on the nature of the organization, all the other C-suite roles that may exist (Chief Risk Officer, Chief Technology Officer, Chief Strategy Officer, Chief Investment Officer, etc.)
In many organizations, the Board will have final (formal) authority on hiring decisions at the C-level, but, in most instances, the board actually defers to the recommendation(s) of the CEO.
3. Making Capital Allocation Decisions
While division and departmental managers may be responsible for managing their respective budgets, the responsibility for setting and managing the organization’s overall budget in order to effectively execute strategic initiatives ultimately falls upon the CEO.
Furthermore, the CEO will also weigh in on when (and how) to raise funds, as well as how to make the best use of surplus capital. Strategies include repaying debt, distributing capital by way of dividends or share repurchases, or reinvesting in the business.
4. Setting Vision, Values, and Corporate Culture
Corporate culture has many elements that are organic in nature, but the mission, vision, and values designed and implemented by the CEO will ultimately steer that culture in any number of different directions.
The CEO must be very aware of their tenor, their behavior, and every single action they take (or don’t take) – the entire organization is watching. Even decisions around what they wear or how they choose to present themselves and engage with other members of the firm will set the tone for the rest of the organization.
5. Communicating Effectively with All Stakeholders
The CEO is the face of the organization. They may be representing the firm in front of the general public, the press, lawmakers or other regulators, employees, customers, suppliers, or any number of other parties interested in company operations.
Relaying core elements of vision, values, and mission is important, but actually living these values is even more critical. The CEO is never really “off duty” – there is always someone watching or listening.
Characteristics of a Successful CEO
As with anything, there is no one-size-fits-all formula. But successful CEOs generally have (or exhibit) many of the following characteristics:
- Extraordinary passion. It takes a special kind of leader to be able to handle the pressure and the scrutiny that comes with such a high-profile position.
- Clear vision. Developing a business strategy requires that a CEO be many steps ahead of the general public in seeing and understanding how trends may evolve.
- Strong leadership. Even with unmatched passion and foresight, the business can’t get there without the right people in place to make things happen. CEOs must be able to attract talented human capital that will support the company’s mission and vision.
- Effective communication skills. A CEO is always under scrutiny and must constantly deliver and reinforce the organization’s message. It’s rare to see a CEO that isn’t comfortable in front of an audience or a television camera.
Corporate Governance
A typical organizational structure looks like this:
The CEO is the top operational decision-maker within an organization, but they report to the Board of Directors (BOD).
All appointments to (or removals from) the BOD are voted on by shareholders of the company. Conceptually, this is what creates a Corporate Governance function within an organization.
The BOD is a safeguard that provides a layer of protection for (and to generally look out for) the rights and interests of stakeholders. This ensures that the CEO – while a highly-coveted title – does not have complete dictatorial control over the entire firm.
Driven in large part by the emergence of ESG (Environmental, Social & Governance), the nature of board oversight has evolved. While historically, their sole responsibility was looking out for shareholders (often called shareholder primacy), increasingly, boards are being expected to look out for all stakeholders more broadly, including consumers, employees, suppliers, and the general public.
CEO vs. Chair of the Board
The CEO is the top operator in the organization; in other words, they’re in charge of the company. The Chair of the Board, on the other hand, is in charge of the Board.
The CEO is, technically, subordinate to the Chair of the Board.
In some instances, the CEO also serves as the Chair. However, as scrutiny around corporate governance practices continues to grow, many firms are moving away from that model.
Since the Board is responsible for evaluating the performance of the CEO, including voting on his or her compensation (and even their dismissal, if warranted), it’s obvious that a potential conflict of interest exists when the CEO is the Chair.
Additional Resources
Thank you for reading CFI’s guide to CEO. At CFI, we’re on a mission to help you advance your career. Some of our most popular free resources include:
- Stakeholder vs Shareholder
- Board of Directors
- C-Suite
- Shareholder Primacy
The 3 Different Levels of Management
Levels of Management
The term Levels of Management refers to the line of division that exists between various managerial positions in an organization. As the size of the company and workforce increases, the number of levels in management increases along with it, and vice versa. The different Levels of Management can determine the chain of command within an organization, as well as the amount of authority and typically decision-making influence accrued by all managerial positions.
Levels of Management can be generally classified into three principal categories, all of which direct managers to perform different functions.
In this article, we will explore the specific definition of these levels, as well as the roles and responsibilities of the managers that fall into these categories.
1. Administrative, Managerial, or Top Level of Management
This level of management consists of an organization’s board of directors and the chief executive or managing director. It is the ultimate source of power and authority, since it oversees the goals, policies, and procedures of a company. Their main priority is on the strategic planning and execution of the overall business success.
The roles and responsibilities of the top level of management can be summarized as follows:
- Laying down the objectives and broad policies of the business enterprise.
- Issuing necessary instructions for the preparation of department-specific budgets, schedules, procedures, etc.
- Preparing strategic plans and policies for the organization.
- Appointing the executives for middle-level management, i.e. departmental managers.
- Establishing controls of all organizational departments.
- Since it consists of the Board of Directors, the top management level is also responsible for communicating with the outside world and is held accountable towards an organization’s shareholders for the performance of the enterprise.
- Providing overall guidance, direction, and encouraging harmony and collaboration.
2. Executive or Middle Level of Management
The branch and departmental managers form this middle management level. These people are directly accountable to top management for the functioning of their respective departments, devoting more time to organizational and directional functions. For smaller organizations, there is often only one layer of middle management, but larger enterprises can see senior and junior levels within this middle section.
The roles and responsibilities of the middle level of management can be summarized as follows:
- Executing the plans of the organization in accordance with the policies and directives laid out by the top management level.
- Forming plans for the sub-units of the organization that they supervise.
- Participating in the hiring and training processes of lower-level management.
- Interpreting and explaining the policies from top-level management to lower-level management.
- Sending reports and data to top management in a timely and efficient manner.
- Evaluating the performance of junior managers.
- Inspiring lower level managers towards improving their performance.
3. Supervisory, Operative, or Lower Level of Management
This level of management consists of supervisors, foremen, section officers, superintendents, and all other executives whose work must do largely with HR oversight and the direction of operative employees. Simply put, managers at the lower level are primarily concerned with the execution and coordination of day-to-day workflow that ensure completion of projects and that deliverables are met.
The roles and responsibilities of the lower level of management can be summarized as follows:
- Assigning jobs and tasks to various workers.
- Guiding and instructing workers in day-to-day activities.
- Overseeing both the quality and quantity of production.
- Maintaining good relations within lower levels of the organization.
- Acting as mediators by communicating the problems, suggestions, and recommendatory appeals, etc. of workers to the higher level of management, and in turn elucidating higher-level goals and objectives to workers.
- Helping to address and resolve the grievances of workers.
- Supervising and guiding their subordinates.
- Taking part in the hiring and training processes of their workers.
- Arranging the necessary materials, machines, tools, and resources, etc. necessary for accomplishing organizational tasks.
- Preparing periodical reports regarding the performance of the workers.
- Upholding discipline, decorum, and harmony within the workplace.
- Improving the enterprise’s image as a whole, due to their direct contact with the workers.
Levels of Management Summary
An organization can have many different managers, across a variety of titles, authority levels, and levels of the management hierarchy that we illustrated above. In order to properly assign roles and responsibilities to all managerial positions, it is important to recognize the key differences between low-level, middle-level, and top-level management.
The key takeaways from this distinction are as follows:
- Top-level managers are responsible for controlling and overseeing the entire organization.
- Middle-level managers are responsible for executing organizational plans which comply with the company’s policies. They act as an intermediary between top-level and low-level management.
- Low-level managers focus on the execution of tasks and deliverables, serving as role models for the employees they supervise.
All businesses are comprised of a vast array of different managerial tasks. When these are coordinated properly, and there is a strong hierarchal manager system in place, an organization can be extremely efficient in creating value through the production of their products, services and overall workflow.
It’s a lot to remember… take our Infographic to go!