For startups and very young small and medium-size businesses (SMBs) in particular, it can be a difficult call when it comes to determining whether the most senior executive in the company should be named a CEO or a President. Many elements factor into this decision, but it often comes down to four main guidelines.
1: How large is your organization?
Some industry trackers define an SMB as any company with under 1,000 employees, which means that some SMBs can be quite large. But there is also common acknowledgement that a majority of SMBs have fewer than 100 employees.
In small companies, especially those with 20 or fewer employees, calling the top executive a CEO may be overkill. Why? Because the CEO position generally carries with it duties in creating a business vision, in visiting customers, in promoting and selling the company's wares, and in other areas that are not usually operational and hands on.
In contrast, a President is more of a hands-on and operational person, leading by example and rubbing elbows with employees as the daily work gets done. Companies with small numbers of employees need this kind of hands-on leadership, and most cannot afford a strictly visionary person sitting in the corner office when all hands are needed on deck.
On the other hand, if the SMB has hundreds of employees and it anticipates that many business units will either be acquired or created, it makes sense to have an over-arching CEO who is responsible for the vision and for whom all of these business units report to. In a structure like this, it is possible to have a President or a General Manager presiding over each unit.
2: Does custom dictate what you call your chief executive?
In banking, no matter how large a major branch is, the customary title for the top executive of the branch is President. Conversely, in the credit union world, a very small credit union of under five employees will still call its head person a CEO.
If an SMB operates in an industry where there already is a de facto title used for the lead position, it usually makes sense to maintain the tradition to avoid confusion and to place the SMB on a par prestige-wise with other companies in its class.
3: What type of person are you trying to recruit?
The qualities that an SMB is looking for in its top executive influence what it calls its top executive position. If the need is for a highly accomplished visionary and sales promoter, it is to the company's advantage to look for a CEO and to offer a CEO-size compensation package. If the goal is to ensure strong operational leadership, looking for a President might be the better option.
4: How does the position title "fit?"
Very often in SMBs, the top person determines his or her title. For many SMB leaders, the decision to be a CEO or a President is a matter of which title feels most comfortable to them. While there is no set rule of thumb, the tendency seems to be for heads of very small companies to call themselves President, and to move into CEO roles as the organization grows and they need more executive management layers under them.
What does your SMB call its most senior executive? How did your business determine what title to assign to the person in that role? Let us know in the discussion.
Mary E. Shacklett is president of Transworld Data, a technology research and market development firm. Prior to founding the company, Mary was Senior Vice President of Marketing and Technology at TCCU, Inc., a financial services firm; Vice President of Product Research and Software Development for Summit Information Systems, a computer software company; and Vice President of Strategic Planning and Technology at FSI International, a multinational manufacturing company in the semiconductor industry. Mary is a keynote speaker and has more than 1,000 articles, research studies, and technology publications in print.