November 17, 2020 – From a leadership and hiring standpoint, transforming businesses and driving change is no easy task. To accomplish the kind of sweeping, transformative change organizations often require, a ‘turnaround’ CEO is often required. In a new report from executive search firm ON Partners, partner Baillie Parker says that the ideal turnaround CEO candidate possesses a unique set of attributes that make him or her the right choice for organizations in distress. “We’re inevitably moving into a period in which companies are becoming financially unstable and will need someone to lead them through a difficult period onto a path of profitability,” he said.
The ON Partners report offers top characteristics to seek out in a CEO who is capable of leading a company out of crisis. “But first a word of caution to the board that must define the leadership mission and make a successful selection,” the report said. “All leaders have areas of greater and lesser strengths, and turnaround leadership is no different. The board must first come to terms with what matters most in the specific situation the board believes it has at hand, and apply that focus in selection.”
Mr. Parker cited these eight attributes that can be put to work in transformational situations:
1. Past Performance is the Greatest Indicator of Future Performance
“Look for a CEO who has previously led successful turnarounds,” Mr. Parker said. “Within those turnarounds, closely evaluate the financial outcome of the business (s)he led to make sure the turnaround was due to more than just timing and broader market conditions.”
2. Understands the Importance of Cash and Cash Management
Cash management is not just the responsibility of the CFO. “Strong turnaround CEOs who have been through challenging times understand the importance of cash management and banking relationships,” Mr. Parker said. “They should be focused on the numbers every day.”
3. Operationally Minded
This is turnaround 101, but these CEO candidates must be operationally minded. They will have to first find the low hanging fruit in immediate operational and financial improvement opportunities. And while they have to see the big picture, they must also be data-driven, with a focus on the details.
4. A Highly Strategic Problem Solver
“Strong turnaround CEOs have the ability to quickly digest information and data and distill the underlying issues in the business” Mr. Parker said. “Once you’re far enough along in the interview process, let candidates review the financials and the board documents. Observe what questions they ask.”
Baillie Parker has completed over 300 searches for C-level, board and high-level executives across a range of functions. His work focuses primarily in private equity across the technology and industrial sectors. See his most recent placements here.
“Look closely at their previous leadership roles and understand how they identified and prioritized problems and came up with a new strategic plan for the business,” he said. “You don’t want a candidate who is only capable of solving operational issues, which is only one aspect of the turnaround. You also need someone with a demonstrated ability to create a new strategy for growth with a very specific timetable around tactics and execution.”
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On a recent CEO search for a distressed private equity-backed company, for example, an ON Partners’ finalist stood out because he had previous successful turnaround experience. More importantly, though, he had demonstrated success shifting market focus from a troubled sector – in this case energy – into new higher growth markets.
5. A Realist with Open and Transparent Communication Style
This person must have the ability to confront the uncomfortable. “Once (s)he has distilled down the business challenges, (s)he needs to be able to communicate those problems to the team and create a realistic transformation story that everyone can understand,” said Mr. Parker. “During a CEO search for a troubled company, our private equity client was taken aback by the candidate’s directness voicing her concerns about the company’s strategic direction as well as its operational footprint. Ultimately, though, they realized this sort of candor was exactly what they were lacking.”
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Also, the report said to ask the candidate what mistakes (s)he has made in the past and in retrospect how they would do things differently. If the candidate is not self-aware enough to take ownership of past mistakes, (s)he will not have the transparency needed for a turnaround. Having the ability to acknowledge missteps and know how to correct them is key.
6. Strong Sense of Urgency
“You want to look for a CEO who is decisive and moves quickly,” said Mr. Parker. “Time is absolutely of the essence in turnaround situations so the ability to drive decisions at a rapid clip is critical.”
7. A Track Record of Making Tough Choices
This person will likely need to quickly make dramatic changes to the leadership team in order to ensure the turnaround plan can be successful. Mr. Parker said that moving away from legacy business models and/or processes may also be necessary.
8. Team Builder
Given this person will often change the make-up of the executive team, (s)he will also have to make new executive hires and re-energize the existing team. “Find out if this CEO has hired successfully in the past and look to see if his or her team has followed them from one company to the next,” said Mr. Parker. “A turnaround CEO must be able to quickly get buy-in on the turnaround strategy from the executive team and the board. While the CEO’s leadership abilities are obviously key, a successful turnaround can’t happen without strong leadership at all levels of an organization. Considering time is truly of the essence, leaders need to mobilize their organizations quickly. Empowering your team and being decisive is critical.”
This brings us back to the concept of board focus and engagement in order to make a successful selection (i.e. deciding what matters most), Mr. Parker said. For example, a board may be strongly aligned to the current strategy of the business and resolved that performance issues are driven by operational leadership weakness. “Or it may be viewed that the business has reasonable financial leeway but that real future success will be in new growth strategies, including M&A,” said Mr. Parker. “So the board’s collective view of the business opportunity and the accessible resources is obviously central, and may define different CEO skill focus. As with most things leadership, what gets recognized and well communicated becomes a tool – and what isn’t recognized and communicated becomes the real threat.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media