There was a time when titles such as CEO (Chief Executive Officer), MD (Managing Director) and GM (General Manager) were more commonly reserved for people working for large organisations that had a large staff complement and formal, hierarchical management structures. These days, however, the title of CEO is used in much smaller companies as well. As will be discussed in this article, the size of the company impacts significantly on the role played by the CEO.
The CEO is the highest position in an organisation and this person is the public face of the company. Good examples of well-known CEOs are Mark Zuckerberg of Facebook, Elon Musk of Tesla and the late Steve Jobs of Apple.
The next highest position is that of the MD. This is an operational role and the MD is the internal face of the company and is concerned with the day-to-day operations of the business.
GMs are further down the hierarchy and have more limited positions. They are usually in charge of regional operations, or of a specific division of the company. Depending upon the management structure, GMs can report to the MD, or CEO, or even both. However, the MD and the GM report to the CEO, and the CEO and MD, in turn, report to the Board of Directors.
CEOs of larger companies deal with high-level strategic decisions that impact the company’s overall growth and are responsible for the overall performance of the company. This means they need to be much focused on facilitating the achievement of future goals and guiding the executive team and employees to align the company with the strategic vision set by the Board of Directors.
CEOs are also responsible for setting the tone, vision and often the culture of their organisations. As the public face of the company, it is their job to position the company in a favourable light in the media and at public events.
The MD and GM are concerned with the running of the business, with the MD being responsible for the performance of all business divisions of the company. GMs on the other hand are responsible for smaller sections of the company, this could be divided regionally or into specific business units depending upon the business focus of the company.
CEOs are also responsible for appointing key managers and heads of departments. The CEO may elect to delegate specific responsibilities/decision making powers to their executive team, providing the Board of Directors sanctions these actions.
Managing Directors monitor the daily performance of the business, and their job is to provide the business information to the CEO and the Board of Directors to assist them to make good strategic decisions. They are responsible for translating the strategic goals into departmental goals and targets that will ensure the company meets these objectives. The MD must, on an on-going basis, review the performance of the company, and the performance of the various departments/divisions and institute corrective measures when challenges are identified. The MD is also responsible for hiring support staff and supervising people of various departments (for example, sales, products, procurement etc.). It is their job to monitor divisional expenses and keep the profitability of the company intact. They also support the CEO by implementing measures that improve and streamline the operations of the company.
Ultimately, both the CEO and the MD are responsible for running the business successfully and maximising shareholders’ wealth. Both are expected to maintain integrity and positively position the company in the business world. The CEO performs these tasks to the outside world, whilst the MD is responsible for the internal morale of the company and must motivate employees and set the example of an exemplary work ethic and company culture that employees are expected to adhere to. Both are executive Directors of the Board and are responsible for keeping the Board of Directors informed on the status of policies, goals and overall performance of the business. Their job is to provide the business information necessary to enable the non-executive Directors to make informed and impactful decisions that maintain shareholder value, and improve the growth prospects of the company.
The responsibility shouldered by CEOs is dependent upon the type of company he/she heads. Listed companies (where the company has raised capital by offering shares to the general public) are tightly controlled. Providing profits that benefit shareholders is a top priority.
The size of the company, its legal structure and its Memorandum of Association (which can be unique for each company) all impact the roles played by people holding these titles. In smaller organisations that do not employ a large number of people, the roles of the CEO and MD are invariably merged, and few small companies use the General Manager title.
This means that the CEO of a small company needs to focus on setting and achieving future strategic objectives, positively positioning the company in the public eye, and yet also be very focused on the day-to-day running of the business in order to keep the business sustainable and generate the profits required to implement the growth strategies. CEOs of small companies do not have the luxury of separation of duties afforded by larger organisations. Invariably, CEOs of small companies are often the owners/founders of the business, whereas in larger organisations, CEOs are usually employed.
As the business grows, the CEO will need to start appointing managers who will be responsible for the day-to-day running of their specific division, and will report to the CEO. At this point, the job of the CEO will be to guide the managers to achieve the strategic objectives. This requires monitoring that performance is on track, systems are streamlined, and costs contained, in order to achieve profit targets. Once an executive management team is in place, the CEO is able to release the work of the day-to-day running of the business, and focus more on market positioning, business networks and identifying opportunities and partners that facilitate the achievement of growth strategies.
If the title of GM is used in a smaller company, the GM will report to the owners of the company. GMs of smaller companies tend to be responsible for more business functions than GMs of larger companies. For example, a GM of a small hospitality company will be responsible for the overall running of the business, to ensure efficiency and profit maximisation.
Given the myriad of types of businesses that exist, companies can allocate any title they want to their key staff, and therefore there isn’t a one-size fits all description of work. The only common thread is that top management is responsible for executing the company’s strategy, minimising costs and maximising profits.
Source: Robynne Erwin, Finfind Consultant.