Managing director vs. CEO: What’s the difference?
Climbing the corporate ladder is a professional goal for many. The two positions that people generally work towards are Managing Director (MD) and Chief Executive Officer (CEO) titles. These are the two highest roles in a company’s organisational chart, with important responsibilities that affect the success and efficient running of the business.
If you’re set on a leadership position in a company, learning about traditional leadership structures can help you take the right steps toward your ideal job. Even though these two roles are similar, there are unique pathways for each position, with slightly different milestones to hit along the way.
What is a managing director?
A managing director (MD) is one of the highest-ranking managers in a company. The role of a managing director is to oversee the day-to-day operations and overall management of the company or a specific area. They work with the c-suite (the CEO, CFO, etc.), to create and implement approaches to improve the company’s performance. This may include building a good leadership team, managing departmental budgets, developing policies, monitoring performance and more.
What is a CEO?
A chief executive officer or CEO is the highest-ranking executive in a company. Their role is to oversee the overall direction of the company, assessing, monitoring and minimising risk, developing business plans and more. They are also the public face of the business, so may have to speak to the media on behalf of the company, its owners, investors and stakeholders.
In a public company they report performance to the board of directors, who ultimately make decisions to improve share price and keep shareholders happy. A CEO is also often a board member and typically always a shareholder.
Is a CEO a director?
CEO and director are two different roles, however in some cases the same person will hold both positions. It’s common for executives in smaller companies and startups to hold many titles and roles, in which cases it’s typical for a CEO to also be a director.
Differences between a director vs. CEO
While similar, in that they oversee the performance of their company, there is a difference between a managing director and a CEO. Think of the CEO as being invested in the ‘big picture’, while the MD focuses on the individual areas that drive a company towards that wider vision.
These are some of the main differences between a director and CEO that may make you consider one role over the other.
Interests
The main interests of a managing director and CEO are different.
CEO: big-picture thinking, strategy, innovation, industry trends, long-term growth.
MD: operational efficiency, team performance, meeting day-to-day goals, implementing strategic plans, and hands-on in terms of operations.
When choosing which role you want to pursue, it’s important to reflect on your own interests. Do you prefer big-picture thinking? Or do you like to be morehands-on, helping improve team performance? By working out what drives you, can you make an informed decision about which role is right for you.
Roles
Both a CEO and MD also play different roles in the company.
CEO: sets the overall vision and direction for the company, represents it to the public, makes high-level decisions.
MD: manages the company's (or a specific business unit’s) day-to-day operations, ensures smooth functioning of departments, reports to the CEO.
A CEO’s day-to-day tasks are different from those of a managing director. On a regular workday, a CEO may be involved in: high-level stakeholder meetings, strategic planning, PR activities, and addressing any unexpected situations. A managing director’s day may instead include tasks like overseeing daily operations, managing teams, overseeing project management, and meeting with middle management.
Hierarchy
When it comes to hierarchy, the CEO outranks the managing director. However, this can vary depending on the organisation. Generally, it looks like:
CEO: the highest-ranking executive in the company, leads the entire c-suite (other top executives).
MD: may report directly to the CEO or be part of the C-suite depending on the company structure.
When considering which role you prefer, you should also think about where you want to sit in the hierarchy. Do you want to be at the top? Or would you prefer a less high-profile role and intead report to the CEO?
Publicity
In higher levels of management, you may be required to represent the company to the public. Here’s how it looks for the different roles:
CEO: the public face of the company, frequently interacts with media. They may also appear in press conferences.
MD: typically operates behind the scenes, less public exposure than the CEO.
The level of publicity you’ll be exposed to is an important consideration for anyone wanting a career as the CEO or MD. If you have a love for public speaking, then you might feel comfortable stepping into a CEO role.
Decisions
Decision-making is a big part of both a CEO’s and MD’s responsibilities. However, there are some differences between the two:
CEO: makes strategic decisions impacting the company’s future, approves major investments, sets long-term goals.
MD: makes operational decisions to achieve company objectives, manages budgets and resources, approves tactical initiatives in line with the CEO’s strategies.
At the core of being a CEO or managing director is your ability to make decisions. Consider how well you work under pressure when deciding what path is right for you.
Responsibilities
One of the main differences between the two roles is their main responsibilities.
CEO: oversees all aspects of the company, ensures financial health, drives profitability, builds and maintains strong relationships with key partners, and many more.
MD: manages a specific team or business unit, implements strategic plans at the operational level, motivates and inspires employees, achieves departmental goals, amongst other things.
When deciding which role is right for you, consider whether you want to be responsible for a team or unit, or for the company itself. While some people will thrive in a CEO role, others may prefer working at an operational level.
How to choose which leadership role is right for you?
The leadership role you aim for should be one that matches your skills, values and ideal lifestyle. Some are more practical, hands-on roles, while others are more involved in the visions and strategic planning of the company’s direction. Here are some things you should consider when writing your career plan.
Interests and passions
When exploring which leadership role is right for you, consider what excites you most about being in that job. Is it being able to help with the overall vision or is it executing the plans and ensuring their success? You may find you have the vision and leadership abilities to drive success from a high-level position that’s less hands-on. Or you might find it more satisfying to work closely with the teams fulfilling the vision. These are all things that can influence if a managing director, CEO or other role is the right fit for you.
Skills and experience
Your strengths, skills and experience are important things to consider when choosing which leadership role might be right for you. If you’re a big-picture thinker with a talent for business strategy and the ability to influence and inspire, a role like CEO may be ideal. But if you’re a strong manager who can connect with and motivate teams, and identify efficiencies on a more granular level, an operational management role may be your calling.
Personality and work style
Other factors to think about when choosing a leadership role are your personality and work style. For example, if you have high levels of confidence, thrive in the spotlight, and can handle immense amounts of pressure and scrutiny, you have a suitable personality type to become a a CEO. But if you prefer to be behind the scenes and focused on getting work done rather than managing appearances, a managing director role may be more suited to you.
Career goals
It’s important your career plan aligns with your ultimate professional goals. If an executive role is in your future, consider how you see yourself involved in a company’s operations. Do you envision shaping the overall direction of a company and being its public face? Or do you see yourself more instrumental in the specific ways a company achieves its objectives? Where you see yourself will guide you to the leadership role that’s right for you.
Managing directors and CEOs are important leaders in any company. Understanding what they do and their different roles in the success of a company is important when it comes to choosing the right role for you. A CEO is a visionary leader, steering the direction of a company, while a managing director is more hands-on in running a company’s operations. Both are critical roles with a high level of responsibility that ultimately determine an organisation’s success.
FAQs
I’m great at managing teams and day-to-day operations. Does that make me a better fit for MD or CEO?
If you’re great at managing teams and the day-to-day operations of a company, a managing director role may be a good next step for you, and more suitable than being a CEO. A managing director is a senior role, responsible for daily operations and directing the company’s resources and people, as well as approaches.
Is a CEO higher than a managing director?
A chief operations officer, or CEO, is higher than a managing director. The managing director is responsible for the everyday operations, while the CEO oversees the direction and success of the company. Typically, the managing director will report to the CEO.
Can a managing director eventually become CEO in the same company?
If the details of their job change, a managing director may become a CEO. Not every company will have a managing director, but they will have a CEO, so it may be a case of changing roles or duties.
Is an MD role a stepping stone to becoming a CEO or are they entirely separate career paths?
Managing director and CEO roles are both senior-level roles that oversee a company, so an MD role isn’t typically a stepping stone to becoming a CEO. But the skills can transfer if you are applying for different roles at other companies.
Do CEOs and MDs typically work similar hours, or does one involve more work-life balance?
As CEOs and MDs both oversee companies, they both work long hours in roles that offer little work-life balance. According to the Australian Bureau of Statistics, both managing directors and CEOs work an average of 52 hours a week.
Can a CEO be a managing director?
Yes, a CEO and a managing director can be the same person. This is common in startups or smaller companies where founders hold multiple positions.
Does a managing director own the company?
It’s not required to be an owner to be a managing director. A managing director may hold shares in a company, be an owner or neither.
Which is higher, managing director or executive director?
A managing director is a higher position than an executive director. The managing director has the highest executive role in a company.
Is the CEO the owner of the company?
A CEO may be the owner of a company but that’s usually only the case for smaller companies.
