What’s the difference between an operational CEO and a strategic CEO?
Operational CEOs focus on the short term horizon such as 1 week to 1 year and look at tactical items such as margin, sales and people performance.
Strategic CEO focus on the long term horizon of 3 years plus and look at innovation, sales relationship health and people development.
In this episode we talk about the difference between an operational and strategic CEO, and how to become a more strategic CEO.
Are you an operational CEO or a strategic CEO?
Episode 70 – The Growth Whisperers
The Growth Whisperers is a weekly podcast hosted by Brad Giles and Kevin Lawrence two advisors to mid-market businesses, one Australian, one Canadian, who each work with CEOs and Leadership Teams across the world with a mission to build enduring, great companies. Each weekly episode covers interesting situations and questions from the world of strategic planning, leadership development, talent and hiring in high growth entrepreneurial companies where real results matter.
Are you an operational CEO or a strategic CEO?
Kevin Lawrence 00:13
Welcome to the growth whispers podcast where everything we talk about is building enduring great companies with enduring great teams and enduring great strategy. And during great cash flow, just enduring greatness all around. I’m Kevin Lawrence. I’m here with my co host as I am every week, Brad Giles Brad, how you doing today?
Brad Giles 00:31
I’m doing excellent. Thank you. Excellent. Just got off an interesting week, down south, and pumped and ready to go. How are you doing?
Kevin Lawrence 00:44
I’m doing great. I’m just up up up the lake, on some vacation time surrounded by awesome forest fires here in there, which has made it very interesting because we’re in the desert region, but it’s great. And just have some nice time to let the brain cool off. So it’s good.
Brad Giles 01:00
So very clear, what
Kevin Lawrence 01:02
is let’s jump into Our word of the day. And we’ll talk about our topic actually talk about a topic first. So what are we talking about today, Brad? And then we’ll just quickly jump into the Word of the Day in and away we go.
Brad Giles 01:10
Yeah, for sure. We are talking about? Are you an operational CEO, or a strategic CEO? CEO is one role. But are you an operational CEO or a strategic CEO? So we’re going to talk about the difference and the impact? And actually how that can make you feel as a leader? Yeah, it’s
Kevin Lawrence 01:32
awesome. I love this topic. And it’s something we talk about all the time as CEOs grow through different levels. I call it a shift from a lowercase c CEO, to a capital C CEO, which we’ll get into that good. So word of the day or phrase and today, Brian, what’s yours?
Brad Giles 01:49
Um, yeah, so it’s kind of in tune with our topic today. But it’s about Napoleon Bonaparte. Okay, now, this is not going to take forever. Napoleon Bonaparte before every battle, he had a thing that he did, he would get onto the horse and secretly ride into the enemy’s camp, undercover and suss out the whole of the enemy. He be honest horse just going through the enemy’s camp to get where they were at. He did that in every single battle that he fought except for one, which was Waterloo, which you may or may not know that he lost. Because he had, I think it was Hemorrhoids at the time. And couldn’t ride a horse. So yeah, that it’s a little bit different to the word of the day, but it’s just something that I picked up that was like, Yeah, you’ve got to know your enemy.
Kevin Lawrence 02:45
Yeah, firsthand. I love that. Um, mine is what are you really afraid of. And it was interesting. We had an experience, they doing a combination of ropes course we’re kind of up in the treetops, climbing things, balancing on things zipline in between things. And I have a notable fear of heights. But yet, when I’m doing that, I had almost no fear. So it’s interesting people take this thing called fear, fear of heights. And it can be a fear of anything, anything that kind of psychologically gets in your way in your work your life. But then when you go on to unpack it, it’s interesting, because I’m actually not afraid of heights. I’m afraid of jumping. And I have this impulse to jump and this thing when I do this course, you’re connected, so you can’t, so move them, it was a couple times is a bit tense, but generally not fearful. Because it’s it’s not about the heights, it’s basically afraid of myself. Yeah, yes. You know, we come across things all the time, and we learn as coaches and is it when people think there’s an issue or a challenge, if you unpack it and dissect it down, you often find that there’s something very different edits. So that was mine. I had that experience again today, of how I actually quite enjoyed most of it. And, but it’s because I understand what really is at the root of when I’m stunned standing on the edge of a tall building on a short railing. Why that feels very different.
Brad Giles 04:15
Awesome, awesome. Let’s so I’m looking forward to hearing you mentioned these two together today.
Kevin Lawrence 04:20
I know and you know, as I’m, as I’m thinking about that, you know, it’s actually unpacking what you might be afraid of, and basically getting to know the enemy. So if the enemy is fear, you know, and really getting to know what it is you can unpack it and make it go away. And that’s what Nepal said. He would go to the enemy, which would know many people would fear and really dig in there and figure out what they’re about. Also, then probably help them to figure out how to beat them.
Brad Giles 04:48
Awesome. Okay, so, let’s, let’s get into it. Are you an operational CEO, or are you a strategic CEO, so maybe we be no one’s gonna want to stay there,
Kevin Lawrence 04:58
then people are gonna want to stay there strategically. This sounds more impressive.
Brad Giles 05:01
I’m surprised AJ Don’t you know me? I’m clever. Yeah, clever,
Kevin Lawrence 05:05
say and we all, you know, again, so listen, everyone, everyone really think about a reality? Are you truly more operational or strategic sort of router jump in
Brad Giles 05:16
there? That’s okay. There’s a saying, which is if you’re so smart, then why are you not happy? Yeah. If you’re so smart, then why are you not happy? And that really leads into the first part here that we want to talk about, do you believe that you can continue in your role for 10 to 20 years? and retain the energy?
Kevin Lawrence 05:43
Yeah, and the effectiveness and just be outstanding? And that’s, it’s a great question, because a lot of CEOs we talked to get exhausted by what they’re doing. Because it’s hard. It’s not the easiest job in the world. Yeah, it means. And in a lot of cases, what happens for some people is that they’re so burdened by their role, and many cases, so burdened by the operational challenges, shorter term operational challenges. And when you’re earlier in your career, those are great ways to cut your teeth and get really good and learn and grow. But as you go forward, that becomes more, more of a challenge. And some fun energy and maintaining your energy becomes hard for a lot of people because they feel like they’re carrying the weight of the company on their shoulders.
Brad Giles 06:30
Yeah, yeah. And it doesn’t need to be that way. As Mel Brooks, the famous Hollywood producer, actor said, it’s good to be king. The good thing about being king is that you get to set the rules. And that’s kind of what we’re saying through here. If it is good to be king, if you do get to set the rules, then you’ve just got to understand what are the rules that are going to make the difference so that you can continue, or at least you feel like if you wanted to, you could continue for the next 10 to 20 years and retain the energy. As you said, so many people we talked to, they just can’t feel like they can continue for a long period of time. And it’s a problem, it doesn’t need to necessarily be like that, if it’s not sustainable. And then you can’t build an enduring business. That’s what we’re all about, and what we’re always talking about here,
Kevin Lawrence 07:28
you need that you need to have endurance in order to build an enduring business, because it’s a lot of work. And it’s a challenge. So in that first question, you know, do you have that, and if you believe you can continue to grow, and thrive, and add great value to your organization for the next 10 or 20 years, then great, then you are potentially more likely to be a strategic CEO, or you just love it, and you’re set up to be, you know, in your sweet spot all day. And if you’re not, which isn’t the case, for a lot of people, they’re more operational than they want to be. Yeah, and strategic carries a great mental what weight but so does the operational side of it. So let’s, you know, and the distinction between an operational CEO and a strategic CEO. And this is important that we break it down. And they’re very different types of CEOs. That’s the difference between when I say as a lowercase c CEO, it’s almost like a junior CEO, versus and or if you have a smaller business, if you have a smaller business, you’re more likely to be a lowercase c CEO. Although he has a smaller business that you want to get big, you need some of that capital, see strategic stuff to get there. That’s how you get there. So let’s talk here. So what if we were to draw some distinctions between an operational and a strategic CEO, let’s, let’s look at some of them. And one of them we got here and I’ll start the first one, you can go on to others or bribe, but it’s the timeframe of the projects they work on. You know, operational CEOs are generally focused, sometimes it’s a day or a week or maybe a year. But they’re closer to the day, week, month, maybe quarter focus on the projects that they work on, the decisions that they make, the emails, they respond to, the meetings that they’re in. So for example, we would take, you know, if it was a sales real revenue side of the business, if they were involved in a weekly meeting about key customers and opportunities. That’s more of an operational CEO, that’s a weekly, you know, weekly meeting with a focus probably have a few months of when that business plans, if they’re strategic, you know, they’re gonna be focused generally on stuff that’s about three years plus a lot of the time and there’s no right amount of time. Like it’s, it’s different for everyone. But they’re going to be looking at partnerships. Maybe it’s acquisitions, maybe it’s new products that they that are gonna, you know, take the business in a new direction or new markets, it’s things that will impact the income statement or balance sheet in three years versus, you know, day, week or month. That’s the first is timeframe. And we want to be really clear the amount of time that you should be strategic versus operational. There’s a lot of debate that we can have, there’s no right answer, it depends on you. And it depends on the stage of your business and your goals. But it should be if you’re wanting it north of 25%, at least for almost for most CEOs. On the strategic side, but it could be as high as 70 to 80%. If you’ve really got a massive growth, ambition, and have the right other pieces in place,
Brad Giles 10:46
I love that’s one of in my humble opinion, one of the two nuggets of today’s episode, and that is look at your email, look at your meetings that you’re having as a later. Where are your what is the timeframe? Is it a week, a day, a quarter? Or is it three years? And now that’s a there’s a bit of specificity in there. But I think that Yeah, it’s a really great measure to say, Are you operational? Or are you strategic now? it you can’t switch it all off and go from tactical or operational to strategic. It takes time. But the more that you work on the strategic, the less that you will need to work on the operational.
Kevin Lawrence 11:33
Yeah. So what are some other things? Brad, in your mind? That would be things that would be very different between an operational CEO and a strategic CEO?
Brad Giles 11:41
Yeah. So I love this one as well, this is are they focusing on growing the margin? Or are they focusing on innovation? So an operational CEO, now we’ve spoken about gross margin, gross margin is one of our very best friends. Yes. And it, we’ve got a fantastic episode about that. Gross Margin matters, but, but equally, it is one of the signatures of an operational CEO, the sales manager should be obsessed with gross margin. But the strategic CEO is focused on innovation. And of course, higher gross margin will be born of innovation, ultimately, but are you spending your energy, your time more on for on the gross margin or more on the innovation, so that’s another, that’s another
Kevin Lawrence 12:46
innovation is really going to benefit you. And again, we’ll go back to the three years as a concept, it’s going to benefit you a lot three years down the road or longer. Where that gross margin squeeze or dialing in would be a little more short term. It could be this month, this quarter this year. Yep, that’s a great one. Oh, another one is how they look at people. And one of the things with people is that they would be looking at output or performance, which is good. And an operational CEO would do that and do that. Well. A strategic CEO would be looking at development, ie enhancing people where there’s a an investment today that pays off down the road. They also might be looking at high level recruitment, or attraction strategies to get some of the best talent to start to come to the door over the next three to five years,
Brad Giles 13:39
like building a virtual bench.
Kevin Lawrence 13:41
Exactly like building a virtual bench, which we’ve also done a show on as well. So but really, it’s the lens of people get them to produce versus building an amazing team that will be able to handle four times the opportunities in a decade.
Brad Giles 13:57
Yeah, yeah. It’s, it’s interesting. are you focusing on the performance? I mean, let’s be fair, that is still in tune with the timeframe that we set before, are you focusing on people’s performance this week, this day, this month, or this quarter? Or you focusing on the performance that they will be making in a year or two or three, again, around development? building out the difference between those. And so what do we got? What do we got for our next item, the difference between an operational and a strategic CEO?
Kevin Lawrence 14:33
Well, you know, there’s also, it’s basically around sales, like if they’re looking at sales, an operational CEO is going to look at, you know, the deals that are closing and the pipeline, the pipeline of transactions. Now, there are some strategic CEOs are going to make a call. I’ve got one strategic CEO I’ve worked with for years, on some massive opportunities that might drop $10 million to the bottom line. They might be invested in those opportunities, that’s a long term deal, they might end up because there’s exceptions to everything. But generally, the strategic CEOs are looking at enhancing relationships that will pay off in the long term or continuing them. So we’re out on the boat yesterday, actually, with a good friend rather chatting. And he’s, you would different title equivalent to the CEO of a large company, a very large company. And we’re chatting about how he spends his time versus how his team spends their time. And he basically talked about how he is building relationships with the CEO, and continues to talk to the CEO about long term strategic things, and that at the right time, opportunities end up coming from that. And his team focused on a relationship with the CFO. Right, it’s more of the tactical relationship, not completely, but you know, it’s it’s still strategic, but more on the operational end of getting the deals done. And he’s focusing on the relationships with the CEO is because it’s a you know, it’s that CEO to CEO conversation that brings opportunities, and then the rest of the team executes it. Yeah. But it’s instead of the pipeline, it’s about enhancing relationships, that will fill the pipeline for decades, if done right.
Brad Giles 16:19
Yeah. So an interesting thought around that is, can you have a general manager or a CEO and still be operational CEO?
Kevin Lawrence 16:35
No, absolutely. Because what happens, and here’s the challenge, what happens is the CEO doesn’t get the capital seeing their title, and they stay operational. Yeah. So you can have someone with the title of CEO, but you may not let them run the business like they generally do in there’s different versions of that title. So there’s one, having the people will come to the summit, and we get into the stucks. And the opportunities, it’s having two people in roles. And then secondly, it’s operating like that strategic CEO and pulling yourself out of the weeds and out of the details. As hard as that not because it’s your comfort zone, and you’ve been doing it for years.
Brad Giles 17:17
Yeah, yeah. And, and that, and you know, it and you know, once what works, but to our very first point today, maybe it’s not sustainable, maybe the way in which you run the business, across everything on a very short term manner, isn’t sustainable. Now, that doesn’t mean it. That doesn’t mean, if you had a CEO who was doing that, well, it would be sustainable for them, it should be okay, it should be sustainable, because they’re not also carrying the other burden that the CEO is. But being able to pull that apart and say, the CEOs role has to be sustainable. Therefore, we want to work in the long term to be more of a strategic role, rather than an operational role is certainly what we’re advocating here.
Kevin Lawrence 18:11
So why don’t we Why don’t we dig into what are some of the things that drag a CEO more operational, or lift them more strategic, like specific things that we have seen. And, and, and I’ll start with one of them, but to also to, and they’re tied, one is the strength of their team. And to give an example, if they have a team, and if we take a look at levels and companies and think about a vice president versus a director, in turn, basically an autonomous leader that can manage almost anything with someone that still needs help with some decision making. Generally, and they’re still earlier in their career, often, not always, what often is, is that they have very strong bite VPS, or whatever title, you want to call it under the CEO, that are strong and actually don’t need a lot of care and attention. They need to be supportive, but they’re accountable. They know their stuff, they deliver, and they get stuff done. So whatever it is, having a team that’s incredibly strong, allows them to not have to get into the weeds. Now, they still may have a problem with that some personalities do, but they don’t have to be in the weeds as much or as on the other side. So that’s one is a strong enough team. So you have the opportunity to and the other side is taking that opportunity and picking projects that are about three to five years in the future and working on them like the new facility, like the acquisition strategy, like the expansion into another market or innovation like we’ve talked about, but having notable amounts of their time on those projects, and then going and meeting the partners and the vendors and everyone around That future state idea that they’re working on. So that, you know, they’re less likely to get too much into day to day. But they got so the right team, and then the right products, a little bit of both one sets you up, the other one pulls you.
Brad Giles 20:14
So what was and you know, what I would add to that is, is trust, maybe a little bit of a different angle from what you’ve got there. But I would say that trusting the people to do the shorter term stuff, trusting your team, I’ve seen it in leadership teams where, you know, CEOs have been burned, they’ve been burned by, you know, poor performance or bad situations, and, and they just, they can’t build up enough trust in their delegates to their team, to be able to completely hand over to them to be able to completely let them run with and take full responsibility. So they can step out of the week or the month or the quarter, and spend a lot of their time working on the longer term stuff. And, and so that kind of they get into this, this, this terrible loop of that they can’t escape from a random trust.
Kevin Lawrence 21:21
Yeah, and I would always add, when people have say the word I need to trust, and I would add the word verify, oh, yes, and verify it, and which is usually you need data and reporting to be able to do it. And we’ve done other episodes where, you know, doing this is is like being a, this is the shift from a visual of a pilot, a visual licensed pilots called VFR visual flight, where you can fly when you can see where you’re going, ie good weather and sunshine. Yeah, versus instrument rated pilot, where you can fly in the dark in the storms. And in a snowstorm when you can’t see a thing or a sandstorm, we can Sandstorm, I’d be more dangerous. I don’t know if that’s true. But where you can fly with it when you can’t, when your eyes can’t guide you? Yes, it’s not possible. And then having the right reporting in that it makes a massive difference. And whether it’s on the people on the process, the financial KPIs, the operational KPIs, how people are doing and bringing the strategy to life in terms of the execution plans, all that stuff really, really makes a difference to Yeah, so and a lot of people don’t have the right data. And that’s why they have to have their hands in it. And it’s, you know, it goes back to the fate, one of my favorite phrases, which is managing by objective, you know, and the processes that we set up in companies. Everyone has clear operational metrics, financial metrics, they have cleared quarterly goals by group and by person. It doesn’t take a rocket scientist to tell where performance is and isn’t people doing the work or the people that oversee that. But a lot of people don’t have tight enough systems to make it that way. And then they can be feel, or maybe truthfully do need to be over involved to make that happen.
Brad Giles 23:05
Yeah. So what can we do about it? What what is it that that leaders can do? If they’ve listened to this episode, and identified themselves as an operational CEO, and think, you know, what I actually want to induce, I feel as though my role is not one that I can maintain for a long time, then. And I’m trying to find a way to get out maybe rather than selling the business and idea could be to turn to become a strategic CEO. So what can people do about it? Well, I’ve
Kevin Lawrence 23:43
got a couple. I mean, I’m like you, I’m always working with CEOs on this. And actually, most of AI CEOs, we’re working on this to some degree, they’re all at different levels of climbing this ladder towards strategic CEO. Because most of want to keep going for the long term. But where we normally start? Is them getting clear on really deciding that they’re going to do this. And usually they’re in enough stress and pain that that’s an easy decision. I go to the team, like I got one that we’re doing this with right now. And he drew me his org chart. And he thought he needed to make a change and restructure it. I just as we started going through it, I’m like, well, there’s this person in this box here, who isn’t an A player who you have all kinds of stories about, who is your you’re dropping down and doing part of their job, and we’re gonna go and verify the structure. I think his structure is fine. He needs to get an A player and a couple of critical roles. So he doesn’t have to be as involved as he is. And he’s involved. He’s creating work arounds and bridges and holding people’s hands on stuff that he shouldn’t have to be. But he’s kind of you know, the person He’s been with a long time he likes them. And he doesn’t realize he’s kind of the amount of pain he’s creating for himself in the organization. So it’s, you know, make sure you have the right structure and basically surrounded by a players in those key roles. We talk about some of those other projects for him, but until he gets that stabilized, and get the strength he needs around him, it’ll be very hard for him to the next part, which is my favorite is working on more of those strategic projects.
Brad Giles 25:26
Yeah, it’s it’s Jim Collins reverse reaction or response to many things, which it’s first people, you know, first, you got to get the right people on the bus. And then we can think about the other thing. So yeah, first of all, we’ve got to, we’ve got to have a team of competent a players or people who are good enough to be able to do this, that’s, that’s kind of sets the foundation, but then start working on the things that are going to carve out more time for yourself. So start thinking about the longer term things, what is it that you can obviously delegate this, it’s there’s some obvious stuff around there, but begin to work on the things that are long term, the things that are important and not urgent, and maybe you start off spending three hours a week on that. And then, and then that will begin to free up a bit more time so that in two months or three months, you can go to four hours a week,
Kevin Lawrence 26:33
for sure. Other things, is to stop taking meetings that are about short term things, or stop attending meetings, that your direct reports should be able to handle it one of our CEOs is deeply involved in the strategic planning meetings. And one of their, their, their decisions, is that they’re no longer going to be involved in the group discussions. So when people go off into breakout groups, or individual rooms, when we’re in person, they’re just gonna sit and hang out whether they’re in the room with me or go do something else. Because those are operational discussions. They don’t need to be there. But they’ve been there for all the years, they’ve been running the company. And so there’s there it’s about the meetings that you stop attending, or you attend once in a while, and you just sit and listen. Other another piece, and it’s interesting. One of these, the hallmarks of the operational CEOs is they take a lot of notes in meetings. Sometimes though, the damn scribe. Sometimes I’ve seen the people running 250 $300 million businesses, where the CEO is noting down the action items. I mean, they’re really helpful. But the real operational ones have a hard time letting go of that. And that’s just, you’re in the way of other people and letting people handle those things themselves. And again, it’s not it’s, it’s more common than I would think that it would be, especially you know, when and
Brad Giles 28:01
so, but all of those things that you’ve said is about figuring out what you need to stop doing. And what I love that one of the scribe because there’s a leader that I work with, you know, let’s say, a greater than $200 million company, and he’s taking notes at every single meeting. And I just, I just think that that is, you know, your, your time is much better served. Yeah, but overall, what we’re saying is what he stopped
Kevin Lawrence 28:34
you at that level, you just shouldn’t do it? Yeah, that is somebody else’s job. And that’s just an indicator of other things you’re holding on to and we do, it’s interesting. I have one client that I’ve worked with many amazing strategic CEOs, but one in particular. And I remember this amazing CEO would take almost no notes. He might write down, you know, seven words in a meeting. Yeah. But because everything else was up to everyone else. And he would get people to present. He would ask a whole bunch of questions, a number of questions. And then he would get them to make a recommendation he needed to decide, or ask them to update it, and then come back and see him in a couple weeks. Yeah, but he didn’t take a strategic CEO almost never comes away with any homework. You not leave, they leave the meeting with everyone else having things to do, but rarely do they have things to do.
Brad Giles 29:31
Also, awesome. Awesome. So are you working on things that are three years plus? Or are you working on things that are one week or one month? So let’s move to a quick review of what we’ve spoken about here. Really, you an operational or a strategic CEO? We begin by asking the question, do you believe that you can continue in your role for 10 to 20 years and retain the energy. That’s the big problem that we come across all the time with leaders. So, operational CEOs focus on short term one week to a quarter, maybe even six months or a year, they focus on operational CEOs focus on the tactical items. And they focus on the margin, they focus on sales on the people’s performance, you know, tell us about the strategic CEOs, Kevin,
Kevin Lawrence 30:33
strategic CEOs are not caught up in the day to day firefighting in the business generally. And they’re looking at three years out and innovation and building long term relationships, developing people developing new products, or markets or alliances or things that just add long term value to the business. So they’re working three years out, versus working in the fire that there is today. And like he talked about upfront, like Napoleon, you know, riding out to go and assess out the next battle, they still get their first hand information, they don’t lose contact. But they’re thinking about how do we win long term, not worrying about the details of what’s going on. And we didn’t talk about we’ve kind of talked about, you know, for a lot of people the shift is when deciding you’re going to do this. It’s saying no to a whole bunch of short term tactical stuff like don’t be the scribe, don’t come away with homework, other people are supposed to have homework and not you. And, and, and finding ways to build the team that’s so darn strong that you can trust and rely on them, although you verify them and that’s usually a big gap. Aside from them being control freaks not letting go. It’s not having a strong enough team that can handle what truly needs to happen at the scale that they’re at.
Brad Giles 31:44
Awesome. Well, thank you for listening. This has been the growth whispers on Brad Giles. You can find me at evolution partners.com.au and you can find Kevin at Lawrence and co.com. Again, thanks for listening. We hope you have a great week and can catch up again next week.
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