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In Transformational Businesses, a Good CEO is a Work in Progress

work in progress

What makes a good business leader? Confidence is, of course, an essential trait in a CEO – without it, there’s no aspiration, drive or belief in the company’s strategic plan. But how important is self-confidence? Is it necessary for a leader to have all the answers? I would argue that self-assurance should be tempered with self-awareness, especially in those running 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, aware 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, the focus here is not on serial CEOs of major corporates, but on those leading small businesses with turnovers of £10m to £50m looking to rapidly scale up their operations and double or triple in size within five years, using private equity investment to do so. Typically, these are run by first-time CEOs, who have built their business successfully up until this point but are now about to enter a new league, where 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.

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

Humility breeds respect

CEOs may need to turn a mirror on themselves, so that they can spot gaps in their skills and experience, assess where they are now against where they are going, and identify 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 positive, process.  As the business evolves, they should be asking themselves what they should stop doing and what they need to start doing. Just because doing things a certain way worked before, it doesn’t mean that will continue to be the case 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, rather than just dictating from the top, should engender a culture of continuous improvement throughout their organisation. Far from being humiliating, a little humility from those in senior positions in fact commands enormous respect and loyalty. CEOs can’t know everything, so surrounding themselves with a 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.

Clearly, that ability to listen requires real trust in the core team, so it’s important to carry out an objective process of identifying and building on their strengths and addressing any weaknesses, both at the point of investment, and on an ongoing 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 time for everyone to up their game.

Being a CEO of a private equity-backed business is a journey. It doesn’t stop once the investment is made – rather, private equity provides the injection of fuel needed to allow the company to continue on its road to growth. Getting to the next stage will require professionalisation of the business and organisational change, and CEOs need both confidence and humility to recognise that they will need to change too. That’s why a good CEO in this context cannot be the ‘finished article’. They must be a work in progress.

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