The job description of a CEO is a blueprint of what the CEO is expected to do in a job. It includes the ideal candidates' attributes to perform successfully in such a role. The structure of the job description of the CEO has the overall purpose of the role and primary duties. The primary purpose deals with what the CEO will do in the job. The third portion of the job description of the CEO showcases what the CEO must possess or bring to the job for them to be successful. This includes Knowledge, Skills, Abilities, and Other characteristics. The CEO is ultimately accountable for the success or failure of a company.
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The job of a CEO and what goes into the job description vary by the nature of the industry and the organization's size. The mandate of CEOs of large organizations tends to focus on highly strategic issues. In contrast, small- to medium-sized organizations include significant operational work.
In this article, I cover what you need to include in the job description of the CEO and samples of what must go under each section.
Job description of CEO: Activities versus results
A job description will often be written in two formats: the first will define the duties and responsibilities of the position. In contrast, the second format will describe the desired outcomes of the position.
Some advocate for a simple job description that does not detail the tasks the CEO has to do but a broader overarching responsibility. Such a description allows the CEO to find means to achieve the desired results within the limits of the authority delegated to them. For example, The CEO will have to do whatever is needed to achieve ends and comply with executive limitations.
The CEO makes all decisions, formulates all policies, and gives authorization for all activities, provided that they can demonstrate to the Board that they are appropriate. Under this omnibus kind of role description, the CEO must demonstrate that the decisions and actions taken are consistent with a reasonable interpretation of the Board's ends and executive limitations policies.
Job description of CEO: The overall purpose of the job
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Under this section, you capture the core mandate of the CEO job in a summary form. The job description of the CEO should be so clear under this section that no stakeholder is left in doubt as to what the CEO's mandate is.
The CEO (chief executive officer) is the highest-ranking executive in a company. The CEO is responsible for leading the company, overseeing all business units, planning for the future, and ensuring that the company is performing well and achieving its goals. The CEO's primary role is to set the company's strategic direction and make sure that the company's goals are accomplished. The CEO is ultimately responsible for crafting the business's strategy, which covers the financial, business systems, customers, and staff working for the business. Ultimately, the CEO should ensure that the business wins in the marketplace and make the shareholders happy by bringing an optimal return on shareholder funds.
The overall purpose of CEOs of large organizations is to lead in developing and executing a winning strategy for the organization. Usually, the decisions a CEO can make are limited by the laws of the country and international best practices. The decisions made at this level are superior to any other decisions. Only the Board has the power to redirect the decisions of the CEO. In large organizations, the CEO's job involves integrating several independent business operations. This is often the case in roles such as Group CEO.
In small to medium organizations, the job description of the CEO includes dealing with the organization's strategic direction but also touches on operational issues.
CEOs are responsible for providing a company with overall guidance on all strategic and operational issues, regardless of the organization's size. This responsibility falls on their shoulders.
Job description of CEO: The primary duties of a CEO
Under this section of the job description of the CEO, you list all the core duties the CEO performs. Remember that the CEO role is strategic and rarely goes into operational issues if the role is pitched correctly.
The CEO must be highly aware of the diverse economic, social, political, technological, and religious environments to grow and protect shareholder value. They often oversee profit and loss in one or several strategic business units and assess their overall value as reflected in the corporate balance sheet. A company's CEO performs various functions, including strategic planning, raising money, and representing the company to the outside world. They are the ones who get the final word on all significant decisions. They make input into critical operational decisions. One of the primary responsibilities is to ensure the company remains profitable, which means finding ways to increase revenues and cut costs where possible.
The job description of a CEO includes dealing with mission-critical issues that impact the organization's operations. As they make vital decisions, they often pay attention to global, national, and regional environments, specifically building the organization's capacity to respond to environmental changes.
The CEO is responsible for activities and decisions materially influencing the organization's survival. This is why such roles require astute candidates in strategy formulation and implementation. Decisions at this level may only impact the organization five to ten years in the future. A poor decision at this level may threaten the future well-being of the entire organization.
The CEO at this level may be required to anticipate and establish new unified business systems that serve society's future needs. This is accomplished through alliances, mergers, and acquisitions. The critical consideration is how value can be established and enhanced across the business.
The decision-making process is geared to meet critical business drivers, which are sustained profit and wealth creation for the long term, while contextually considering social, environmental sustainability, and ethical issues. These are issues that can not escape the attention of the CEO in the globalized village.
The work primarily focuses on building sustainable wealth in its most general meaning. The CEO must secure investment money and actively manage image, reputation, and financial issues to build confidence in the business's complicated web of relationships.
The CEO provides a dual perspective, one that looks outside to secure the company's long-term existence and another that looks within to establish and maintain working conditions ideal for the internal stakeholders.
This is the highest organizational level where key strategic decisions and choices are made. It is the level at which the rules of the game for the following decade are intentionally decided.
Individuals operating at this level will be required to operate outside their functional area and give equal weight to several other functional areas. It does not matter what background the candidate has in functional areas. What matters is the ability to lead the whole organization.
Work at the level is focused on formulating an organizational strategic intent, which may be defined as expressing a desired and attainable future position. This is the core of the work being done at this level.
They monitor the profit and loss and evaluate their overall value as reflected in the company's balance sheet. They analyze the asset needs of the business to determine whether or not there should be an increase or decrease in investment in light of the long-term strategic thrust of the business.
The most important thing for a CEO is to ensure that the company meets its goals and objectives. In some cases, the CEO may be responsible for all aspects of the business, including financial performance, human resources, marketing, and product development. In other cases, the CEO may delegate these responsibilities to other senior management team members.
The duties and responsibilities of a CEO vary from one organization to another. However, the following are the typical duties and responsibilities associated with the position: Setting the company's vision and strategy, making significant decisions, managing operations, and resources, and serving as the Board of directors' principal point of contact.
Below I list some of the core duties that a job description of a CEO should contain.
- Decides the overall strategic direction of the business.
- Decides what policies are needed to support the strategic direction of the business.
- Coordinates the economic, social, technological, or political contexts for the entire organization.
- Determines significant policy setting constraints for the business.
- Sets the organization's financial and social direction, including the enterprise's viability.
- Oversees profit and loss for the business and its subsidiaries.
- Determines the objectives for corporate investment and divestiture.
- Assesses the value of current technologies and seeks new ones.
- Develops human capital capabilities to enable the business to be sustainable.
- Creates an enabling environment to enable all critical stakeholders to participate in the company's operations.
- Engages critical external stakeholders to create opportunities for the enterprise.
- Ensures that the firm and its products or services have a positive image in the public eye and work to promote and preserve that image.
- Works with the Board to promote good corporate governance practices throughout the organization.
- Act as the lead person in promoting social responsibility interventions in liaison with the community.
- Leads in building and sustaining a performance culture within the business.
- Develops mechanisms to manage risk throughout the business.
- Develops mechanisms for tracking the progress of the strategic goals and feedback to the Board.
- Provides overall leadership to the organization.
- Develops and monitors the implementation of the company's succession plans for critical roles.
Job description of CEO: CEO job education requirements
To become a CEO, one must typically have a college degree in business, economics, or a related field. CEOs typically have significant experience working in management positions. Many CEOs began their careers working in entry-level jobs and worked their way up through the ranks of their respective organizations.
The job of a CEO is one of the most important and demanding jobs in a company. A CEO needs to be highly educated and experienced to succeed. The education requirements for a CEO vary depending on the company and the position, but a CEO typically needs a bachelor's degree in business or a related field. Many CEOs also have a master's degree in business administration (MBA) or a related field.
Despite the demand for college degrees as a minimum requirement for CEOs, scientific research shows that years of education have a significant but weak relationship with actual job performance. When hiring CEOs, it may be beneficial not to overemphasize academic achievements.
Job description of CEO: Experience Required
At this level, candidates must have experience extending beyond their domain expertise. For this type of role, candidates need to have a broad awareness of global, regional, and local events and trends. It necessitates considering things from several angles and incorporating a wide range of concerns and requirements for the company into a comprehensive strategy.
In the job description of CEO, does experience matter? Research shows that experience does not predict performance that much. Therefore, understanding what experience is required to succeed as a CEO is critical. Instead of focusing on the number of years a candidate has been leading at the highest level, it may be critical to focus instead on the diversity of leadership experience the candidate brings to the job.
Job description of CEO: Knowledge, Abilities, and Other Characteristics
The CEO level optimizes leadership. Leadership in this context can catalyze influence on various diverse groups, whether within or external to the organization, a rival, or a strategic partner.
There has been debate on whether domain knowledge is needed to be a successful CEO. There are divergent views on this. On the one hand, others believe that your domain knowledge is less important as you ascend into a CEO role. Instead, your soft skills and the ability to rally employees and other stakeholders toward the company vision are critical.
It seems evident that those aspiring to lead the organization as CEOs need to develop a generalist mindset instead of domain-specific expertise.
The CEO role requires a strategic thinker capable of engaging in broad, complex, analytical & conceptual thinking. The CEO must be driven to improve the company by attracting and developing top talent. Critical thinking is a signature competency for the CEO. This same competency feeds into the other strategic competencies required for a CEO. Such competencies include high business acumen and tech-savvy. The role requires a collaborative individual who can engage stakeholders from diverse backgrounds—an ability to work effectively with peers or partners, including those not in the line of command.
The CEO genome project, the most extensive study focused on what drives CEO performance, has important lessons on what is required to hire a successful CEO. Successful CEOs have the following characteristics; decide with speed and conviction, adapt proactively, have relentless reliability, and engage for results. The same study found that education has no relationship with CEO performance. Employers hype education and university attendance as crucial business performance drivers.
CEOs must have strong leadership skills and be able to motivate and inspire employees. They must also be able to make difficult decisions quickly and efficiently. To be successful, a CEO must possess strong communication, leadership, and decision-making skills.
CEOs are required to have the ability to make informed judgments on the distribution of resources and the expansion of the company. The CEO needs to have a strong understanding of the company's industry. The CEO must articulate the company's mission and values to shareholders, employees, and the public.
Job description of CEO: Context
The CEO's job will be to preserve critical business units and alert them to the possibilities of development over the next fifteen years. The CEO needs to have an awareness of and respond to cultural variations. They often focus on establishing a robust local, national, regional, and international presence inside and beyond the place of origin.
The individual aspiring for the CEO role must be able to look beyond the company's current context to discern future growth opportunities. This means engaging in the process of expanding one's curiosity beyond the areas of real or prospective impact. At this level, it is essential to understand the many influences caused by economic, social, political, technical, and religious settings. This gives the CEO room to search and discover unexpected sources of opportunities.
Job description of CEO and CEO Pay
CEO pay has come under intense scrutiny in recent years as the disparity between executive compensation, and average workers' earnings have grown. In 2015, for example, the median pay for CEOs at S&P 500 companies was $19 million – more than 300 times the median earnings of American workers. What explains this massive disparity in earnings? Do CEOs contribute much more to their firms' success than other employees?
There is no one answer to these questions; however, one explanation for why CEO pay is so high is that boards of directors determine it. These board members may be hesitant to determine CEO pay at levels that are too far below those of other companies operating in the same industry. This \"peer effect\" on CEO pay has been documented in several studies. In a 2013 study, it was reported that an increase of $1 million in the CEO's pay at a given firm raised the median CEO pay at comparable firms by about $400,000.
It is essential to understand how CEOs are paid. CEOs receive a base salary, an annual bonus, and long-term incentives, such as stock options. The base salary is a fixed amount the CEO receives regardless of the firm's performance. The bonus is usually a cash payment tied to the firm's performance – for example, the CEO might receive a bonus equal to 10% of the firm's profits.
In recent decades, the CEO pay has skyrocketed, with the top executives at large companies making over 300 times what their average worker makes. This increase in pay inequality has led to public outcry and, in some cases, protests. What are the reasons for this increase, and what are the consequences?
The debate over CEO pay has been a hot topic for some time now. Whether CEOs are overpaid has been popular, with many arguing that these executives' pay packages are excessive. Many factors determine whether a CEO is overpaid, but one of the main factors is the level of performance that the company has seen.
Research shows company size explains over 40% of the variation in CEO pay. Company size is often measured in terms of total headcount and the size of the company balance sheet.
Job description of CEO and CEO Performance
Developing a job description for CEO is the first step in developing the performance parameters for the CEO job. Remember, the purpose of developing a CEO job description is to use it to hire the best CEOs and assess their performance objectively. The performance indicators used in a CEO role are derived from the key responsibilities set out in the job description of the CEO.
The Board can use the key results areas in the CEO's job description to measure the CEO's performance. The areas covered in such assessments include strategy implementation, return on shareholder equity, succession planning, building a performance culture, and many more of the listed areas in the job description.
Even though the job description can provide some guidance as to what aspects of the CEO's performance should be evaluated, the most important thing is to have a knowledgeable CEO. A person dedicated to the company, including its clients, workers, and future.
Conclusion
The job description of a CEO is a crucial tool required in hiring the right CEOs. Every Board that aspires to get the best CEO must have an accurate job description for the CEO. Globally, companies lose an estimated USD112 billion dollars due to the wrong selection of the CEO. Boards tend to look for subordinates when hiring instead of leaders. Women are 28 times less likely to be picked for a CEO role for various reasons that have nothing to do with performance. All these challenges emanate from poorly designed job descriptions which Boards use to hire the wrong CEOs.
As you develop the CEO job description, note that individuals targeting to occupy CEO roles must be capable of working outside their experience paths. They must be inclined to work effectively within the hierarchical structure of their company. Leaders at this level can only succeed if they recognize the significance of the knowledge and achievements of others. A humble estimation of one's abilities is crucial in this role. At this level, humility is desirable, and it is important to acknowledge that others possess specific expertise essential to success. When regularly exposed to high levels of attention and opportunity, even the most modest person may be tempted to inflate their ego.
Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm.Email:mnguwi@ipcconsultants.com or visit our websites https://www.thehumancapitalhub.com/ and www.ipcconsultants.com