Aneesh Varma

Notes for CEOs: Building the Executive Team

These pages are my efforts to open source everything that I have learned about being a CEO. I have now done the Founder-CEO role for over 16 years across 3 startups, including the venture-backed route. I was just 23 when I became a CEO, and therefore learnt stuff the hard way: mistakes, wrong-turns, failures, frustrations and all of that. Along the way, I have had a chance to meet 280+ CEOs (of all types, including the very large publicly-listed companies) — and I realized that to learn about the craft being a CEO, it is peer knowledge of other CEOs is absolutely vital in addition to working with coaches, reading books & blogs, and learning through experience. But it’s not easy to have all these peer conversations with other CEOs – so these pages below are the open-sourced collection of everything they have collectively said to me. Hopefully this helps you skip past making some of the mistakes I made while honing this craft.

– Aneesh

tl;dr: Notes for CEOs: Building the Executive Team

  • Though it might be informal at the start, the (Founder)-CEO needs to eventually formalize a proper Executive Team with a rhythm and process to ensure good decisions are being made
  • This team needs to stay within 6-8 people to be efficient and will likely have rotation through various inflexion points as the company evolves
  • Most importantly, this team needs to establish trust and sort out their behaviours as they are on this team to serve the company as the first priority, not their own functions/divisions

Who is this page for? 

This page is a set of notes to help the CEO (Founder-CEO or appointed-CEO) during the 1-to-2 stage to think about that Executive Team as it gets past the initial hurdles into the scaling stage. Typically, this is a company that has found Product/Market Fit — that is now at 25+ employees and starting to add more complexity as it scales. Creating a formal and structured Executive Team now becomes vital to the next stage. 

As a Founder, your first job was all about getting the Product into a stage where it’s truly loved by its users (0-to-1), but now as you scale, your job as a CEO is about building the company (1-to-2)

Adapted from an YCombinator blog post

Background context:

I tend to think of it as 3 stages of most startups (a crude visualization):

  • The 0-to-1 stage: Establishing the initial Product/Market Fit
  • The 1-to-2 stage: Scaling the product and becoming a viable entity (the product is profitable and ideally the company itself is within reach of profitability — default to alive!)
  • The 2-to-10 stage: Expansion, internationalization, more product lines, more complexity, legal matters, PE capital and perhaps even eventually an IPO. As the numbering increment shows, this is a longer stage that takes different bursts of energy to get there.

And building that company, especially at the 1-to-2 stage, requires that Founder-CEOs think about assembling a group of leaders who can work alongside you to help execute on this to set the company up properly for the longer journey: The Executive Team.

Note: Yes, this oversimplifies it — including all the stages along the way when companies get acquired and subsumed into other entities. You could also loosely attach the Seed > Series A > B > C tags as inflexion points along this journey, but not always as funding isn’t a true mark of progress. (There will also be a separate set of notes coming up shortly about how to think of the CEO’s responsibilities during this 1-to-2 and 2-to-10 phase. Also at times, this is where the Founding-CEO steps back to bring in a CEO for these later phases, more on that in a separate note).

What exactly is this Executive Team (ET)?

In the early days of a startup (0-to-1 stage), while chasing Product/Market Fit, there is an informal concept of leadership given the whole company is only 6-10 people or so. The leadership team are mostly just the co-founders and any other “wise person” that is at the scene.

This initial leadership team is basically like a group of village leaders who came together in a tribal council to talk through the key issues at that moment. They make instinct–driven decisions based on their past experiences (“the winds are blowing from the east this month, rains are coming soon, we need to build roofs”).

But as Product/Market Fit is found (ie: the 0-to-1 is happening) and the focus then shifts to building a company and scaling its processes (1-to-2 stage). The headcount will start growing past 20-30 through this phase and rapidly can get up to 100+ (and larger based on the nature of the operations, especially if there are some manual steps involved).

This is when to formalize this top leadership team into a proper Executive Team (ET).

Note: I am using the term Executive Team (ET), though many of the CEOs I met continue calling it the Leadership Team, or the Senior LT, or Management Team (I also heard C-level Team and I think that sends out the wrong message). This in all cases refers to the main team of company leaders that the CEO works with (ie: the “first team” of the CEO, see below) often comprising of CxO and VP/SVP. However, it is not a default that everyone with those type of titles ends on this team (see sections about selection and rotation below). I will be using the abbreviation ET to denote this team. 

A book that nearly all successful CEOs have talked to me about is Patrick Lencioni’s 5 myths of a dysfunctional team (also a top pick in the compiled reading list). There are many important concepts he breaks down, and many of these are also available in their free videos and the book (or yes, you can hire their consulting arm, Table Group – though its not cheap). 

First Team: the idea that true leaders prioritize supporting their fellow leaders over their direct reports.

This 2 minute video below from Patrick Lencioni is really a useful explanation of why its important that ET members are responsible to their peers (other ET members) more than they are to their individual or “Second” teams

Also it is important to note that only the CEO can hire this Executive Team and has to ensure they work well together. I remember reading that Patrick Collison (of Stripe), went around to meet lots of executives at other companies to see what the gold standard looks like and that helped him design his hiring process. Sometimes you need to also work closely with your Board to learn how to evaluate these senior hires. This team will take a while to hire, it isn’t going to be a quick process, but its vital to get it right.

What exactly is the purpose of this Executive Team (in relation to the CEO’s role)?

The CEO is ultimately looking after the long-term health of the company. That idea has to be understood by members of the ET. And as described above, they all need to make the ET their first team (higher priority than their functional teams). So this team is there to provide meaningful inputs to the CEO to understand the various pressure points that are on the horizon, and then work together to make good timely decisions.

Nearly all companies are in the business of taking risks (sounds cliche but it really is true, all that varies are the levels of risk). A ship is always safe in the harbour, but that’s not what ships are built for. They need to be out in the deep seas taking the risks to fulfil their cause. The ET need to come to terms with this.

“An imperfect decision today, is better than a perfect decision tomorrow” (because a perfect decision never exists, so why stall). Make the decision.

Think about this in the context of a system of sensors within a machine: Each member of the ET is helping bring up various sensor readings relevant to their functional area at the company. These sensor readings are like the input into your decision process (where the buck stops with the CEO, more on decision making in a separate detailed post).

So it is absolutely critical that each of the sensors are working well:

  • Are they giving the ET the right inputs? Are they telling the whole story?
  • Are they carefully scrutinising their own domains? Asking the right questions?
  • Are they just telling a “curated story” at the ET (hiding their incompetence)?
  • What should they resolve before they bring it up to the ET?

That is why establishing Trust within this Executive Team is the most important base, so that true honesty and dialogues can come about (see section on Behaviours & Rhythms later on).

What is the optimal size of this Executive Team?

The magic happens with about 6-8 people including the CEO.

Nearly all CEOs I spoke with who had accidentally ballooned up their ET past this limit were regretting that choice. They all felt that the 6-8 size seemed to work well, and it got messier once they let it get bigger (and therefore were keen to prune it back to 8 at the most). There is definitely some logic to this, as even Jeff Bezos talks about the 2 pizza rule and similar thinking in the military or agile practioners as well.

Here are some relevant notes that I heard many CEOs share (while lamenting):

  • This is not a party. This is probably the most important and expensive team in the company that needs to be actively participating. So no point in just having people “attend to observe”
  • There will be a temptation to have other “influential managers” at the table because they have a strong reputation as an Engineering Leader or some other important role. But that is not the only reason someone should qualify to the ET. The ET has to be designed with purpose to have the right skills and decision-making discipline.
  • Not everyone with a CxO title automatically gets invited to the ET (not a party!). Similarly, you might have a few S/VPs in there for certain areas where a CxO doesn’t exist.
  • It is ok to have a senior leader attend an ET meeting for a specific discussion (during a deep dive for example). This also becomes a good way to expose them to how the ET works, and evaluate how they might transition in the future (see note about succession planning towards the end of this page).
  • As a CEO, nearly all these ET members are your direct reports — for every person you manage, you need to think about spending 2 hours a week for them (some of this is during the 1-1s but also other prep work and career development planning). So don’t let the ET team get too big.
  • Also you might have to stagger the hiring of these Executives because it takes a lot of time to hire 1 of them, and you want them to help you as you then go hire the next one. The new person needs to settle in before the next ET member joins in (This is where possibly a good Executive Search firm can make a difference too, they can be very expensive but a bad executive hire is even more expensive).
  • Every few years, you will have to rotate your Executive Team as you hit various inflexion points. Hard as it will be, you might need to shuffle out some ET members to non-ET roles (more on this below). And that will be hard emotionally for some people to digest as they will feel they are moving away from the centre of the company — but it is important to establish this early on so that the whole company knows this isn’t a demotion (you might yourself eventually come to the stage, where you no longer are the right CEO and need to be rotated out — more on in a separate post in the future).

Definitely don’t do this: A few CEOs that I spoke with tried to resolve the petulant want of some senior managers to have a “direct line to the CEO” by creating this secondary team that met once a week as another forum. Just about all of them regret it and know it was a bad decision as it serves no purpose (and weakens the first-team concept). So just don’t do it — there will be a few upset managers who will feel that they are not getting a “seat the top table” — but they need to know why this ET exists, and that as a CEO you will communicate important things out to the company (separate post coming up about Communications).

What are the behaviours expected from those on the Executive Team?

Ok – this is a BIG TOPIC because it’s is not easy.

The first most important, absolutely non-negotiable, must-have-thing is for each member of the ET is to champion the company values (especially those who are existing employees of the company rising into the ET position). For externally sourced candidates, you need to spend extra time evaluating for this through the interview stages. This is non-negotiable. Don’t compromise.

Here are some notes as a CEO you ought to discuss with each member of the ET, about the behaviours which are important to recognize:

  • Each member of the ET needs to put the Company above themselves. Being on the ET is not their chance to just fight for their fiefdoms and functional areas. This is why the first team concept is vital to embed early on. Tell each member of the ET that they have to make the decision that helps the company, if even if it creates some strain on them or their function (as they say it is about “walking the uncomfortable forest”)
  • Learning to make the call. Any ET will never have all the information, nor will they have the time to collect it. They will have to make a large number of decisions with uncertainty. But it’s important to make that decision and not rely on some other forcing mechanism or some other person to enable it, when it’s their decision to make. At all times however, make the decision (or the CEO needs to immediately step in to make it). Choosing a direction is more valuable than sitting in limbo and fear (and decisions can be updated in the future with more information, detailed page coming up including Type I vs II decisions and also the concept of disagree-but-commit in Bezos-speak).
  • The ET will set the tone for the company. How they conduct ourselves will create the basis for other teams. It seems obvious to say that, but it’s important to think about any bad habits they have built up that are creating a model for others. Self-awareness is a vital differentiator. The CEO should work with each member to help them work on areas they have self-identified as weaknesses and encourage the idea of knowing when to ask for help.
  • Establish the moral compass early on. Know the way to lean for decisions the ET will make in the hard times. What are the principles you will follow when there is ambiguity? (Brian Chesky of AirBnb, an amazing CEO to learn from, often talks about relying on your core principles to make decisions when data simply isn’t there).
  • Self-control around emotional response to a certain matter that skews the decision making. It will be very important to keep disruptive emotions and impulses to a check to ensure the ET are making proper calm-headed decisions. Responding in anger is likely to create poorer decisions that will affect the livelihood of the entire company that is dependent on this team to get things right. Don’t do it. (Tony Fadell in his wonderful book Build calls it “getting loud as a manager” and how one should never do it)
  • Be aware that each member will need to change their perspective on things to “see it from the other side” to make really good decisions. But they aren’t a brain trust that has to always brainstorm and come up with the solutions. They are creating the boundary conditions which will allow for solutions to exist. That requires being able to move between different styles of engagement and interactions. Think about how this might be seen internally & externally (empathy). Keep aware the the ET is not here to micro-manage things. Their role is to create empowered teams that understand the problem, and can then go off and come up with solutions (Liz Wiseman describes this as being a Multiplier, asking the right questions of the wider team who are ideally closest to the problem, not giving the answers).
  • Set the (high) standards for the wider company. What is this team going to tolerate? What is mediocrity look like? What is acceptable to pass forward?
  • They will need to learn how to manage their time and energy well (being on the ET is a draining job, but they have to stay charged up). Invest in your own fitness and health. Get disciplined about managing your time and work load.
  • Controversial: Be available more. The ET has wider working hours than the rest of the company. It is a sad reality of this position (that’s why “they get the big bucks”). It doesn’t mean that work-life balance is wrecked, but that there will be some expectation to be flexible and more available. Accept that. If done well, this will not mean that every holiday or weekend is work mode, but rather that it might occasionally require some attention.
  • Invest in making sure you are fully up to speed on all relevant company materials and market knowledge in your sector. This will mean a fair bit of research and reading time needs to be set aside (I advocate the idea of having a few “deep work hours” blocked off in the diary of each ET member, twice a week, to just ensure they are getting thinking time to process all this and not just running from one meeting to another). I wrote a short post about this few years ago — the idea of comparing the time each ET member spends on the Keyboard vs Thinking as a way to evaluate growth.
  • Related to the above, the members of the ET should think about how to build relationships with the wider market, the investors, the board, and even the media (for the right topics). A good CEO should be investing in creating multiple speakers for the company who can go out and talk about the company in the press or events. This might also require some work to create a common set of FAQs or notes on how to answer certain questions (not a script please!)
  • Remember, the CEO might also bring in new people into this ET over time, who won’t have the full background context and history. As the CEO, you need to help them get there (invest that time, and encourage them initially to spend extra 1-1 time with the other ET members).

Some of this will require working with coaches, that as a CEO you will need to think about as well to cultivate these behaviours. Many CEOs I spoke with used their ET offsites as a good mechanism (every month) where some of the time initially was used to work through team building exercises (perhaps with a coach or on the back of some team assessment they all took like CliftonStrengths or Hogan et al). Much of this was to open up the team and make them comfortable to trust each other. This takes a while, but becomes really important when a crisis hits that the team has established trust.

Emotion is the enemy of good judgement 

Taught to all pilots

In terms of rhythms and heartbeats, it varies by the stage of the company and also how well they have adapted to working assynchronously. So here are some notes that I felt were common for many CEOs about how their ET operated:

  • The ET meeting day: Despite the common concept, Monday mornings were not the best slot for the full ET meeting. Most CEOs seem to prefer using Monday mornings for 1-1s with their individual ET members, getting deeper exposure to the topics and issues. (This also is a great way to learn some of the tribal knowledge of each area of the company that the CEO might not be getting exposed to)
  • Agenda setting: The CEO should edit the agenda of topics coming into the ET meeting (which then happens on Monday afternoon or Tuesday). Sometimes not everything needs a full ET discussion as the decision could have been made by the Executive directly with CEO as a quick sounding board (and then shared with the ET as a business update).
  • Structure: The meetings should have some structured topics to cover regularly (KPIs, Team Morale, Customer Complaints etc) but really the focus should be on getting decisions made which require full team discussion. If done properly, all the routine business updates should be in pre-reading distributed by each member (the worst meetings are those which each person is just giving updates — you don’t need a meeting for that!)
  • Actions: Track all the follow ups that were setup during the discussion. The CEO ought to check-in through the next few days with the respective ET member to see how they are progressing or if they need a 1-1 to dive into some of the complexity of that follow-up they took away.
  • Communications: Recently, many CEOs seem to find that many things can also be kept moving forward through effective use of asynchronous communication tools (eg: Slack, Teams, Discord et al). This is especially useful if the ET is getting distributed with Remote work or sitting across timezones. It is important as a team to agree on some Slack etiquette to ensure it is correctly being used for important discussions (hint: Use Threads — “we aren’t animals here” as a friend of mine says!)
  • Special situations: When crisis hits, also have agreed ways of changing the communication lines amongst the ET (perhaps you all agree that you are going to stop using Slack etc for important discussions, and rely on video-calls only during a crisis moment). Important to discuss these norms early on during peacetime so the team is aware what to do in wartime!
  • Additional meetings: A very useful tip is to keep aside some flexible time later in the week (to come together as the ET, if needed) for other unexpected items. This is important, as many of the ET members will have busy diaries and finding time when urgently needed is hard. So keep a slot that can be used, and if not, it becomes available as free time for reading/thinking for the ET members individually.
  • Offsites: As mentioned earlier, most CEOs make this a key recurring habit (monthly or so) including time to work on the team dynamics rather than just using it for strategic discussions only.
  • What does the rest of the company need to know about what happens at the ET:
    • The ET doesn’t have to disclose your notes (while it’s a charming idea to have everything open and transparent across the company, in reality none of the 280+ CEOs I have talked to ever opened up their ET notes as it might have very sensitive items)
    • But it is good to provide some routine updates to the wider company about topics in flight or deep dives coming up (especially if others are involved in preparing something for it). This can be done as a bi-weekly or monthly note from the CEO (which I noticed is becoming common amongst many CEOs).
    • Once in a while, it is good to re-educate the wider company on what is the ET and what they can expect from it. This also helps set the tone especially before/after a rotation.

Important: As with anything, poor habits or sloppy behaviours can creep into the functioning of this ET. It’s a slippery slope. And as the CEO, you need to constantly be the guardian of how this team behaves and operates. Keep observing carefully and don’t let habituation sink in and never start tolerating poor behaviour (the whole company is watching, they need to see the role model team for their own functions).

Remember that at every rotation of the ET, as the CEO, you will get a chance to re-establish the standards and norms, so use that to upgrade your modus operandi. Writing out a letter to each member of the team, as a new version of the ET is being created is a good practice that I have done and other CEOs reported back that it was a helpful activity.

Why do you have to rotate the Executive Team?

Rotation in this context means changing the team at various points to address the needs of the company. Put simply there are two activities that happen, that you should stagger a bit:

  • Some existing ET members leave (this has to happen. Don’t see this as a negative thing and therefore it is important to educate the company about this too).
  • Some new people join or get hired in (provided the ET isn’t exceeding the optimal size of 6-8 as discussed earlier).

The reasons are usually in 3 buckets:

  1. Sometimes: not getting the behaviours you all agreed on, despite feedback.
  2. Sometimes: it is fatigue of an existing ET member.
  3. Most of the time: it’s inflexion points.

If it is bucket 1, then just see this person out of the company. Don’t delay.

If it is bucket 2, that is a tougher one to resolve. See my notes below after the explanation of bucket 3 (about inflexion points).

Inflexion points are those moments when the “number changes” in this crude analogy of 0-to-1-to-2-to-3-4-5-6-7-8-9-10. Don’t confuse this with funding stages (which are typically only a feature of venture backed companies). Series A, B, C, D, E aren’t always correlated with these key increments, but sometimes can be a trigger point (it definitely is for the other team a CEO will work with — the Board — more on that in a separate post).

In most cases the inflexion points are quite evident: Scaling the product, taking the product international, new product line scales up, acquiring other companies, preparing for IPO, et al (Note: many CEOs I talked with also referred to these as breakpoints). And the general advice has always been that you need to hire executives just a little ahead of the inflexion. And work with them on the org design that is needed to ride through that breakpoint.

But in some cases, there are not going to be any obvious markers about these inflexion points (and much like the very crude analogy of the frog in the boiling water, it is hard to know that things are shifting). As the CEO, you need to be aware and thinking about the complexity ahead as the company reaches various points. And that is why sometimes fatigue (bucket 2) might be a bigger issue before you reach an inflexion point (for example, if inflexion points are taking more work or are further spaced apart).

What got you here, won’t get you there.

Marshall Goldsmith, book with same title

Bucket 2 is a tough one: Fatigue is a real thing amongst ET members. Don’t underestimate it. People get tired. It’s natural. After 3-5 years of this high paced routine, some people might want a break especially if that promised next inflexion point hasn’t shown up yet (“All this grinding out and we aren’t even moving forward”).

Ironically and conversely, sometimes it is the arrival of the inflexion points that can make certain people realise that they are in fact quite tired. The busy activities of scaling up kept them distracted earlier, but when the company hits that inflexion point and they take a breather — then they notice it. The most self-aware individuals will often ask to step down at that time (ideally helping the CEO with transitioning to the successor in a respectful manner).

As the CEO, you need to constantly keep monitoring — you might notice that someone is starting to make uncharacteristically poor decisions or worse, poor behaviour is happening. It might actually be fatigue behind the scenes, especially if they have been on the journey for a few years.

  • Make sure you have the communication line open and talk honestly with them. Give them the feedback but also try to understand if there are other (personal) circumstances that are causing this.
  • Get them coaching, get them support and jointly set ways to evaluate their progress. If they can’t make that jump (and the effort is being put in), then it’s hurting the company and you will need to have that serious conversation. In all cases, they have given a lot to the company, so do it with respect. Show your humanity and be generous. And if you can, help them find a role amongst your network or at best, offer to be a referral.
  • A handful of CEOs that I spoke with have created extended sabbatical periods for certain members of the ET to go off and recharge. If your finances allow that, worth trying but also figure out what do during their absence.
  • Some have also created a process by which these members step off the ET and get involved in the company in some new role to re-energize and build new skills (such as launching a new geographical market or new product division et al).

After every rotation, as new members join, it is an opportunity to once again re-establish the expectations you have of this team as a CEO. You might add upgrades into how you want to work (having learnt from recent experiences). But most importantly, you should also have a fair and honest conversation with the existing members who are rolling forward into the latest iteration of your ET — about their commitment till the next inflexion point.

  • Establish a sense of commitment to the cause for the next 18-24 months or longer. It doesn’t mean the ET member is contractually tied in, but you are being given fair warning about what you are signing up for.
  • Yes, it might be prestigious to be an “executive” at the company — but it also comes with some real responsibilities and real obligations. There is a sacrifice you have to make in some personal aspects of your life at times because that is the role (it doesnt mean there is no work-life balance, but it is definitely a different lifestyle choice than when you might have started your career as an individual contributor, working on somewhat defined blocks of work).
  • A useful technique here is to write a letter to the ET as the inflexion point is coming up, which explains what is the next 18-24 month period going to involve to the next inflexion point. This is expectation setting for the tour of duty ahead — and provides a chance for them to raise their hands and opt-out before tour starts. Many CEOs with whom I have shared this idea have found it very useful, because losing a key member of the ET midway through a stage is quite detrimental (though can happen for other reasons).

Succession planning: A truly world class executive who really understands their craft, should also help you think about the succession planning of their role. It’s a positive sign if they are building future leaders in their division. Ask them about:

  • Who are the leading candidates from their function/division who can step up? (It doesnt mean that your shortlist should be purely built this way, especially to ensure you can also bring in external hires and think about diversifying the candidate pool).
  • How are they going to help with the transition? Perhaps they have prepared detailed handover materials.
  • What are the skeletons they are carrying in their division that you need to be up to speed on?
  • How much time and notice are they giving you to plan this succession?

Jamie Dimon, the long serving CEO of JPMorganChase in his 2020 shareholder letter referenced his earlier thoughts about succession planning which is a good way to also close off this extended write up.

… number one priority is to put a healthy and productive succession process in place. As I will be increasingly focused on this process, I would like to share my thoughts about the essential qualities a leader must have…

Leadership is an honor, a privilege and a deep obligation. When leaders make mistakes, a lot of people can get hurt. Being true to oneself and avoiding self-deception are as important to a leader as having people to turn to for thoughtful, unbiased advice. I believe social intelligence and “emotional quotient,” or EQ, matter in management. EQ can include empathy, clarity of thought, compassion and strength of character.

Good people want to work for good leaders. Bad leaders can drive out almost anyone who’s good because they are corrosive to an organization; and since many are manipulative and deceptive, it often is a challenge to find them and root them out.

At many of the best companies throughout history, the constant creation of good leaders is what has enabled the organizations to stand the true test of greatness — the test of time.

Jamie Dimon (originally written in 2009)

All the books mentioned, are also detailed on my CEO reading list suggestions.

Notes for CEOs: Building the Executive Team by @aneeshvarma

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