For many, the layers of management that sit within a business can appear to be little more than an impenetrable mess. Often this can be the result of corporate restructurings or acquisitions that see a business change. Let’s go back to the bare bones and answer the following; What does a management structure look like and who is involved?
At the top of the tree, you typically have the Managing Director (MD) or Chief Executive Officer (CEO). These titles are essentially interchangeable. This is the leader of the firm, the individual with the ultimate responsibility and will only be as good as the team they build around them.
Immediately supporting the CEO are the two further key ‘board-level’ roles. The Chief Operating Officer is typically considered the CEO’s right hand person, someone who can easily roll their own sleeves up and ensure things get done within the business, often with a large focus on Human Resources. Alongside the COO, you have the Chief Financial Officer (CFO) who is responsible for the day to day financing of the business, annual reporting, liaising with auditors, accountants and quite possibly regulators, too.
There’s a proliferation of other director titles that can be found on boards, including the Chief Information Officer (CIO), the Chief Compliance Officer (CCO) and even the Chief Marketing Officer (CMO), but the main responsibilities are largely seen as lying with the CEO, CFO and COO.
Above the board of directors sits a Chairman, who will have been elected by the directors themselves. The chairman is responsible for the orderly running of meetings, and ultimately the long term performance of the business itself. Good governance is often at the heart of a Chairman’s role. Whilst it would be wrong to suggest that CEOs are more focused on short term goals, it does underline why best practice states that the CEO and Chairman roles shouldn’t be combined, something that often challenges smaller, fast growing companies.
‘Non-executive directors’ are also frequently appointed to the board, as individuals whose experience can prove invaluable in shaping a company or helping introduce new clients. These so-called ‘NEDs’ offer an independent perspective, but as the title suggests should avoid making any executive decisions.
Being a director may sound like a great aspiration and something that can be hugely rewarding as you help shape the fortunes of a company, but it’s not entirely without its responsibilities, both to shareholders, staff and indeed society as a whole. Legislation is different in each country, but the UK Companies Act of 2006 makes it clear that certain standards need to be upheld. These include even the basic points like ensuring proper record keeping. Failure to adhere to this can result in the individual themselves being fined, and even banned from being a director for a period of time. Having this level of influence certainly comes with strings attached.