Founder: Turnaround Talk
Over the past two years, there are many examples of companies who have shown great resilience and determination to address the main challenges that were presented by the Covid-19 Pandemic. This can only be achieved when all departments in the company pull together to achieve a common purpose, that of sustainability and future proofing the business. During this time, leaders often emerge and their skills in delegation and talent management are often the cornerstones of the company’s success. A company’s CEO is often cited as the captain of the successful ship.
What happens when we need to move beyond delegation? At the end of the day, there is only so many tasks that can be entrusted to staff, junior and mid-level management. There are specific tasks that a CEO has to take ownership of. These tasks cannot be delegated to others. This is especially poignant when addressing financial distress or a business turnaround.
Delegation is a sensitive topic. I recently read an article by McKinsey which discusses this in detail and highlights five CEO specific tasks.
Set the bar high: Look to launch unicorns
The article points out that if companies expect 50% of their new revenues to come from new businesses, products, and services, they need to aim high.
Too often, however, new businesses fail to lead to transformational value, with about four-fifths generating less than $50 million in revenues, according to our research. The CEO has a challenging role to play to ensure that the time and resources that go into a new business are worth it. The CEO’s laser focus on value is crucial in keeping the organization from being distracted by the latest hot idea that might sound good but that doesn’t have the market potential to be transformative.
The article adds that orienting the entire company toward this level of value starts with identifying a clear aspiration, ambitious goals, and specific targets. For example, the CEO of one insurance company was explicit in wanting to quadruple the size of its B2C business within only five years by building a new digital customer-centric B2C offering. From the beginning, targets included ambitious concrete milestones, such as the launch of a minimal viable product within five months and go-lives in two additional countries within one year, as well as operational key performance indicators (KPIs), such as one million website visitors within the first nine months.
Another example is Patrick Hylton, president and CEO of NCB Financial Group, the largest and oldest bank in Jamaica. Hylton oversaw the launch of Lynk, the bank’s digital payments business. He set targets for the new business to reach the 35% to 40% market share of individuals without bank accounts. “I have huge ambitions for Lynk, the digital payments business we’ve launched,” he said. “I want it to rival and even surpass the incumbent.” This mindset aligns with broader patterns we have seen of successful CEOs being uniquely bold in their ambitions.
Photo By: Canva
The article points out that bold ambitions are particularly important when there is directional clarity in a business-building thesis and its value but there is not enough conviction in some parts of the business to invest in hiring a significant number of people or building out the technology assets needed to capture the opportunity. If the CEO does not step forward in these moments to act as a bridge by pushing forward decisions, actively building support, or driving toward specific deadlines, the initiative grinds to a halt or reverts to business as usual. An important part of a CEO’s role, as we have learned in business transformations and other contexts, is to help organizations avoid these collective-action problems.
Inevitably, some new businesses will fail. CEOs must not get too attached to a single business but instead focus their energy on where the real value is: developing a serial business-building capability. Serial business builders generate an average of 40% greater revenue for each new business they build when compared with first-time new-business builders. For this reason, CEOs need to focus their energy on managing a portfolio of new businesses (for example, recalibrating strategies and reallocating resources) and strengthening the organization’s institutional business-building muscle.
Protect the new business from business as usual
The article points out that McKinsey’s analysis makes it clear that allocating protected funding for the new business is one of the most important things a CEO can do. CEOs must invest sufficiently and then protect that money from the inevitable attempts from incumbent parts of the enterprise to take it back as issues arise.
In practice, securing promises of investment is often easier than securing and distributing the investment itself, because funding tends to follow a traditional (and inflexible) P&L-driven process that relies on annual budgeting cycles. The result is that funding can’t be released when needed or funds are taken from other initiatives, which creates resentment in the existing business. To secure the new business’s financial independence, the CEO needs to establish a dedicated and protected funding source as well as an agile budgeting approach based on venture-capital-style stage gates whereby funding tranches are unlocked when the new business hits certain milestones.
The article adds that the CEO has to extend that protective posture to preserve the new business’s broader independence. While it’s tempting to use established tools and processes in IT, HR, and marketing, for example, hard lessons have shown that these come with significant bureaucratic strings attached that lead to cost overruns and significant delays.
In fact, business-as-usual protocols and processes can pose a significant danger to the new business and require the CEO’s active intervention. The new entity needs new mechanisms for funding and expectations that don’t tie to the quarterly P&L cycle of a company. The markers of success are different; it’s crucial to provide clarity on KPIs that are meaningful to a new business—such as revenue growth, accomplishment of milestones, and customer experience—and to get leadership alignment on those KPIs. Existing compensation structures and hiring processes are often less appropriate when it comes to attracting talent, and they are hard to change because they require the CEO to work closely with the head of HR.
The article points out that, at a large regional bank, existing practices for onboarding new vendors were often time-consuming because of the risk-evaluation process. The CEO accepted the need for the checks but approached the head of procurement to make sure someone was dedicated to support the new business. As a result, onboarding a vendor for the new business went from three and a half months to three and a half weeks.
To ensure this operating model is practical and effective, the CEO needs to put in place a clear governance process. An ingoing precept is that more separation between the new business and the incumbent (except when it comes to strategic direction) is most effective. With that grounding, the CEO should work to mold a governance model that incorporates focused oversight aimed at enabling the new business, providing explicit authority for the new entity to make decisions (often through a venture board), and installing a funding mechanism in which the budget is released based on meeting specific KPIs.
Identify a leader who could one day be CEO and create the right talent blend
The article points out that the success of a new business relies on finding the right balance between the independence of a start-up and the relevant advantages of the existing business. Where the CEO can have the greatest impact is in striking that balance, starting with hiring the leader for the new business. The CEO needs to find someone with not only the entrepreneurial and operational capabilities to run the business but also the softer influencing and collaboration skills to be able to work well with those in the incumbent business—whether that means working with various functional leaders to access talent and assets or aligning strategies with the board.
Photo By: Canva
Understanding the importance of working with the incumbent was one reason why Øyvind Eriksen, president and CEO of Norwegian-based energy company Aker ASA, had the CEO of Aker’s new business spend extensive time learning about the parent business and its capabilities as soon as he was hired.
The article adds that part of finding someone who can work with the incumbent is seeking a leader with stature. One leader told us that the new-business leader should be someone who could be CEO of the entire company someday. Putting the new-business leadership in a position to work as equals with leadership in the incumbent led the CEO of a consumer services company to assign two acknowledged top performers in the organization to lead its new business. This move demonstrated the importance of the new business to employees and ensured the new-business leaders had the credibility to work with incumbent executives.
Ensuring a productive relationship between the new business and the incumbent extends to ensuring the new business has a blend of new hires and strong performers from the existing company. Finding the optimal internal-external talent mix isn’t an exact science, and it requires persistence from the CEO to understand where the blockers are and break through them when needed—convincing functional leaders to commit their best people to the new business, for example, or working with the chief human resources officer (CHRO) to put streamlined rotational and transfer policies in place.
The article adds that, in charting a path to the optimal internal-external blend of talent, CEOs should consider pursuing an acquisition, but only when it’s measured and focused on scaling. Our research has shown that new businesses that made two acquisitions early in the scaling process were 25 percent more likely to significantly exceed expectations than those that made no acquisitions or made three or more of them.
The trying times a CEO faces
In a discussion around privatisation in 2021, the issue of the trials and tribulations that a CEO faces in the current South African market was highlighted.
The discussion featured CEOs from two major companies; Andre de Ruyter from Eskom, and Thomas Kgokolo who was the Interim CEO of SAA at the time of the discussion. Both spoke openly about their role as CEO and how they needed to focus of sustainability to improve their businesses. Kgokolo was not appointed the permanent CEO of SAA and throughout 2022, we have seen the immense pressure that De Ruyter faces at Eskom.
More recently, we have seen the pressure that Comair CEO Glenn Orsmond faces during the liquidation of the airline.
At the other end of the spectrum, we have Omnia CEO, Seelan Gobalsamy, who listened to the advise of the council that was given to him on how to turn the company around. Gobelsamy then took ownership of resolving the necessary issues and was brave enough to implement the plan presented to him. Delegation only works if the company’s CEO is an equal player.
