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WHAT WILL IT TAKE TO BE A SUCCESSFUL CEO OR BOARD MEMBER IN 2021?
Baillie Parker, Partner and Tim Conti, Managing Partner at ON Partners Discuss Successful Leadership Traits for CEOs and Board Members That Will Be Required in the Post-Pandemic Era
Published in Hunt Scanlon 2020 State of the Industry Report Part II – In the following article, Baillie Parker outlines characteristics that organizations should consider when evaluating CEO candidates. Tim Conti then shares his experiences, observations, and advice when recruiting board directors.
Key CEO Traits
As a growing number of organizations find themselves in distress, they are turning to leaders who can steer them through rough waters. ON Partners’ Baillie Parker outlines the following characteristics that organizations should consider when evaluating CEO candidates:
Organizations should look for a CEO who has previously led successful turnarounds. Within those turnarounds, closely evaluate the financial outcome of the business (s)he led to make sure the turnaround was due to more than just timing and broader market conditions.
Cash and cash management
Cash management is not just the responsibility of the CFO. Strong turnaround CEOs who have been through challenging times understand the importance of cash management and banking relationships. They should be focused on the numbers every day.
This is turnaround 101, but it is worth emphasizing that these CEO candidates must be operationally minded. They will have to first find the low hanging fruit in immediate operational and financial improvement opportunities. And while they have to see the big picture, they must also be data-driven, with a focus on the details.
Strategic problem solving
Strong turnaround CEOs have the ability to quickly digest information and data and distill underlying issues in the business. Once you’re far enough along in the interview process, let candidates review the financials and board documents and observe what questions they ask. Look closely at their previous leadership roles and understand how they identified and prioritized problems and came up with a new strategic plan.
A realist with open and transparent communication style
This person must have the ability to confront the uncomfortable. Once (s)he has distilled the business challenges, (s)he needs to be able to communicate them to the team and create a realistic transformation story that everyone can understand and get behind. Also, ask the candidate what mistakes (s)he has made in the past and in retrospect how they would do things differently. If the candidate is not self-aware enough to take ownership of past mistakes, (s)he will not have the transparency needed for a turnaround.
Strong sense of urgency
You want to look for a CEO who is decisive and moves quickly. Time is absolutely of the essence in turnaround situations so the ability to drive decisions at a rapid clip is critical.
Track record of tough choices
This person will likely need to quickly make dramatic changes to the leadership team in order to ensure the turnaround plan can be successful. Moving away from legacy business models and/or processes may also be necessary.
Given this person will often change the make-up of the executive team, (s)he will also have to make new executive hires and re-energize the existing team. Find out if this CEO has hired successfully in the past and look to see if his or her team has followed them from one company to the next.
A turnaround CEO must be able to quickly get buy-in on the turnaround strategy from the executive team and the board. While the CEO’s leadership abilities are obviously key, a successful turnaround can’t happen without strong leadership at all levels of an organization. Considering time is truly of the essence, leaders need to mobilize their organizations quickly. Empowering your team and being decisive is critical.
Advice for First-Time Board Members
After distinguished Navy and corporate careers, Bruce Grooms last year joined the board of EMCORE Corporation, his first experience serving on a corporate board. Finding only “paragraphs of platitudes” when searching for advice, he shared his own experiences, observations, and advice with ON Partners managing partner Tim Conti, who helped secure Grooms’ EMCORE board director role. Here are Grooms’ top learnings:
Get to know your CEO and board chair
Board members need to quickly get an understanding of the CEO’s strengths and weaknesses and how they complement the needs of the company. Understanding leadership’s areas of expertise then making thoughtful efforts to help fill in gaps is a quick way to prove value. Having regular conversations with the CEO helps build trust and leads to a deeper relationship. By the same token, discussions with the chair can accelerate your understanding of the company and the market and help identify areas to probe during board meetings – which ultimately makes you better as a board director and more valuable to the CEO.
Understand the legal side of the business
Having a clear understanding of legal issues is critical, and proactively managing them is even more important. There is always a competitor trying to leverage its size or protect its competitive positioning by pulling legal levers. They often have nothing to lose to make filings even when merit is questionable. Ultimately, you learn that your duty is to protect the company with a long-term perspective regardless of the merit of the actions taken against you. There is no such thing as a small legal matter.
There are rules in communication
It’s important to get a grasp of whom amongst the company’s leadership team and broader board of directors has a talent for customer relations and investor relations. Assess who is best equipped to represent the company in public settings and be involved in managing who plays this role. On a related topic, make sure you’re educated about when or if you are permitted to speak on behalf of the company. Conversations you have about its performance really do make a difference on who will invest and how. The bottom line: When in doubt, keep your mouth shut.
Study materials before meetings
In order to be most effective during board meetings, it’s critical to get relevant materials to review well in advance and to push for it if necessary. Conduct a thorough review of the materials and key issues, ask clarifying questions before the meeting, and impact the agenda if materials suggest a key issue is not going to be addressed sufficiently. Reach out to other directors in advance and ask if they have similar questions or concerns. This will build confidence that you better understand the issues and can contribute to the discussions. A fresh set of eyes that questions the status quo and makes recommendations for improvement is always well received by board members.
Know your business acronyms
The world feasts on acronym soup, and despite your best efforts, it’s possible that an acronym could mean many different things. New directors often suffer in silence to avoid asking what they view as elementary questions. Don’t make that mistake. There truly is no such thing as a dumb question when it comes to executing your role as a board director. Ask questions, don’t gag on acronym soup, and pursue issues you deem important to the company. If it does not already exist, ask the company to include an acronym glossary in each board package. You will find this invaluable.
Get to know the organization and its leaders
Make an effort to get to know senior leaders across your organization, and pay close attention when they present during board meetings to assess their capabilities. As a board director, the CEO may ask for your opinion of key executives, and you need to have done the work to be able to provide useful feedback. Put in the time to build relationships with various senior executive leaders outside of board meetings. This process helps give you a sense of the company culture and the level of engagement throughout.
Financial literacy is key
There is no better way to learn the business and the condition of the company than participating in audit committee meeting discussions, so sit in on these meetings when you first join the board. If not formally assigned, you will not play an active role, but merely observing the meetings will dramatically enhance your understanding of the company, which is core to your duty as a director. When unfamiliar terms are discussed, record them and look them up later. Get a clear understanding of which financial data has elements of subjectivity and which do not. Always question the underlying assumptions to better understand the subjective data.
Financial literacy is more than just the balance sheet and quarterly financials, and it’s important to have conversations early on about the company’s cash position and planned capital expenditures, among other items – discussing the timing of these expenditures matters as much as the decision to spend in the first place. If there are ways to enhance shareholder value, it is your responsibility to pursue them.
About ON Partners
Since 2006, ON Partners is the only pure-play executive search firm building diverse C-level and board leadership teams. We rebuilt the institution of executive search for the way you work. Our approach includes present partners who engage with their clients from the first brief to the final decision, individually crafted solutions that are unique to each client, and an easier experience all around. Named by Forbes as one of America’s Best Executive Recruiting Firms and to the Inc. 500/5000 Lists eight times, ON Partners is consistently ranked among the top 20 retained executive search firms in the U.S.
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