In this powerful episode, Scott Ritzheimer, Founder of Scale Architects, shares why hiring a professional CEO is rarely the answer in stage 4-5. If you're disillusioned in level 4 wondering whether to scale with an executive team or if you're ready to become the CEO yourself, you won't want to miss it.

You will discover:

- Why a professional CEO cannot replace you stepping into the chief executive role.

- How to decide if your vision truly requires an executive team in level 5

- What it takes to mature from disillusioned leader to effective chief executive

Scott helped start nearly 20,000 new businesses and nonprofits and with his business partner started led their multimillion-dollar business through an exceptional and extended growth phase (over 10 years of double-digit growth) all before he turned 35. He founded Scale Architects to help founders and CEOs identify and implement the one essential strategy they need right now to get them on the fast track to Predictable Success.

Want to learn more about Scott Ritzheimer's work at Scale Architects? Check out his website at https://www.scalearchitects.com/

Connect with Scott through his LinkedIn at https://www.linkedin.com/in/scottritzheimer/

Hello, hello, and welcome, welcome once again

to the Start Scale and Succeed podcast, the only podcast that

grows with you through all seven levels of your journey as a

founder. I'm your host, Scott Ritzheimer, and today we are

talking about the hardest level there is, and we're actually

going to talk about the worst escape route that founders reach

for. If you're just joining us, we are about halfway through a

series. We are also halfway through the journey that we all

go along as founders, and that means we are in the belly of the

beast. If you missed episode one in this Should You Really

series, you're probably going to want to check that out. It's in

the show notes below. Just a few episodes ago, don't worry, you

don't have to watch all the episodes between here and there.

Just go back and catch that one before you come here, because

it's going to help set a lot of context for what we're talking

about. When we say things like level four and level five and

level nine or niner, we won't say that. Just level four and

level five is what we're talking about here, so check that out if

you haven't already, or if it's been a minute, because we're

doing these little ways apart until you might have forgotten,

but what we're talking about here is yes, level four, and I

call this the disillusioned leader level, now that doesn't

mean you have to stay a disillusioned leader. In fact,

nobody wants to stay a disillusioned leader. So, if

you're in that mode again, this is full-time founder, you have

usually at this stage more than 15, more than 2020-five,

employees, but not quite 50 or more, so we're again in that

kind of messy middle. Technically, you're a small

business, but you don't feel like one anymore, and but you're

still not technically a big business, and so in so many ways

we're just kind of stuck right in the middle. You have a bunch

of leaders, and you can't do it all yourself anymore, but you

can't quite trust them to do it all, because there's some

fundamental flaws there, even though you love them to pieces,

things just aren't working quite the way that you want them to.

This disillusioned leader moments really hard, but again,

we don't have to stay there, so we have two paths forward, and

the topic of this episode is going to be the third path that

most people reach for that isn't actually a path at all. What are

the two valid paths? Let's hit this first. The two valid paths

are one, you learn to thrive in this leadership level, and this

is where we go from being a disillusioned leader to being

what I call a contented leader, and we'll talk a little bit

about what that is here in a moment. The other one is you

still have to become a contented leader, you still have to do

some of the work of that, however, the other option is to

keep going from there, so you're going to tackle this level with

the express purpose of getting to level five, and level five is

the chief executive level, and for the vast majority of those

that I know that are in level four, that's the way to go, and

that's really interesting, because most founders actually

tried to do the opposite. Most founders at this stage are

disillusioned leaders, and so they, they used to think that

they had the golden gut, they just knew how to smell out

profit, they used to think that they could make whatever

decision they needed to make and find a way to make it happen.

They used to think that their business would keep growing when

they kept adding people. They, they used to be under the

illusion that somehow they had figured it out. And while we

might sit here and think, well, shame on you. Of course, it's

not all of those things. That's not the truth at all. It's

actually, it was exactly all of those things, or those

illusions, as we talked about in an earlier episode, are all a

necessary part of getting to this point. And so, whether

they're proper beliefs or not, they were necessary beliefs to

get to where we are today, or necessary lessons that we

learned along the way.

However, you try and apply all of those, and it doesn't work

now in four, and it's, it's brutal, it's not pleasant. I

mean, the, you're, you're probably experiencing that, like

you, you walk in to work, and the only reason you're there is

because you own the place, like you would have quit a long time

ago if it wasn't your name on the sign out front, and and it's

not because everything's broken, it's not because everything's

bad, you probably have more revenue than ever, you. Might

especially at the beginning of this level have more profit than

ever, you have more people to help than ever, you have more

things to brag about with your, you know, CEO peer group, but

but you're dying inside, you're you find yourself trapped in a

prison that you start to realize you made, and as these

realizations are coming in, it's not uncommon. It's actually

quite normal for them to build to a point that they start to

make us wonder, wait a second, have I been the problem all

along? I've gone through all these different levels and

solved all these different problems, and none of that's it.

I'm here, and maybe it's me. Maybe I've taken this

organization as far as it can go. Maybe I need to hire a

professional CEO or executive director or another senior

pastor, if you're in a church, maybe we need a grown-up to run

this thing, is what it feels like, and in some sense you do.

There's a piece of that intuition that's true. The

problem is the chances of it working with anybody but you are

almost none, and there's lots of reasons for that. A professional

CEO won't save you, one, because even if you bring them in,

you'll probably hold so much control that they won't actually

be able to make the differences that need to be made. You have

to have the conviction to make those yourself, and if you do,

you might as well just do it, because founders figure stuff

out. Number two, any professional CEO that would be

willing to come in under those terms, would either have you

feel like they've been lied to because they thought they were

going to be in charge and they aren't, or they're not really a

CEO, they're really more like a COO, which would actually be

kind of the better outcome, because that's easier to fix,

but they're not the answer. Another possibility is you bring

just the wrong person in altogether, like if you don't

know how to be CEO of your company, how do you know how to

pick a CEO of the company? That's real. Like, how do you

interview them? Do you interview for someone that you like? Do

you interview for someone that's like you? Do you interview with

for someone who's not like you? What is the standard? Do you pay

someone else who's never been CEO of your company to tell you

what you need from CEO of your company, and again, or

nonprofit, or church, or whatever organization, the

chances that can work, don't get me wrong, but this, what this

is, there's this whole idea that you'll just step back, that

you'll step out of the way, and that some hero will come in and

save the day, is it's a false narrative, it's not true, and

folks in my line of work have breathed into this, because we

have this whole, like, if you're a founder, you're not a CEO. We

make it out like it's a wiring thing, like you, like piddly

entrepreneur, you're just, you're just flawed, and you

could never be CEO, and so you shouldn't be. I just don't buy

it. I haven't seen it. I'm yet to, I've worked with 20,000

founders. I'm yet to see one who genuinely desired to get to

level five and be CEO, who, with a little bit of help and enough

hard work, couldn't do it. It's not, it's not a wiring thing,

it's a skills gap, and even more than being a skills gap, it's a

desire gap, and that's the heart of this episode, because what we

really have to get to is, do you really want to be in a company

run by a CEO? Because if you do, you should be the CEO in way

more ways than we can discuss in this.

You're the ideal person to become CEO if it's even needed

in the first place, and that's what we're getting at, is does

this thing have to grow, does it actually have to scale. We've

got this whole kind of scale or die ethos in a lot of

entrepreneurial founder circles, and one, we mean all kinds of

things by scale, but when I'm talking about scaling, I'm

talking about going from 50 to 500 people, or I'm talking about

going from, you know, 45 people in one office to 250 people

across seven states. That's what scaling looks like. It's not

just growing, but it's, it's, it's increasing to whatever size

the market will allow, or you desire. It's being able to go

when it's time to go. It's being able to slow when it's time to

slow, and being in control of that, being CEO is about leading

through an executive team, and you know, whatever you call

them, you don't actually need an executive team with less than 40

people on your staff, it's like pouring jet fuel into an old

Volkswagen rabbit, like it runs on diesel. It doesn't, you can

put more powerful stuff in it, but it's not going to work. And,

and so, what we've really got to wrestle is, like, how big does

this organization need to be to fulfill your vision? If it needs

to be significantly bigger than it is right now, then yes, it

needs to be led by a CEO, and until you've been that CEO, it's

you, you're the guy, you're the girl. It's time for you to

submit to your own vision and get it done. And when you do,

you'll be awesome at it, you know. It'll be a little awkward,

little pig on roller skates action to start with, but you

can learn the skills of being a CEO, and the thing that you're

terrified of being CEO and being in meetings and being bored out

of your mind and reading PNLs, you got to do that for a time,

but when you get to level five, you actually get to graduate in

level five from being CEO, chief executive to being CVO, chief

visionary, and it's amazing, it's a brilliant fit for the

natural wiring of most founders, but you've got to go through a

process to get there, and, and that's where this whole

professional CEO thing undermines the whole process,

because it disallows you the opportunity to learn the skills

that you need to be an effective executive, and if you're not

going to be an effective executive, then who really is,

if you're not going to walk away altogether, which is generally a

mistake at this stage, because the organization is not ready

for you to walk away without taking a huge hit in its value

and your ability to cash out, and so what we've got to figure

out here is not, are you fundamentally flawed, can you be

a CEO? Should you go hire a professional? That's not the

question. The question is, does the vision demand a bigger

organization to achieve it? Do you have to scale your staff? If

you do, then yes, someone needs to be a CEO, and you don't need

to hire a professional CEO. What you need is to start hiring

executives. You don't need to put somebody in the top seat in

the organization, or let's be honest, pretend they're in the

top seat of the organization. You need to actually own that

position, and you need to hire your team of executives to work

with you. You cannot be chief executive if you have no other

executives, you're not chief of anything, and so to really be

CEO, regardless of what your business card has said since the

day that you started to be CEO, you've got to step into that

role yourself, you've got to have other executives, and so

that's really what's on offer here is it's not about hiring a

professional CEO to come in and save the day. It's about you

recognizing what your vision demands, and then stepping in to

fulfill the need of the organization to fill that

vision. Now, that leaves us again with two options, and

there's a third, in that you could go back and make the

business smaller. Sometimes that happens, but we're not going to

talk about that in this conversation.

You can, you can push forward and become that CEO, or you

might find that's not necessary. You don't need a professional

CEO, and you don't need to be CEO. You just need to learn to

thrive where you are right now. So, what are some reasons that

that you could do that, some of the circumstances that might fit

some of the the the things that you might want to do. Well,

here's how you can get a sense of whether or not level four is

right for you, whether whether you even have to figure out all

this stuff of getting to level five in the first place. First

one's obvious. You can hit your vision with an organization

that's somewhere in the 25 to 50 people range. It's not, you

know, and those are flexible, but it's not massive. There's

not like seven layers of middle management. It's just you and a

handful of leaders rocking and rolling with a closely knit

group of people. And what's cool about this level is that you can

know everybody on your team, now you won't have the same degree

of relationship with everybody, but when you get past this and

you're walking through the halls of your company and someone has

been hired that you've not even met before and they've already

started and worked for you for months and you've never met them

because they're part of a different part of the

organization, that's a weird feeling, and you know, level

five, that's fine. You don't have to deal with that weird

stuff here in level four. If the market that you're competing in

fits a team of that size, that's great. It's real difficult to

dominate a national or global market with a. With 40 or 50

people, that's a real challenge, possible in some really niche

domains, but not in most. If your revenue and margins can

sustain a leadership team and your frontline staff, so this

one you got to solve one way or the other, because it's only

going to get more expensive if you go to level five and need an

executive team, but sometimes we can get stuck, depending on the

industry, in this kind of middle ground where you haven't quite

reached economies of scale, but you have experienced some

diseconomies of scale. You're just kind of in between. It's

pretty efficient to run a small group in level three, where

you're driving it and you're out there doing it. It's pretty

efficient to run an enterprise in level five, but there's this

middle spot that just doesn't work in the industry. I see this

somewhat frequently in construction and in related

industries, where it's just, you can't work on projects that are

big enough to keep you busy, but you can't stay with projects

that are small enough and available, and it's a little bit

of a no man's land. So, there's just the market reality of,

like, can you actually run an organization on that size in

your industry sustainably? Otherwise, you have to just

muscle through it. The the other part of this is that you're

willing to continue to shoulder the decision making burden,

you'd be more comfortable making the call yourself at this level.

We have a leadership team, at least that's what we call it,

and again, you can call it whatever, but it's really a

group of people who are there to support us as we make the

important decisions, and, and that's great, if that's a fit

for you, you like them, you trust them to do what you've

decided, that can be a great, a great deal. It can also be

really hard to carry that weight by yourself for a really long

time, whereas with an executive team, you're actually creating a

team that's capable of making decisions without you, and in

fact probably makes most of the decisions either with or for

you, and and leaves you with just a few that you actually

need to make yourself. You can let go of daily execution while

still maintaining being in charge, and, and sometimes that

can be really tricky. Sometimes we'll be tempted to jump in when

we're that close to the execution, and, and for some

folks, they just can't resist, and so they have to get further

away from the front line.

I talk about the move of level five to be, you know, moving

from level four coach on the sideline to GM in the box.

There's a reason why the GM is not at the sideline, and a big

part of that is because they'd be tempted to interfere with or

make decisions that are not actually their job, and it would

change their perspective in a way that's not actually helpful.

So you're able to lead from the field level and not jump back in

and save the day more than you should. You don't need to scale

just for scale sake, like you can say no to even some good

opportunities if they're not the best one. And again, you're

willing to do that all under around something like 50 people

on your team, or the equivalent, and those are all like, if that

matches for you, then honestly, the best decision that you can

make is probably to stay in level four. If you were to try

and get to level five, you'd introduce more complexity than

that was necessary, you'd introduce more overhead than you

could get a return out of from an economies of scale

perspective, you'd add more risk, particularly financial

risk, to the equation than then you probably are willing to

handle, and the intensity of the game would go up in a way that's

just not pleasant. Now, How do you know if if it's time to move

forward, what are some signs that it's time to go to level

five? First one, obvious one, already said it, gonna say it

again. Your vision demands it. Your vision demands a more

complex organization than you can lead alone, and you've got

the energy to lead a team toward it, so the two requirements that

I have for level five CEOs really are this. If you're

saying, 'Hey, can I be that? Two criteria, you ready? First one,

do you have a vision for a better future for your

organization? If you do, that's that's number one, not the skill

to do it, not all the answers on how it's going to happen, but

just a clear vision on what you believe the organization can and

should become. Two, the energy to lead a team to figure it out,

not the energy to do it, not the energy to. Or the team on your

back and carry them all across the line, not even the energy to

coach from the sideline, but the energy to lead an executive team

toward it. If you have those two things, you are the ideal CEO

for your organization. You just are. And so, if you have those

two things, and your vision demands that, that better vision

demands that you scale beyond the current operation. Level

five is probably going to be great for you to get there. It's

going to cost you. You're going to have to throw out the founder

card. You're going to have to throw out the owner card,

because in level four we kind of walk around and everyone knows

we're in charge and everyone does what we say, for better or

worse, when you have an executive team, they're actually

paid to tell you no. Now they're paid for more than that, and

they need to accomplish more than that. But one of the

biggest things that an executive team brings to the table, that's

different from a leadership team, is that they make these

big decisions with you, and the only time that would be relevant

is if they're capable of disagreeing with you, because if

they would always agree with you, then there's no point in

having them with you, they're just redundant, and so if you're

okay with building an executive team that tells you no, and you

trust them to do that wisely, you might be suited for level

five. Now, what else we have here, we have the you We've got

the executive team. What else we have, the willingness to mature

personally, skillfully into the leader, the executive, and

visionary that your executives need you to be great executives.

Need a great leader. They need someone to inspire them to make

the right decisions and move in the right direction, and give

their discretionary effort, and come up with great ideas.

And so the limiting factor here is oftentimes whether or not you

have developed and matured as the leader that you need to be

in the way that you communicate, in how clear the vision is, in

how trusting you are with material decisions. All of those

are necessary requirements for executives to do their best work

for you, and so again I want to bring us back that the principal

question in this episode was, do you need to hire a professional

CEO, and if you're in level four, not level five, the answer

is no. The answer is no. Now you'll see in the next episode

that that changes completely in level five, because half of your

job in level five is actually find your successor, but that's

not a professional CEO, that's a, that's a replacement

visionary leader for your organization. So, we'll talk

about that in the next episode as we build on how to navigate

level five, but right here, when we're navigating level four,

you, you don't hire a professional CEO so that you

don't have to become an executive, that's not going to

work for you. You, you don't hire a professional CEO, but

then what you do is decide, does your organization need a CEO?

Does it need a chief executive? And the answer to that is, does

it need an executive team? Because an executive team needs

a chief executive, and and it needs an executive team if it's

going to scale any to any significant degree beyond 50

people, because the complexity and intensity of leading an

organization at that size is just so much greater than the

traditional leadership team or team of leaders can handle, and

so I'd be remiss if I didn't say level four is a hard level, it

really is. And if you're there and you're feeling beat up and

you're questioning yourself, you're not alone, and you

probably have some things that you need to work on, but that

doesn't mean that you can't do it. It's not a fatalistic thing.

You haven't reached your limit, you haven't reached the end,

you've just reached the limit and end of level four, and at

least the way that you're engaging with level four right

now, and so you've got to decide what you want to do about that,

so if you're willing to stay in the game, stay close to the

game, I should say, and own the hard decisions, and keep pulling

the organization forward toward your vision for it, then that's

great. Level four might be fantastic for you, and you can

really be a contented leader and lead that for a long time, if

you need to step forward, if you need to get to the next level. A

professional CEO is not going to do it. Learning the skills of a

CEO are going to be exactly what makes that happen for you, so

the. What it takes to get from level four to level five.

Hopefully, you've got some sense of which level is right for you.

If you are already beyond this question, you've already moved

into level five, or if you want to know what's coming next, then

the next episode is going to be fantastic for you, because we

are going to actually talk about and zoom all the way forward to

whether or not it's time for you to step down, and it's gonna be

a great exercise. It's gonna be a great conversation where we

talk about should you really step down. So that's all about

the transition from level five to level six. Hope to see you

there, and with that, you know your time and attention mean the

world to us. I hope you got just a little bit more clarity than

you had before this conversation, and I cannot wait

to see you next time. Take care. Hey everyone, Scott Retheimer

here. Thank you so much for listening to the Start Scale and

Succeed podcast. I hope this episode gave you exactly what

you need for the level you're in right now.

If you want to discover what level you're in, take our 10

question founders evolution quiz for [email protected] That's

Founders quiz.com it'll pinpoint exactly where you are and give

you tailored tips to move forward and reach that next

level in your journey as a founder. If you got something

out of today's episode, don't forget to subscribe, rate, or

review. It helps us reach more founders like you, and let's be

honest, it means a ton to me, my team, and all our incredible

guests. So, keep starting scaling and succeeding, and I'll

see you in the next episode.