Chief executive officers (CEOs) and managing directors have pivotal leadership roles within a company. The responsibilities of people in these positions can often overlap. Some smaller companies may have one or the other.
However, many firms have both CEOs and managing directors, and each has a distinct and well-defined role within the company. CEOs oversee activities in the C-suite and handle big-picture decisions while managing directors focus on the company’s daily operations.
Both these positions can affect the profitability and success of a company.
Here is an in-depth look at the parts CEOs and managing directors play and how they help companies succeed.
What Is a CEO?
The CEO is often likened to the captain of a ship. They’re responsible for charting the company’s overall direction and long-term goals.
A CEO will come up with strategies to help achieve the company’s aims, but they will usually leave it to other executives and managers to carry out these plans. For instance, a CEO may work with a chief operating officer (COO) to carry out certain plans. The CEO may decide to change a manufacturing process to increase productivity, then charge the COO with coordinating the changes with factory managers.
What Does a CEO Do?
A CEO wears many different hats. They act as the chief strategist, developing long-term plans and mapping out a path to greater success. This involves gathering insights from other executives and researching the market to find new opportunities and identify challenges.
CEOs also serve as the face of the company for employees and stakeholders. They will speak to shareholders and report to the company’s board. They also make appearances as the company representative at industry events and functions.
CEOs are also the ultimate decision-makers in the company. They sign off on budgets, appoint executives and key managers, and deploy resources and capital. They will also plan company expansion or development and make decisions about which new products or services to develop.
CEO Skills and Education Requirements
CEOs must also be strategic thinkers and capable leaders. They need business knowledge to anticipate future trends and formulate effective long-term plans. Furthermore, strong communication skills are paramount.
There is no defined path to the CEO’s office. If you have executive ambitions, you can start with a bachelor’s degree in business administration, finance, or a related subject. Many CEOs pursue an advanced degree such as a Master of Global Business Administration or a specialized master’s program.Â
Extensive work experience is equally crucial. CEOs typically rise through the ranks, gaining skills and knowledge as department managers and junior executives before applying for C-suite jobs.
What Is a Managing Director?
The title “managing director” can mean different things depending on the company structure. In small or privately held companies, managing directors perform many of the same duties as a CEO. However, in most corporations, the managing director focuses on overseeing day-to-day operations.
In these cases, the managing director is the senior-most employee outside the C-suite. They ensure the company’s operations are efficient and productive and work in support of the CEO’s long- and short-term aims.
What Does a Managing Director Do?
A managing director’s daily tasks revolve around the efficient execution of plans and smooth business operations. Managing directors may oversee hiring, budgeting, resource allocation, and performance monitoring. They will often make operational changes to improve performance and efficiency or cut costs.
In many ways, managing directors serve as a link between the CEO and employees. They translate the CEO’s big-picture vision into smaller, measurable goals that employees can pursue through daily activities. Managing directors often outline and assess different metrics to measure the progress toward each benchmark.
Managing Director Skills and Education Requirements
Managing directors need a diverse skill set. They must be adept at management and able to motivate employees. Like other leadership positions, the ability to communicate expectations and delegate tasks is also essential.
Problem-solving abilities are crucial because it ultimately falls to a managing director to solve operational issues.
There’s no single educational path to becoming a managing director. A bachelor’s degree in business administration or management is a common foundation. Some companies prefer managing directors with industry-specific degrees, like engineering.
Multinational companies may prefer managing directors with an international business background. Master of Global Business Administration degrees specializing in finance or international relations can be advantageous for jobs with corporations. Some professionals with a background in consulting may have the broad operational knowledge necessary to work as a managing director.
Like CEOs, managing directors need extensive experience. The career path can include lower and mid-level management jobs or work as the director of a specific department.
Key Differences Between a CEO and a Managing Director
CEOs and managing directors are both leading authorities and decision-makers within a company. If you hope to pursue one of these positions, it’s important to understand the differences between them. This can help you tailor your education and career choices.
Here are three areas that illustrate the differences between CEOs and managing directors.
Responsibilities
The CEO focuses on strategy, long-term planning, and plotting the direction of the company. They make high-level decisions about acquisitions, developments, or company structure, and they serve as the face of the company for investors, board members, and the public.
In contrast, the managing directors focus on the more technical aspects of daily operations and fundamentals like budgeting and hiring. They’re responsible for carrying out the CEO’s plans at an operational level.
Authority
The CEO is the top authority in a company. They answer to shareholders and board members but are responsible for making all major decisions at the company. The CEO has the ability, if they wish, to replace the managing director.
The managing director’s authority is more focused. They’re in charge of operations and can delegate tasks to departmental managers. However, they can’t make strategic decisions beyond the operations that they oversee.
Accountability
CEOs shoulder the heaviest accountability burden. They answer to the board of directors for the company’s overall success and performance. Ultimately, it’s the responsibility of the CEO to solve high-level problems and make changes to overcome any shortcomings in the company.
The managing director is responsible for operational performance and resolving any issues that arise in this area. They’re accountable to the CEO, who can assess their performance and make changes if needed.
How Do CEO Salaries and Managing Director Salaries Compare?
According to the Bureau of Labor Statistics (BLS), chief executives like the CEO earn a median annual salary of $206,680. Meanwhile, the median pay for management occupations is $116,880, with operations managers taking home $101,280. Overall, CEOs command a higher salary, though this can vary depending on the company and the importance of the managing director role.
Managing directors and CEOs have slightly different roles, but they both have an impact on the company’s direction and performance. With the right education and experience, you can pursue these senior positions in a company and play an important role in its success.