By: Marc Ian Prine, Ph.D., Senior Advisor, 29Bison
Over the last few years, the number one priority of most privately held company CEOs has been fundraising. Investors have focused on top line revenue and promises of future profitability, poring over stories and projections of outsized growth. This means CEOs have had to sharpen their pencils, generate consistent results and present sparkling pitches.
In the last few months new challenges have cropped up. Rising interest rates, enhanced market uncertainty, threats of inflation, domestic and geopolitical instability, to name a few. Now, key performance indicators are more reflective of publicly traded companies; focused on margins and the bottom line, lean operating principles and burn rates. Prospective investors are more careful, critically evaluating their CEOs’ abilities to execute on all the visionary statements made during their pitches. Investors are looking for a crisis-ready CEO.
The core competencies of a steady-state CEO are those of the strategic visionary, including social agility similar to that seen in magnate sales leaders. Many of the executive assessments we have done over the last few years have been based on an investment thesis targeting top line revenue and organic growth or acquisition-based strategies. Increasing EBITDA through expansion, not consolidation.
On the other hand, the crisis-ready CEO is poised and purposeful. Risks are taken in highly calculated ways and teams are pushed to do more with less. The crisis-ready CEO inspires through assurance, rallying their team around core values and the organization’s purpose. Here, EBITDA accrues through consolidation and tactful execution.
One CEO we have been working with for years is seeing no difference in this unique environment. She has always been focused on profitability, saw outside capital as additive to her business and never relied on it as a lifeline. While capital has helped her accelerate the growth of the business, EBITDA and cash-flow have always been front-and-center. Now that others in her industry are floundering, she is on the attack – executing as if this is her greatest opportunity to gain market share.
There is a crazy psychological phenomenon (wink) that if you tell someone what you expect of them…they are more likely to do it. Leaders must work with their boards to clarify expectations and identify what needs to change to achieve the new objectives. Create an agile strategy that gets the organization to key milestones and goals, and change approaches without compromising growth, or sacrificing business reputation and organizational culture. Build a solid executive assessment process, alongside a qualified advisor to help facilitate this transition and orchestrate necessary change.
Top leaders infuse confidence and direction during times of uncertainty through careful, transparent and consistent communication. Simply acknowledging the unknown and recognizing what has contributed to success to this point may not be what gets the organization to the next milestone. Both strategic and tactical steps need to be taken to articulate what will remain the same, what will be different and how the shifts in direction and process will take place. Provide front-line managers with the tools they need to adjust mid-year metrics and shift priorities.
Effective leaders must then walk the walk. Make decisions that reinforce new priorities, recognize employees for adopting these new ways of working, and show genuine appreciation for all change efforts and mistakes made in the right direction. The most impactful leaders will roll-up their sleeves and show others they are in the foxhole along with their employees.
Your portfolio company top leaders should be as ever-changing and dynamic as the markets they serve. Comprehensive human capital due diligence, executive leadership and cultural assessment processes can help to identify your executive leaders’ crisis-ready and steady-state skills. Many CEOs and their leadership teams are being forced into an environment they have never navigated before. This kind of transformation requires talented, expert guides.
Do you have a crisis-ready CEO? Because for the time being, you’re going to need one.
Let us be your compass.
Send us a note or give us a ring (215.337.3111) we’d be glad to help.