Effectively taking ownership of leadership during distress

When presented with a business rescue plan, the immediate actions of senior leadership will determine whether the company can navigate out of its financial distress successfully. This is one of the fundamental truths of business rescue. Can a CEO step up to the plate and lead effectively?

This can be s challenging as coming up with a plan to address the root causes of the distress itself. An unfortunate reality of financial distress is that there needs to be a regime change. Will the newly elected senior leadership have the requisite skill set to succeed?

Success will mostly depend on the CEO as the passion and vision to succeed is driven from the top. However, I recently read a report from McKinsey that shares insights from a recently hosted CEO Forum, and the reluctance that some CEOs feel – particularly when it comes to the preparedness to succeed – is frightening.

The report shares other key insights into what it takes to be a CEO in the current business operating environment.

Develop insight and edge from a diverse ‘kitchen cabinet’

The report points out that, in volatile times, the competitive value of true insight rises. This is true for tier-one executives as business leaders and as CEO candidates. Yet one of the most important—and most challenging—aspects of being a top leader is getting expert, unvarnished, and diverse insight into yourself and the world around you. “I always believed in business that you should have an environment where people can tell you the good and the bad,” said one CEO. “You have to want to know it all.”

At the Leadership Forum, candidates relish the opportunity to network with peers across industries. They tell us that seeking feedback from a wide range of sources is now the norm. Within their companies, they want to hear from people far outside the senior team. One CEO explained: “You have to learn the business from the ground up. You’ve got to go to the people who live the work every day to understand it.” So they reach out to customers who engage with salespeople; suppliers whose needs affect everything from retail touchpoints to investment allocation; external stakeholders; leaders from other industries; and experts on geopolitical, regulatory, and technological issues. To stay abreast of a business environment where external pressures are constant and constantly changing, they need better insight from a more diverse range of people.

The report adds that CEO candidates want a similarly broad range of views about themselves, but getting such honest insight can be difficult. It’s often said that being a CEO is the loneliest job—perhaps the second loneliest is being a CEO candidate. Family and friends can provide intimacy and knowledge of your personal strengths and challenges, but seeking out the professional perspective and counsel you need is a sensitive task. Rising CEOs describe the feedback of peers as invaluable to understanding how they should continue to prepare themselves. But they worry about seeming overly careerist as they seek out such feedback, and they know that some of the people whose advice would be most helpful, such as the incumbent or board members, are simply inaccessible. The sensitivity of the task might make it tempting to forge ahead without the feedback. But the process of finding and listening to the right diverse group of people will do more than give you invaluable insight; it’s also good training for the sensitive collection of insight that will be central to your success as a CEO leading a team of people with a range of conflicting needs.

Ready your value creation thesis

What will you deliver? What is your promise? To put it bluntly, how will you double the company’s market cap in five years?

The report points out that rising CEOs must offer a clear and detailed vision of how they will transform the company they hope to lead. They need to specify a handful of decisive moves they will take to execute that vision. And they must show, whatever their experience, that they can create value across the widest canvas, that of the entire company.

Sometimes, this value creation thesis becomes a blueprint for a CEO’s first 100 days. When one food industry CEO visited the Leadership Forum, he told participants that he had a four-point plan ready when he ascended to the top job: rethink partnerships, crack the China and India markets, rationalize the portfolio, and launch the next wave on digital. It was a classic value creation thesis: bold and comprehensive, with clear actions that were taken up immediately.

The report adds that rising CEOs at the Leadership Forum have found it helpful to detail this thesis on a “placemat”: a slender document that serves as a forcing mechanism for a set of complicated decisions whose answers depend largely on the state of the company (Exhibit 2). Many candidates have gone on to use this placemat as part of their presentation to the board during the selection process. For those who do rise to the top, it has also proved useful as a way to align their top team and mobilize the organization.

For rising CEOs at well-performing companies, what’s the justification for dramatic pivots? What kind of distance do you want to put between yourself and the current CEO? Where will you leverage your personal strengths to drive breakthroughs that others would have a difficult time creating? A persuasive value creation thesis positions you for a quick takeoff and lays the groundwork for the growth message you’ll be communicating to the whole company. “I’ve actually gone back after all these years and looked at all the strategic changes we’d planned, at where we said we wanted to take the company,” reflected one CEO. “We worked on creating a culture for the company, a new approach to ‘How are we going to do things around here?’ And we did a pretty good job.”

Manage your personal energy

The report points out that it’s hard for function leaders and business unit heads to really internalize what becoming CEO might mean for them personally. They have grown accustomed to managing intense demands on their time and personal space, but the CEOs we speak with agree that the top job is intrusive in a completely different way. Inside and outside the company, people track a CEO’s every utterance and action, looking for signals. Everything is amplified.

Rising CEOs should be prepared to figure out a unique model for safeguarding, developing, and tapping into their personal energy. This isn’t solely a matter of work–life balance; bringing the right energy to work is a job requirement. “Balance your own personal life,” one CEO urged forum participants. “We can all work a lot, but if you don’t bring yourself to work every day refreshed and energized, it’s really hard to be great at what you do when you are in the office.”

The report adds that CEOs employ a variety of techniques to manage their personal energy. Some schedule two hours of pure thinking time in the middle of the day. Some schedule their most important meetings for the morning. Others turn to hobbies that are all-consuming but profoundly different from their CEO responsibilities—triathlons, painting, even serving as DJs—with the hope that they will be completely refreshed when they return to the job. Intense fitness routines are common, and many CEOs fiercely protect their vacation time to ensure they have the recovery time needed to serve as a true corporate athlete.

At one forum, a CEO talked about the difference between “rubber balls” (things a CEO can ignore) and “crystal balls” (things a CEO dares to ignore). “The easiest thing to call a rubber ball and let drop,” she explained, “is your own personal management: your own health, your own time management, your own think time. Most people tend to think of that as the rubber ball. And it is a rubber ball—until it’s not.” The message is clear: while there’s no single recipe that works for every leader, rising CEOs need to be ready with their own plan for managing their personal energy.

Committing to preparation is the rewarding first step

The report points out that committing to a rigorous CEO preparation process is one of the most rewarding developmental journeys a top executive can make. The process is a deeply personal and challenging experience that asks a lot of candidates across several dimensions. It is a science, a methodology with a clear set of stepping stones, including the ones mentioned in this article. Engaging fully improves the likelihood of a candidate’s success. But that’s just one of the rewards that comes with the hard work.

Candidates have to take an honest look at their personal and professional track records, skills, and development areas and assess their readiness for the top job. They have to approach the task with humility. As one CEO explained, “If you get to a leadership role and you’re afraid to ask for help and afraid to say you don’t know something, my guess is you are walking on some pretty thin ice. Ultimately, it helps build credibility.” Rising CEOs have to sharply craft a fact-based, holistic, integrated aspiration for the company they’d like to run. They have to identify ways to enhance their capabilities by gaining relevant knowledge and expertise via workshops, forums, and “go and sees” (for instance, visiting other organizations) and by taking on opportunities that build a particular content area (for example, digital, analytics, and sales). And they have to prepare for interviews with the board of directors by conducting mock interviews with advisers and coaches.

The report addsthat these things have been part of the process for decades. But the additional focus on external events and external stakeholders, as well as a deeper, more realistic examination of the personal challenges that come with the CEO role (or, for that matter, with any top leadership job these days), make the CEO preparation process more rigorous—and more rewarding—than ever.

Two paths diverging in the woods

The role of the CEO differs when you run a profitable company compared to navigating a company out of financial distress. For one, when it comes to value creation, you won’t be focused on doubling the company’s market cap over a five-year period; you will first be focused on stability, then profitability.

While things may be different, the advice stays the same. Building a company from the ground up bears plenty of similar features to a company that is in financial distress in that the company emerging from distress needs to be viewed as a company with a fresh start.

This is where legacies are built, and heroes are made, provided the right path is taken. The Robert Frost poem about two paths diverging in the woods is very applicable to business rescue.