The Real Prize: Why CEO A is Winning (Even with a Smaller Paycheck)

Sustainable growth and team investment, not just CEO compensation, define successful tech leadership. This article analyzes two contrasting leadership styles, highlighting how prioritizing long-term organizational health fosters greater success than short-sighted cost-cutting focused on maximizing personal income. It offers actionable insights for building impactful and enduring tech companies.

#leadership #techleadership #startup #ceo #compensation #growth #innovation #productmanagement #engineering #design #leadershipcoaching

As a leadership coach with a background in computer science and product innovation, I often find myself in conversations that boil down to a central question: what really defines a successful tech leader? Is it the size of their salary? The prestige of their title?

The answer, as you probably suspect, is far more nuanced. I recently discussed a compelling scenario with a few founders that perfectly illustrates this point.

Imagine two startup CEOs, both at the helm of similar tech companies boasting $1 million in Annual Recurring Revenue (ARR). Initially, both draw a $150k salary. A year later, CEO A earns $300k, while CEO B takes home a more substantial $400k. The immediate question is, of course: who's more successful?

Intuitively, some might point to CEO B. But let's delve deeper into the choices each leader made and the impact on their respective organizations.

Figure 1: Startup CEO compensation options

Consider this: both CEOs started from the same foundation – a $1M ARR startup, a team of four (with salaries of $160k, $125k, $130k, and $135k), and $300k allocated for general operating expenses.

CEO A made a conscious decision to invest in growth. They doubled the ARR to $2 million, recognizing that a larger pie benefits everyone. This leader expanded the team by hiring two more individuals (at $140k and $150k), and crucially, rewarded the original team with well-deserved raises, acknowledging their high performance. Furthermore, operating expenses were increased to $500k, ensuring that everyone had the necessary resources to perform at their best. As a result, the CEO's own compensation doubled to a respectable $300k – a fair reward for orchestrating that impressive growth.

In contrast, CEO B chose a different path. They opted for a strategy of drastic cost-cutting, which ultimately led to a decline in ARR, dropping to $750k. A team member was let go, and the salaries of the remaining three were significantly reduced. Operating expenses were slashed to a meager $80k. The outcome? A $400k salary for the CEO, achieved at the direct expense of the company's overall health and the well-being of its employees.

CEO A is clearly playing the long game. They're investing in their team, cultivating a culture of growth, and building a sustainable business model. They understand that collective success benefits everyone, including themselves. Their team is likely motivated, innovation is encouraged, and the company is strategically positioned for continued progress.

Conversely, CEO B appears to have prioritized short-term personal gain. While they've achieved a higher salary, it's come at the cost of the company's future. Morale is likely suffering, attracting and retaining top talent will be a challenge, and the prospects for future growth are significantly diminished.

What does this scenario tell us about effective leadership in the tech industry?

It underscores the importance of focusing on sustainable growth, not just short-term cost-cutting and vanity metrics. True leadership involves expanding opportunities, not simply carving out a larger slice for oneself. It demands investing in your team, equipping them with the tools they need to succeed, and fostering a culture that encourages innovation and collaboration.

When evaluating leadership effectiveness, it's essential to look beyond the headline salary. Examine the underlying health of the company. Are employees engaged and motivated? Is the company demonstrably growing? Is there a solid, sustainable business model in place?

We must value leaders who are committed to building enduring companies, not just chasing quick profits. These are the leaders who will create lasting value and deliver superior returns for their stakeholders.

And for engineering, design, and product manager leaders, it's critical that decisions directly impact the work, the team's performance, and ultimately, the organization as a whole. Advocate for investments in people and resources. Champion a culture that values innovation and collaboration.

As a coach, I'm dedicated to helping tech leaders like you develop the skills and mindset necessary to build thriving, sustainable businesses. Let's move beyond metrics that prioritize short-term gains and focus on creating organizations that are not only profitable for a minority with the most power but also make a positive impact for all stakeholders.

What are your insights on this? I encourage you to share your experiences and perspectives in the comments below.