Successful CEOs are masters at getting the greatest value out of time and new CEOs are under unique pressure to meet business objectives quickly. Boards and investors expect rapid turnarounds to meet hold-period objectives and their patience is understandably low. A 2016 study demonstrates that 69% of new Private Equity CEOs get less than 48 months in role, with the average tenure ended at 27 months. That means if a new CEO isn’t meeting expectations at 18 months, it is unlikely they will survive.
What trips up even previously successful CEOs? It usually comes down to an execution problem. Execution problems are, at their core, talent problems. Address the talent problem early and your results will follow. That means the new talent strategy needs to be fully up-and-running at six months.
Traditionally, most CEO’s don’t throw themselves into that process, paying more attention to customer strategies, operational concerns, and finances. Many focus solely on the senior leadership talent. That’s a necessary but insufficient step, as execution challenges often present themselves much deeper into the organization. As a result, boards are looking for a new CEO, again. The business, the investors, and the CEO suffer.
This is such a common pattern that much of the equity investment world takes a high rate of new CEO “churn” for granted. The traditional human resources cannot accommodate the new acquisition model either. Here we often place greater value on activity rather than pragmatically casting aside any encumbrances to meet urgent timelines. As a result, new talent strategy is up and running in 18 months, if at all. The ship is already gone.
The “Blind Spot” begins with the acquisition. For 90 days, many equity investors have minimal sound feedback about the current state of talent. They assume talent will be addressed when they appoint a new CEO. However, that assessment is necessary for a quick takeoff and ought to be critical in the selection process. The new CEO walks in the door and quickly determines whether the existing Chief Human Resource Officer is a fit. Instead, this is the very time for that leader to take over the culture and strategize a talent approach to enable business strategy.
No matter what, this is the time to make wise investments and connect with the very people that will drive the success of the organization.
Getting rid of the “Blind Spot” begins with:
- Shining a spotlight on talent the moment an organization becomes interested in acquiring a new business. Take a step beyond evaluating financial and market strength because it is even more important to understand the strength of talent.
- Hiring a CEO that not only understands the existing talent assessment but also has the skills to develop an effective talent strategy immediately and with urgency.
- Having the “go forward” team in place at 90 days and the fully new talent strategy in place and operational at six months.
- Assessing the business strategy through the lens of talent. What about the current situation will support or challenge execution? What needs to be done today to eliminate obstacles? What are the critical few priorities that must secure focus now, while pushing aside things that can be improved later?
Why has talent become so very important? Because the rate of change has increased to the degree that we either need people who can change quickly or determine what kind of people we need to meet rapidly changing business objectives. Historically, new CEO’s have either turned people responsibilities over to human resources and went on with their lives or have postponed the work.
Moving forward, boards and equity investors need a CEO who embraces and drives the talent agenda as a critical success lever to achieving business outcomes. They also need a new type of CHRO (Chief Talent Officer, perhaps) who understands how to reach business objectives and counsel the CEO with savvy and confidence, especially when he or she needs to change the course.
The alternative?
The clock’s ticking.
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Brought to you by Jackson Lynch, President – 90 Consulting
P: (832) 930-7449 / E: jackson@90Consulting.com
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