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The Owner Exception V3: Welcome to Simple Leadership. In this podcast, I break down one idea on the topic of business leadership, where I share lessons I wish someone had told me earlier. If you want every episode delivered straight to your inbox, or want to dig into the full archive, head to SimpleLeadership.com. I'm your host, Josh Holtzman, and today we're talking about the owner exception. Rank does not confer privilege or give power, it imposes responsibility. Peter Drucker. One of my clients was running two leadership meetings every week. The first was on the calendar. All six members of the leadership team attended, including the company's co-founder and chief financial officer. The second ran 90 minutes, and he wasn't invited. He didn't know it existed. The other five leaders had lost confidence in him as CFO. The company had grown and the job had grown faster than he had. They didn't feel they could speak openly about his decisions with him in the room, so they took those conversations somewhere else. Issues got discussed twice. Side conversations multiplied. Some of the company's highest paid people were giving up more than seven hours of leadership time every week to work around one person. Everyone on that team could see the problem, but he was a co-founder and an owner. And no one knew how to tell him. One person, two hats. In most privately held companies, there's a business owner who also has a job in the company. That means they wear two hats, each with different responsibilities. As an owner, they have the final say. Together with any other owners, they're responsible for approving the company's direction as proposed by the leadership team, approving big decisions, such as large investments, acquisitions, or selling a business line. Deciding on distributions, carrying the financial risk, and choosing who runs the business day to day and holding that person accountable. That work belongs in a regularly scheduled owner's meeting, separate from the leadership meeting that runs the business. As an employee, they have the same duty as everyone else. Meet cultural and execution standards. That means living the values, keeping commitments, and delivering what the seat requires. You own the company, you don't own the seat. This is good news for the owner. An owner's real interest is the value of what they own. Staying in a seat they've outgrown or living by different standards puts that value at risk. An owner who wants what's best for the company earns every seat they hold, including a seat on the leadership team, the same way everyone else does. What it costs when the standard bends. Two founders started a consumer products company. One led product design, the other oversaw the rest of the business. When I started working with them, we defined clear responsibilities, measurable goals, and cultural standards for every role. The founder leading product repeatedly broke those standards and often missed his commitments. When others fell short, he was quick to lose his temper. He also struggled to manage people. Removing him from the leadership team would have caused a lot of drama, so his founder convinced him to take a new title instead. Chief of Product. He kept research and development, product direction, and his seat on the leadership team, but lost his direct reports. The company didn't need that seed. It kept him content and contained some of the damage. It didn't change how he treated people, and he still missed his commitments. The cost showed up everywhere. Employees described a culture of fear. If an owner could miss his commitments without consequence, it was hard to hold anyone else to theirs. The people who did deliver grew frustrated, and many didn't stay. The company paid more than it should have to keep people, and that still didn't create loyalty. Meanwhile, the founders felt frustrated that their people didn't seem more grateful. His partner couldn't bring himself to go further, and their fifty fifty ownership made that conversation even harder. I made the case that they'd remain owners until the day they sold. Their seats were a separate question. Holding a seat that didn't fit and living by a different standard was holding the company back and putting the value of a future sale at risk. They decided not to make the change. Why it's hard to say and what makes it easier. If everyone can see the problem, why does it last? For the owner, especially the founder, it's often about identity. When so much of who they are is tied up in the business, giving up a seat can feel like giving up part of themselves. If I'm not the CFO, who am I? And because they wear both hats, feedback about their job can feel like a challenge to their ownership. For the team, it's about risk. Even if you don't report to the owner, they have real influence over your future. It takes courage to tell someone with that kind of influence that they're falling short. A few simple practices make the conversation possible. Define what's expected of the owner. Write down what's expected of them as an owner and what's expected in the seat they hold. Give the seat the same clear responsibilities, measurable goals, and cultural standards as any other. It's hard to hold someone to a standard no one has written down. Evaluate the owner like any other employee. Anyone can be removed from a seat for not meeting expectations, including an owner. No special treatment. In most cases, the CEO does the evaluating. By CEO, whoever's at the helm of the day to day, whether their title is president, COO, or something else. If the owner's the CEO, the owners evaluate them in the owner's meeting. And a sole owner can bring in an outside voice like an advisor. Either way, the owner agrees to the process in advance while things are going well. That makes accountability much harder to dismiss when things aren't. Keep owner topics in the owner's meeting. Direction, major decisions, distributions, and the CEO's performance
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belong there. The leadership meeting stays focused on running the business. Give the team words. A simple question like which hat are you wearing right now? Can we reset a conversation? So can. Can we separate your ownership? From what's expected of you and your role. Those words only work if the owner invites them and responds well when someone uses them. When an owner holds themselves accountable, the team knows the standard is real. And if the owner won't listen, you can keep making the case, accept the exception, or leave. You can't force an owner to be accountable. Three ways forward. When an owner is ready to act on a gap in values or performance, There are three healthy ways forward. Meet the bar. The first is to raise their game. Live the values and deliver what the seat requires. Hold them to the same improvement plan you'd use for any other employee. Sometimes that's all it takes. Move to a seat that fits. One of my co founders was our technical genius. As we grew, he became the chief technology officer. And it was clear he didn't enjoy leading people or want to. So he moved into a seat on our sales team, helping clients see the vision for our technology. He kept the CTO title because it opened doors with client executives, even though his work was now in sales. He let go of the company's technical direction in a seat on the leadership team, kept his ownership, and stayed in the owners' meeting. It was a seat where he did his best work. One caution structure first, people second. Only move an owner into a seat the company actually needs and pay them what the seat would actually pay anyone else, since their ownership brings its own return. Otherwise, you end up where the two founders did, with a seat built to keep an owner content. Step out and own. Geno Wickman created the entrepreneurial operating system and founded EOS worldwide to spread it. Early on, he wore most of the hats on the leadership team. As the company grew, He handed them off one at a time as he had always planned. By the time I joined the EOS community as a coach, he had no seat on the leadership team at all. When he told me that story, what surprised me was that he didn't want one. He and his partner met monthly with the company's leaders on the big picture and trusted them to run the business day to day. He spent his time working on what he loved most, writing and working with clients, the same work I was doing. He'd built a company that could thrive without him running it. Later, I watched him sell it. The conversation they finally had. When I learned the leadership team held a second weekly meeting without their CFO, I helped them understand the cost. The duplicate meetings and side conversations were obvious. The bigger costs were harder to see. Mistakes piling up in a seat everyone relied on, a different standard for one person setting the wrong tone for everyone else, and a leader being worked around instead of being told the truth. The company's other co-founder, the CEO, sat down with the CFO. He made it clear the CFO's ownership wouldn't change. But if he wanted to keep working in the business, he needed to move into a seat the company required and where he could succeed. He made the move, and the second meeting ended. Eight years later, he's still there. The company's grown about five times over, and he loves the work he does. It took courage from both owners. One to say it and one to hear it. Any company with an owner in a seat can end up here. Understanding the two hats is the easy part. Acting on it takes courage. For the team, that means speaking up when the standard bends. For the owner, it means putting the company ahead of the seat. That's it for today. Thanks for listening. Follow simple leadership wherever you get your podcast so the next one finds you without having to look for it. And subscribe for free at SimpleLeadership.com so new topics land directly in your inbox. For more insights, tools, and bonus content, follow along on LinkedIn. See you next time.