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May 20, 2024 • 59min
A Masterclass On Hiring A CEO To Run Your Company ft. Andrew Wilkinson
My First Million
In this episode, Andrew Wilkinson shares his expertise on how to successfully hire a CEO to run your business, allowing you to step back while maintaining the company's growth and performance. As someone who owns around 40 companies worth a total of $500 million, Wilkinson has extensive experience in finding, vetting, compensating, and transitioning CEOs to take over the day-to-day operations.
A Masterclass On Hiring A CEO To Run Your Company ft. Andrew Wilkinson
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Key Takeaways
- Andrew Wilkinson owns around 40 companies worth a total of $500 million, which he is able to manage by hiring great CEOs to run each business
- The key steps to hiring a successful CEO are: 1) Ensure your business is big enough (at least $300k in profit) and you're ready to fully delegate, 2) Find the right CEO candidate, often a #2 at a similar-sized company, 3) Thoroughly diligence the candidate, 4) Manage the transition carefully, and 5) Structure the compensation package correctly
- Look for a CEO whose "hammer" (their primary skill) aligns with your business needs, and who has the right cultural fit and willingness to take on risk/upside
- Leverage recruiters to broaden your candidate pool, but also do deep reference checks and background investigations
- Structure the CEO compensation with a low base salary but high upside bonuses tied to performance, and consider having them invest their own money for equity
- The hardest part is fully letting go and trusting the CEO to run the business, without undermining their authority
Introduction
In this episode, Andrew Wilkinson shares his expertise on how to successfully hire a CEO to run your business, allowing you to step back while maintaining the company's growth and performance. As someone who owns around 40 companies worth a total of $500 million, Wilkinson has extensive experience in finding, vetting, compensating, and transitioning CEOs to take over the day-to-day operations.
Wilkinson emphasizes that hiring a CEO is not an easy task, and requires carefully considering whether your business is ready, finding the right cultural fit, thoroughly diligencing the candidate, and structuring the compensation package correctly. He walks through the step-by-step process he uses, drawing on lessons learned from both successes and failures over the years.
Topics Discussed
Realizing the Need for a CEO (1:36)
- Many founders start out loving their business, but eventually reach a point where they no longer want to run it day-to-day
- Hiring a CEO is the "third door" - an alternative to either continuing to run the business or selling it outright
- Wilkinson found that as his design agency Metalab grew, he lost the passion for tasks like traveling to meet clients, preferring to focus on new projects instead
- Realizing he was no longer the right person to run the growing company, he began exploring the option of hiring a CEO
Finding the Right CEO Candidate (16:46)
- Look for a CEO who has run a similar-sized or slightly larger business in the same industry or with similar customer dynamics
- Assess their "hammer" - the primary skill or growth lever they tend to rely on (e.g. marketing, sales, operations, finance)
- Use recruiters to broaden the candidate pool, but also do thorough reference checks and background investigations
- Avoid "big company" executives who may struggle with the autonomy and scrappiness of a smaller business
- Seek someone who is willing to have "skin in the game" through equity or a performance-based compensation structure
Diligencing the CEO Candidate (27:14)
- Look for "green flags" like the candidate being nervous/authentic, rather than overly polished
- Trust your gut instinct - if something feels "off", don't ignore it
- Verify claims on the candidate's resume through reference checks and background investigations
- Ideal is a CEO who has run a company 2x the size, not 20x - the skill sets are different
Transitioning to the New CEO (34:41)
- Rip the band-aid off and fully empower the new CEO, avoiding the temptation to undermine their authority
- Set clear boundaries, like only needing to approve expenditures over a certain threshold
- Start with bi-weekly check-ins, then move to monthly, quarterly, and potentially annual meetings
- Avoid the "swoop and poop" - don't bypass the CEO to give direct feedback to their team
Structuring the CEO Compensation (44:48)
- Offer a lower base salary but high upside bonuses tied to performance targets
- Consider having the CEO invest their own money for equity, rather than just granting stock options
- Uncapped bonuses provide stronger alignment as the business grows
- Avoid candidates who just want a high guaranteed salary with minimal risk
Founder-Led vs. Professional Management (49:55)
- There's a common myth that founder-led businesses are always better, but this depends on the founder's personality
- Some founders are better suited to being hands-on, while others thrive more in a high-level, delegating role
- Wilkinson found that as his business grew, he lost the passion for the day-to-day operations and wanted to focus on new creative projects
- Hiring a CEO allowed him to maintain ownership and upside while freeing himself up to work on what he enjoyed most
Conclusion
Hiring a CEO to run your business is a major transition, but can be a highly effective strategy for founders who no longer want to be deeply involved in the day-to-day operations. Wilkinson's step-by-step approach emphasizes thoroughly vetting candidates, structuring the right compensation incentives, and then fully empowering the CEO to run the company without undermining their authority.
The key is finding the right cultural fit and skill set match, rather than just the most impressive resume. Wilkinson cautions that this process requires discipline, as the temptation to micromanage or undermine the CEO can be strong. But when executed properly, hiring a CEO can unlock tremendous value and free up founders to focus on their true passions.