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Self-awareness at the top: why a good CEO is a work in progress, not the finished article

4 March 2019

Pascal Wittet

Pascal Wittet, Partner in our Private Equity team, examines the evolution of the SME CEO.



It’s a myth perpetuated by TV shows like The Apprentice that business leaders should have all the answers, never admit defeat or failure and have huge amounts of self-assurance.

But as most CEOs know, real life is just not like that, nor is it the way to get to the top. Of course, confidence is important – without that, there’s no aspiration, drive or belief in the strategic plan. But so is self-awareness, especially in ambitious, private equity-backed SMEs looking to step up to another level.

In our experience, the most successful CEOs display a willingness to learn, adapt and grow along with their businesses. They know that they’ve got more personal and professional progression ahead of them. After all, how can a business transform itself without a transformational CEO?

To be clear, we’re not talking about serial CEOs of major corporates here – although the extent to which even those with extensive experience running blue chips can ever claim to be the ultimate CEO, the “finished article”, is debateable. My focus is on small businesses, those with turnovers of £10m to £50m with between 20 and 80 staff, who are looking to rapidly scale up their operations and double or triple in size within less than five years, using private equity investment to enable them to do so.

Fulfilling potential is top priority

Typically, these companies are run by first-time CEOs, who have built up their business successfully until this point but are now about to enter a new league. The business model and the dynamics of the management team, and therefore their own role, are about to change significantly. Not only do they have to adjust to that change – they have to lead it. 

Mark Hepburn, CEO of 23.5 Degrees Ltd, a rapidly growing UK Starbuck’s coffee franchise, which is one of our portfolio companies, sums his experience up like this: “If your company is on a rapid growth journey, you’ll never go back to the way things were pre-investment. You’re now accountable for delivering a plan, and that requires real professionalisation of the business, starting at the top. This is a seismic shift for everyone. I’d been focusing on the business, the staff, the new sites, but not on myself. Now I realised that however well I had performed up until this point, it was time to up my game.”

From here on, CEOs will need to be more forward-focused, not just concerned with the day-to-day running of the business but thinking ahead about its future direction. Hard graft and sound decision-making may have got them this far, but what private equity investors are really backing is future potential.

We’re making a judgement call that the CEO and management team have, as the Oxford English Dictionary defines potential: “qualities or abilities that may be developed and lead to future success”. That requires the appetite and motivation to continuously improve. Those who believe they have done all they can, simply don’t have that mindset.

Evolution at the top

What’s required here is a positive but pragmatic approach – one which takes an impartial look at the company’s strengths and weaknesses and acts accordingly. In a previous article, we looked at the importance of re-evaluating the core team’s performance and potential to identify gaps in current skills and experience and understand whether those individuals have what it takes to develop and support the business as it grows.

Many CEOs we work with see the benefit of turning a similar mirror on themselves, so that they can visualise where they are now against where they are going, and what support they might need (for example in terms of mentoring or delegating tasks to others) to get there. This can be a challenging, but ultimately very rewarding and positive, process. 

Mark Hepburn says, “CEOs almost need to keep re-inventing themselves so that the business doesn’t outgrow their skillset. They should be asking themselves what should I stop doing and what do I need to start doing. Just because what you’re doing worked before, it doesn’t mean it will continue to do so as the business evolves, and there may be opportunities out there that require a totally fresh approach.”

A CEO who leads by example, through self-awareness and self-improvement, should engender a culture of continuous improvement throughout their organisation. CEOs can’t know everything, so surrounding themselves with good team who are listened to, who are being challenged and developed professionally and who feel valued, is essential.

Those people will then be engaged in the company’s vision and inspired to contribute positively to its success. For any CEOs who haven’t read it, I recommend Jim Collins’ bestseller “Good to Great”, which argues that CEOs who achieve sustained outperformance over an extended period of time are “humble” listeners, rather than just dictating from the top. I’d contend that, far from being humiliating, a little humility from those in successful, senior positions in fact commands enormous respect and loyalty.

In private equity backed businesses, John Place, CEO of portfolio company Rowan International, one of Europe’s largest residual stock management distributors says, “There’s a real cultural change happening and there needs to be clarity around accountability. Your leadership style has to adapt, to get the best out of your management team, and also in your interactions with the Board.”

Rowan's CEO John Place

The CEO in context

Clearly, that ability to listen requires real trust in the core team, which is why an objective process of identifying and building on their strengths and addressing any weaknesses is so important, both at the point of investment, and on an on-going basis. Only then can the CEO’s role be put into context and honed as necessary. Often a reason why a CEO is not performing highly is because they are having to compensate for some of their team’s shortcomings. If this is the case, it should be triggering alarm bells for the CEO that they don’t have the right team around them today, let alone for the business of tomorrow.

“It’s tough handing over the day-to-day running of the business to your team in order to focus on building long-term value, but it’s absolutely essential. They need to be empowered to learn and develop and so do you as CEO and that can be really fulfilling. It can take a lot out of you but you get so much back, grabbing those opportunities to drive the business forward.” - John Place, CEO of Rowan

It’s all about the journey

To coin a cliché from those "reality" TV shows: this is all about the journey. It doesn’t stop at private equity investment – far from it. Rather, private equity provides the injection of fuel needed to allow the company to continue on its road to growth. Like it or not, that growth will require organisational change. And that has to be led from the front.

If that’s true, and I believe it is, a good CEO in this context has to be a work in progress – he or she can’t possibly be the finished article. That means self-belief and self-awareness, confidence and humility need to sit side by side. It can be a challenging balance – but successful CEOs don’t get to the top unless they’re up for a challenge!

“What I realised”: The CEO’s view

CEOs of Connection Capital portfolio companies share their insights on the realities of their changing role:

  • “Continuing as before wasn’t going to deliver the strategic plan”
  • “What’s normal today won’t be in the future”
  • “You’ve got to continually re-appraise your ability to deliver the key milestones – as an individual as well as a business”
  • “My focus shouldn’t be on short-term delivery any more – it should be on long-term value growth”
  • “Learning is an ongoing process and that’s challenging but immensely rewarding”
  • “Having a good team that you trust is vital. So is having strong support to fall back on, whether that’s a good Chairman you can talk to or understanding friends and family”

 Russell O'Connor
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