Minimize use of CxO titles at early company stages

Tuesday Jun 4, 2013 by Jay Batson - Entrepreneur, Angel Investor, & Mentor

I'm about 10 months into helping a bunch of startups through organizations like TechStars, MassChallenge, and others.  And I've seen an emerging trend among startups that I want to discourage: The over - and inappropriate - use of "Chief (fill-in-the-blank)" titles.

"What's the problem," you ask?  "Why not give people CxO roles?" There are a bunch of reasons:

1.  Chief x Officers are designed to be positions that report to the Board of Directors of the company - not to the CEO.  I'm willing to wager that in your early-stage company a) you don't even have a Board of Directors yet other than themselves, and b) if you do, the Board doesn't want to be doing the quarterly reviews of, setting the compensation of, ... these people. Keep it simple - all your staff should report to the CEO.

2.  Those of us who have been in the trenches a while will simply see young entrepreneurs with these lofty titles as maybe a bit pretentious, or at least ill-informed. You don't want to start off (funding / mentoring / ...) conversations with people thinking that about you.

3.  You won't be able to hire above yourself.  If you're smart at building your business, at some point you're going to want to have people that are smarter than you doing important things at your company.  You'll need to have titles available to them.  If the CxO titles are already held by somebody, you won't be able to transfer it to them without it sounding like a demotion to the one who has the title now.  You definitely won't want the demotion-thing happening.

4.  Speaking of demotions, if / when you get professional capital to invest in your company, they're going to gently encourage you to nuke those titles because of reason 1 above.  This takeaway will appear to you, and everybody around you, as a demotion / take-away at a very early stage in your company.  You don't want that, either.

So let me be concrete about what's ok - and not ok:

*  CEO: It's fine to have a CEO in a raw startup.  Somebody needs to be "the person" who has ultimate responsibility, and it's good to have a CEO. (Make sure your CEO is really going to be the CEO for a while, though. Don't just give somebody the title if you think you're going to be looking for a CEO.  Use "Founder" instead of CEO if the person is temporary.)

*  CTO:  If you have a tech co-founder who is a full-solution hotshot, with full-stack architectural capabilities that will be driving the architecture of your company for the long-run, and who is at the forefront of tech in your vertical, definitely make the person your CTO.  If they're not a rockstar, I'd make the case that they're your "development head / lead". (I note that VP Engineering is a very specific skill, and I might discourage the use of that title, too.  But it's also fair that tech co-founders need to have some status arising from title, so I'll give some leeway if needed on this one.)

*  CFO: If you truly have somebody who is a significant financial talent - who has multi-round experience in negotiating term sheets, has done real estate deals, reviewed contracts, built sophisticated financial models, managed large piles of cash, etc. - then you have a CFO.  But if they're not that kind of heavyweight, I'm going to wager they're a really good Office Manager (a significantly under-appreciated title; anybody who knows it will tell you a good office manager can make a company.)

*  COO: If you're a startup with less than 20 people, you probably better not even have a Chief Operating Officer (COO).  In fact, i'll bet most investors will raise an eyebrow or two about it.  Why? If you're that size, and need a COO to execute on operations, you might have more of a "problem" - not a "team".  Now I'll grant that it's possible your company is in a particularly unique situation.  Like maybe there's a hired-gun that the company (read "investors") is trying out as a replacement for the founding CEO. But in general, I'll bet you shouldn't have a COO.

*  CPO:  You absolutely don't need a Chief Product Officer now - if ever. I'll go so far to say that 95% of the time (NOT 100%) that title is given to a founding CEO after a non-founder CEO has taken over, and the founding CEO hasn't defined a different role.  I've seen the CPO title succeed maybe 2-5 times - ever.  I've seen it be the Title Of Death many more times - including once for me.

*  CRO (Revenue): This is a title that a company the size of Oracle has - not you.

I've even seen novel, invented CxO titles.  And as far as I'm concerned, the only CxO titles that should exist in most privately-held companies are CEO, CTO, and CFO.

So do yourself a favor, and use CxO titles sparingly.

Jay Batson is an entrepreneur, angel investor, and mentor to startups.  You can find this blog post, as well as additional content on his blog called startup dj.  You can also follow Jay (@jab) on Twitter by clicking here.

 

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