Your first go at the CEO role

 

When transitioning into your first CEO/enterprise manager role, focus is targeted to vision, mission, values and the general direction of the company. The ability to set the right team, to ensure successful execution platforms, and to consistently deliver results and building relationships – internally and externally – are crucial skills in the enterprise manager role.

 

 

As CEO, the enterprise manager is responsible for multiple constituencies (e.g. shareholders, investors, boards, alliance partners, banks, regulatory authorities etc.). The complexity is high and so is the risk of failure.

 

 

Additionally, the enterprise manager must ensure that the bi-annual or quarterly reporting of KPI’s are anchored in the long-term strategy, while delivering on short-term goals, and finally the enterprise manager must demonstrate the ability to balance organizational risks and opportunities:

 

  • Customers: Risks, opportunities and relationships associated to the customer base.

  • Collaborators: Risks, opportunities and relationships associated to key collaborators (e.g. industry organizations, suppliers, allies and government/regulators/community stakeholders).

  • Competitors: Risks, opportunities and relationships associated to the competitor base.

  • Capabilities: Risks and opportunities associated to the capability base (e.g. professional and leadership competencies within the organization, structures, systems, processes, technical capabilities, and brand equity).

  • Conditions: Risks, opportunities and relationships associated to the macro environment (e.g. political/government/regulatory, economic, social/demographic and technological).

  • Capital: Risks and opportunities associated to the financial situation and prospects of the company. Financial capabilities i.e. how solid is the investor base?; what is the debt/equity ratio?; and how skilled is the company at generating earnings before interest tax depreciation and appreciation (EBITDA)?

 

The enterprise manager must also balance his/her time between internal and external issues and in addition, the enterprise manager must devote time and focus to shaping the soft side of the business (e.g. talent development). However, since the enterprise manager now reports to the owner(s)/board, he/she will also be measured on hard KPI’s – primarily including the following:

 

1.     Ability to deliver growth in revenue:

 

The ability to deliver revenue growth year after year sends a powerful message to the board about effective enterprise management. It reveals that the CEO and his/her leadership team is able to master the competitive parameters of the market (price, product, place, promotion, people). Understanding the market and its opportunities, and the ability to successfully translating such opportunities into results, equals revenue.

 

2.     Ability to deliver on EBITDA (earnings before interests, tax, depreciation and appreciation):

 

Continuous growth in operating profits of a company sends a strong signal to the board about effective enterprise management, hereunder effective cost control and continuous optimization of the operation. In essence, it tells the story of a CEO that ensures that the company’s resources are allocated to the activities contributing best to the overall business.

 

3.     Ability to generate cash flow/liquidity:

 

The ability to generate cash flow/liquidity, combined with the ability to ensure a strict controlling of the working capital of the company, sends a powerful message to the board about effective enterprise management. This includes ensuring:

 

  • reduced stock and “lead time”,

  • correct invoicing i.e. sent on time,

  • creditors paid when due,

  • short credit terms to debtors, and

  • improved payment terms to creditors.

 

Additionally, the enterprise manager is measured by his/her ability to generate cash flow through tight control of investments, while demonstrating the ability to focus on investments targeting:

 

  • growth in revenue,

  • growth in operating profit,

  • improvement in the competitiveness of the company, and

  • short payback time.

 

4.     Ability to reduce debt:

 

The ability to reduce debt sends a powerful signal to the board and owners as it demonstrates that the enterprise manager is able to take necessary steps to reduce borrowed capital, while increasing equity capital value. Especially for companies acquired in a leveraged management buy-out with the backing of a private equity fund, an important part of the investment case is founded on the company’s ability to reduce the borrowed capital base. In essence, the less borrowed capital at the time of investor exit, the more money goes into the pockets of the investors.

 

5.     Ability to improve the quality of earnings:

 

The ability to improve the quality of earnings sends a strong message of effective enterprise management, including being able to demonstrate a history of continuous growth in market share, revenue, EBITDA, and profit margins while delivering on-target budgeting, cost control and cash flow.

 

In general, the enterprise manager/CEO and the management team will place themselves in a strong position towards potential future investors if they can master the above while showing clear decisiveness, execution edge and deliver on commitments while providing the “how-to” and “why” in relation to the growth of the business. This will demonstrate an innate ability to convert market opportunities into revenue and profit streams.

 

When progressing into a CEO/enterprise manager role the following skills must be cultivated:

 

  • Corporate strategic leadership – hereunder developing the ability to take explicit lead in developing and implementing the company’s vision, mission and values while delivering insights into the entire value chain across businesses. In essence, the key task of the enterprise manager is to create a company direction that the organization will find meaningful, challenging and motivating.

  • Soft-side focus – nurturing the softer/people side of the business, including generating energy, commitment and engagement at all levels of the organization is key to becoming successful in the role.

  • Operational excellence – ensuring that strategy execution levers (i.e. the systems, structures, processes and capabilities of the company) are constantly acting in support of the strategy.

  • Financial modeling & M&A

  • High-level talent management – including succession planning/ management, and dealing with key stakeholders such as the board and investors.

 

CEO/enterprise manager skills are often best acquired within companies that invest in leadership talent and development by offering challenging assignments allowing them to build leadership skills. Moreover, having previously gained experience from international assignments – and from a mixture of turnaround, realignment, sustaining success, and start-up business models – is equally beneficial when it comes to gaining a strong foundation for success in the role. Different business models incorporate different cultural challenges. To be successful in the role, the enterprise manager must understand change management – hereunder where the organization is and what it will take to bring it in the right direction. If the enterprise manager is facing a situation where a part of the business (e.g. a product or project) has drifted into trouble, realignment is required. If the organization is in denial, the task is to pierce through and confront the organization with the need for reinventing the company etc. In addition, gaining from a staff role can contribute to a broader basis for success as various analytical, planning and process tools often are obtained in such roles.

 

Essentially, the key challenge of the enterprise manager is to make the leadership team, and the portfolio of businesses, play effectively together – and to set a team of group managers that are able to lead and develop their groups of businesses.

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