Definition of community manager: An executive in the company who acts as the ambassador of a company or brand on the web. The community manager builds and monitors multiple communities generated in blogs, forums, social networks, etc. S/he becomes the authorised voice of the company.
This pretty much matches the position of a community manager in a company, however, in a community which isn't built on the base of the interest of a company, this isn't correct.
The definition got one key point which is crucial for every CM (Community Manager). He's an ambassador between two sides.
Let's review the structure of any community first. It always is a union between people. A democratic, liberal, or communal community, it doesn't matter. It's a group where people meet. But, in every community, there are people who suggest key points and take a lead, official or unofficial. I call this the dominant core of the community. Especially in a democratic community, this seems to be invalid but think about this: Someone makes a suggestion and now it's his job to persuade people to think that it's a good suggestion. If he succeeds, he takes an unofficial role of a leader. Concluding this, we have two sides in a community: the dominant core (the staff) and the source (everything else, basically: the community). The core shapes (decides) how the source looks. But the core always thinks of side-effects while doing this (members leave, members dislike).
So in your community, on the one hand you have your staff (usually including yourself) and on the other hand the community (your members). These represent the two sides which were previously mentioned by the online definition. Now, what does your CM actually do?
Before answering this, we have to look at a community more deeply. As I mentioned earlier on, the community is a group where people meet - they communicate with each other. So it's all about bringing people together. This includes the both sides as well. It's a meeting place for the staff and the members to discuss the major points of the community and how to achieve it. It's an organization of people with the same interests to pursue specific goals. (This may prove wrong in the end since some people in a organization don't share the same interests but the same goals. Like a forced unification to reach a goal. Economy, politics, etc.)
Usually you don't need a CM, especially if you are a small-time community. But this can change real quick. Let's examine an example: Reddit and StackExchange. Both communities started out as a small community but eventually grew. Both sites have been growing so steadily that sub-communities were (and are) formed. Now, as the head-administrator of one of these sites (usually you are the CEO as well), you probably aren't able to communicate with each of these people individually anymore. So you hire other administrators and moderators to overview each sub-community. These people then report to you every important thing that's going on.
But now something happens that happens to any community: You make an unpopular decision. It's not the decision itself that will give you the hint to hire a CM but its long-term effects. By making unpopular decisions as staff, members lose trust in some people of your team, and could also lose the trust to the whole team. The dominant core made a decision which seems to be right / wrong, and the source thinks of it as a bad decision. You have a conflict now that can't be solved by your two sides, you need someone independent. A CM.
It's important to mention that a CM isn't a real member of the staff, at least it shouldn't seem like it. His main purpose is to communicate the matters of the staff and the community. However, he can't do decisions on his own. If he did, this would make him a moderator or an administrator in the end. Still, he's always bound to you as staff, it's his job to communicate the decisions you made as clearly as possible. He's like an agent between you, the staff, and your members.
But as I said, as a small community, you usually don't need a CM. You need a CM when
- members report to have noone to talk to about serious matters.
- your community grows so explosively that you can't communicate with each new member as staff member.
- you have to make unpopular decisions and aren't able to calm down the community because they call you a dictator (or something else).
Your members have to know that a CM is the person who is responsible for any reports that concern the community itself. They have to know that this person will hear them out, no matter what. A CM has to seem like an independent organization within the community. However, this can get real ugly as well.1
To conclude this now: Imagine you are a member of a community and you really want to get your words heard out. But you heard that the team isn't really happy about criticism and made some unpopular decisions lately seen from the point of view of the community. Fortunately, there's one person in the community who always tries to get your matters priority one. It's the CM. You have a person who'll reach out to the staff and tries to communicate your serious matters as soon as possible.
To answer your question at its fullest, I'll provide you my little definition of a CM:
A CM is a mediator between the community and the staff. He tries to communicate the matters of the community as good as possible. He always has an open ear for every member of the community so the staff and the community can work together at theirs best.
Little extra here to explain why a CM isn't necessarily needed in a small community:
Normally, you as admin try to be as reachable as possible for everyone. This works out perfectly fine in a small community because there are very few problems. You have got your little team - you, a co-admin, and two moderators. Each user has its favorite staff member to communicate matters through him. You know that this works as your community still is very little. But somewhen you just can't manage everything anymore, and then the rest of my explanation is up there.
1Look at the "reddit crisis". A real popular staff member was fired. A CM usually is a popular staff member, still he can be easily fired if the staff decides so. And there it can get real ugly. By making yet another unpopular decision and also removing a popular person, you try your best to make an enormous backslash. So CMs can become really bothersome, especially if they try to overrule you with the power of the community, and you are forced to remove them because they harm the community out of a point of view concentrating on the long-term effects. To prevent this, you have to get the ideal person for this position, someone who will be absolutely always objective and independent. That's not possible.
To reduce such enormous backslash, you should try to replace this person with someone who is popular too as soon as possible. Let this person also handle every complaint that should come up concerning this matter. This will support your effort to find an appropriate solution.