2012 CEO Resolution: Disciplined Dreaming!
During the holidays I focused far less on business and far more on family and friends. Pushing back from normal activities gave extra time for some creative thinking. High on my list was reading one of 2011′s top business books, Disciplined Dreaming.
Author Josh Linkner is a successful serial entrepreneur. Founder of ePrize, a dominant company in the promotions industry, he’s proven the value of tapping into the creativity of the every individual in his business. His book outlines various processes and techniques that encourage and enable innovation among employees.
But what about the CEO? If the CEO doesn’t dream, the business doesn’t grow. Most business leaders find it easier to work in their business than on it, i.e. to handle urgent operational matters than to focus on important growth initiatives. Incorporating more creativity into a CEO’s schedule demands opening space for it.
Linkner suggests deliberately scheduling “heads-up” time for the creative process. He contrasts the differences between heads-up and heads-down operation:
The challenge in switching between heads-down and heads-up thinking is learning to use the analytical and creative sides of your brain simultaneously. Daniel Pink has suggested that the most successful 21st century ventures will be led by those who combine both modes of thinking, enabling them to spot patterns and trends faster than competitors. The result will be superior products, more relevant services, and higher market share.
The CEO who neglects creative thinking and stays in the comfort zone (solving operational issues and managing finances) falls behind competitors. It takes effort to break out of the zone, and it can require reaching outside the organization. Successfully implementing the discipline to dream may require creating a network of friends who are regularly tapped for advice and who act as a sounding board. It means joining a group of like-minded CEOs (e.g., Vistage), or leveraging a special board member, or hiring a trusted advisor, or a combination.
Resolve that 2012 is going to be different for your business. Despite a challenging economy, it’s time to take it to the next step. Leave your comfort zone and grow your business by unleashing your own creativity and the creativity of your entire organization, and resolve to do it in a disciplined way.
Important Indicators are Up
Because I help companies define an exit strategy and grow value accordingly, I’m always seeking better sources of data that capture the current state of the investment world. Pitchbook is one source that publishes particularly useful information about fundraising, investments, and exits. A recent Pitchbook presentation suggests that we’re on the verge of significant growth in private equity investment during the next year, and that’s good news companies moving toward an exit.
One factor mentioned in the Pitchbook prez is that capital overhang is high and growing. When that happens, valuations tend to increase because so much money is looking for a place to land and produce a return.
Additionally, chart below depicts that the number of quarterly private equity exits through corporate acquisitions, initial public offerings, and secondary sales is on the upswing after reaching a low in early 2009.
Finally, one of the best analysts in the business, Richard Davis of Needham and Company, commented in his newsletter that it’s been 25 years since he’s seen so many companies in a great position for an IPO.
Taken together, all these indicators suggest that, despite the continuing malaise in the broader economy, a CEO who keeps his/her company’s partnerships, product strategy, services, and partnerships aligned with potential acquirers can expect to see greater opportunity this year and through the next.
The Reality of Being a CEO
Tactics is knowing what to do when there is something to do.
Strategy is knowing what to do when there is nothing to do.
- Savielly Tartakower
The reality of being a CEO differs in many ways from the popular conception. After many candid conversations with CEOs, it’s clear that the media portrayal of the CEO role as being glamorous, highly lucrative, and psychologically rewarding is incomplete at best. All of the above are true at least some of the time for many CEOs, yet when they’re being candid, most will tell you that it’s far from being chocolates and roses all the time.
In fact, one business leader laughingly told me that people don’t realize how often a CEO gets to “experience sheer terror.” Many things can go wrong that adversely affect the business and ultimately impact CEO priority number one, i.e. increasing shareholder value. What moves are competitors taking that we can’t respond well to? What drivers in the economy threaten the willingness and ability of customers to stop buying? Is our own inability to execute holding us back? Do we have a realistic vision for growing the company?
An earlier post about “The CEO Dilemma” discussed these and other challenges. Many CEOs live life on a high wire, balancing operational issues, cost and cash management, a realistic vision for growth, productive business partnerships, market presence, go-to-market and sales strategies, and many other priorities. Contrary to the supremely confident leader portrayed on-screen, a CEO is not always sure what to do.
Should we pity the poor, downtrodden CEO? Hardly! Most tell me they can’t conceive having any different role. They love what they do and feel fortunate that they have the opportunity. At the same time, life at the top can be lonely. The buck always stops there. As the CEO, you ultimately have to make the big decisions. And sometimes it pays to get assistance.
Where do CEOs look for help? If they’re lucky, experienced individuals on their board of directors are able and willing to serve as sounding boards, yet the fiduciary nature of their relationship may limit those discussions. Alternatively, the CEO may have one or more friends who are or have been chief executives whom they can trust for advice.
Often CEOs are more isolated than they need to be. Organizations like Vistage, CEO Netweavers, and others have evolved to meet the needs of CEOs over the years. They comprise CEOs who are willing to give time to help other CEOs with advice in a trusted environment, often facilitated by experienced serial CEOs. And, of course, there are independent trusted advisers who work individually with CEOs as well as with groups of CEOs to share expertise and experience that can help companies reach new levels of performance.
Optimal Board Conversations
Based on feedback from experienced CEOs, getting the optimal value from boards of directors is a common challenge. Of course, it starts with picking solid board members. As serial CEO Bill Bock said recently, “Building a strong board is every bit as important as building a strong management team.” He recommends at a minimum that you include at least one very strong financial mind and at least one “crusty operational type” on your board to provide balanced guidance to the management team. “The ideal director sees a bigger world than the CEO.”
Assuming that you already have the right people, deriving value from them is up to you, the CEO. You have to engage their best thinking while keeping in mind that they don’t manage daily operations – you do. Giving too much or too little control to the board can decrease its value.
By focusing on growing the value of the company, the 20/20 Outlook process provides a constructive framework for discussions at the appropriate level. Another serial CEO, Mike Shultz, describes 20/20 Outlook as “a methodology that is clear and focused on developing the strategies to fulfill Job One for the CEO and in the process, creates a framework for solid communications with the Board of Directors about their most important measurement of success.” Job One, of course, is increasing shareholder value.
The diagram below depicts the continuum of choices a CEO has for achieving value from his/her board of directors:
Two common problematic relationships with boards can develop: micromanagers and cheerleaders . A CEO may allow the board to have too much control and encourage micromanagement. Since board members often have CEO and operational experience, they can be easily tempted to fill any perceived vacuum in leadership that you display as CEO. While reviewing financial and operational performance is valuable and appropriate, constrain the resulting conversation to high level suggestions for improvement rather than drilling into the nuts and bolts of daily operations. (If a particular board member has directly applicable experience, engage that person offline and don’t occupy the entire board’s time.)
On the other hand, a CEO who over-controls the board wastes everyone’s time. Having a board full of cheerleaders that rubber-stamps decisions and flatters the CEO may feel good, but it defeats the purpose of having directors and prevents their having an impact on the value of the business.
Either extreme implies weakness. The CEO who allows the board to micromanage may lack confidence in his/her ability to lead, while the CEO who totally controls the board may incapable of handling constructive criticism. Optimally you want to engage the board in strategic conversations about increasing shareholder value.
Are you having optimal conversations with your board?
