The Executive Chairman
Introduction
Preamble & History
Consistent and in concert with the “Board of One” concept, a natural next step when moving to the implementation phase is the Executive Chairman Concept. Conceived in cooperation between the Wharton School of Business, University of Pennsylvania and the Tablero Group and its founder Garry E. Meier, this relatively new and emerging concept within the strategic management and corporate governance arena has grown to become quite relevant during the past 15-17 years.
The Executive Chairman Concept has become more prevalent due to the complexities of today's services business models, globalization, rapidly changing markets, increased competition, increased regulatory influences, and the complexities in the application of technology to service business models.
In addition, the CEO role has evolved into an almost impossible task, given the changes in the capital markets and sources of capital, and the ever-changing demands and skill requirements made of today's top executives. The Executive Chairman role, simply stated, augments the gap between the skills that today's markets require and those that are present in the C-Suite level in small and emerging services businesses. Additionally, as a byproduct, this role closes the gap between effective governance, operating issues, and institutional investor interest.
It is well known, and statistically proven that when businesses commit to the Executive Chairman concept, the results include increased growth rates, improving EBITDA performance, and institutional-level shareholder returns. Furthermore, the concept has led to economically efficient business models, effective organizational governance, and lowered executive turnover, while enhancing executive skill effectiveness.
Many successful, emerging small service business organizations have utilized the Executive Chairman role not just as an extension of the Board of Directors, but also in implementing a single-person board concept, more commonly known as the “Board of One".
Many of the most successful institutional investors in the services sector have made the Executive Chairman and/or Board of One concepts a requirement and critical success factors in their investment portfolio governance process, more commonly known as “Operating Partners.”
Successful Applications & Utilization of the Executive Chairman Concept
History and experience have illustrated that this concept provides the highest probability of success when utilized in environments that exhibit the following attributes:
The stakeholders have all made the commitment to be a growth-oriented institutional organization versus a “lifestyle” business.
The shareholders have committed to “surrendering the sovereignty” to at least one highly proven institutional worthy executive.
The company’s performance has stagnated or declined, which includes increasing execution risk profiles.
The history of the company has been “Founder-Centric”. For the good of all current and future stakeholders, a surrender of control and leadership needs to occur. Therefore, the company needs an empowered change agent that will address and change a past bad business model and poor leadership habits.
The company historically has been too internally focused, and has failed to create scalable marketing, direct sales, and alternative distribution venues, beyond the capability of the founder.
The shareholders and/or governance processes have proven to be ineffective as illustrated by: significant executive turnover, failure to recruit talented senior leaders, failure in creating informal leaders within the organization, and ineffectively building the organization’s capability and capacity.
Operating Management is unproven in growth environments, and is not institutional bankable.
Operationally, the company does not illustrate the concepts of operational leverage and scalability. Therefore, the business model needs additional rigor, technology, and people proficiency to achieve any growth objectives.
The organization will require institutional capital for growth and/or shareholder liquidly initiatives in the near-term.
The Executive Chairman or Board of One must have “put and penalty clauses,” should executive management and the shareholders not be 100% compliant to the “Process”.
Executive Chairman “Perfect” Candidate Profile
The career attributes of the “Perfect Candidate” that have led to successful outcomes when implementing the Executive Chairman concept in the business services sector include the following:
Strategic knowledge of the sector, required market differentiators, and value proposition needs to satisfy future demand curves.
Proven experience in understanding and managing exogenous factors that influence a business and its sector.
Multiple BOD assignments in both small emerging entities and larger entities that illustrated effective stakeholder balance, and effective BOD governance processes.
Chairman experience in formal governance processes, where operating management have been “insiders” on the board.
Functioned successfully in an Executive Chairman or Board of One role on more than one assignment.
Has illustrated the knowledge, experience, and principles of effective stakeholder balance.
Illustrated C-level success in strategy development and implementation that led to exponential revenue growth, operational scalability, resulting in institutional EBITDA levels, and has successfully raised institutional capital.
Needs to illustrate proficiency in strategic finance, and corporate development initiatives.
Illustrates strong and committed values and principles, and the “highest professional standards”.
Must have been institutionally bankable in a minimum of 2 institutional endeavors.
Roles & Responsibilities of The Executive Chairman
The Company Founders and Shareholders are considering having a formal and empowered Executive Chairman or “Board of One” to lead and guide the company to be a growth-oriented and institutional worthy organization that maximizes shareholder wealth.
Overview of Executive Chairman Role
Work with and “mentor” the CEO and Leadership Team on the implementation of the near-term and long-term initiatives of the organization through the utilization of best practices in the areas of governance, shareholder management, business model development, business process development, leadership and executive management effectiveness.
Executive Chairman Responsibilities
Provide ongoing oversight and advisory activities consistent with a “Chairman of the BOD” role, including but not limited to:
Implement Consistent Communication Rhythms and Process to all Stakeholders
Be the Company’s “Resident Expert” on Industry/Sector Trends, Exogenous and Economic factors, and Market Opportunities
Sector Representation and Sector Monitoring and Evaluation
Operational & Strategic Outcomes Evaluation
Strategy Review and Strategy Implementation
Setting of Organizational Near-Term Priorities
Monthly and Quarterly Performance Reviews with Executive Management
Organizational Development Initiatives
Tactical Decision-Making
In addition, the Executive Chairman should work closely with the CEO and Leadership Team in developing near-term action plans and tactical initiatives to effectively implement the organizational strategy elements, and achieve budgeted and expected results.
Organizational Development
Provide the CEO and Leadership Team: leadership guidance and development initiatives through the utilization of Tablero’s Leadership Development Tools, which include:
Attributes of Success for Service Company Executives
Attributes of Successful Service Organizations
Targeted Business Model Attribute Development Methodology
Tablero’s Yellow Brick Road (YBR) for Institutional Capital
Governance Actions and Leadership
The Executive Chairman will be empowered to work in cooperation with the CEO in directing, managing, and taking all appropriate actions required to provide the company with the desired outcomes that are “best for all” stakeholders.