Becoming Group CEO

Attaining the role of CEO is the ultimategoal for most executives. But what is required of you as a divisional CEO/MD/FD in order to smooth a transition to the corner office? Arguably, before you look to step into the top spot you should gain sufficient exposure to, and an understanding of, the ‘group’. But what else do you need to consider before making the move?

Leslie Van de Walle, Chairman of SIG plc (and Criticaleye Associate), who moved from divisional CEO roles at United Biscuits and Shell to group CEO roles at United and Rexam plc, believes that one should look first at the ingredients that combine to create a good divisional CEO: “The primary challenge is changing from doing things yourself and controlling to the art of influencing and coordinating. This includes going from directly managing people to selecting the leaders of the business.”

To maximise your chances of getting the group CEO role, Leslie encourages you to consider the following pieces of advice:

  1. Become the best at what you do – You must benchmark your abilities across your peer group. If you’re not number one in your area, find out what you can do to enhance your expertise.
  2. Show your interest in group-wide projects – You should be visibly engaged in group initiatives, perhaps by volunteering your time to work on a particular project, which not only will increase your visibility, but show you are a resource solution for the group CEO.
  3. Demonstrate you have confidence in your abilities by offering to share them and help weaker peers – The corporate environment, especially the boardroom, is a difficult place to volunteer help, however, by doing so, you can create a group of supporters; a pool of peers to interact with and learn from, which will, in turn, create opportunities for growing together on your collective corporate journeys.
  4. Learn from others by making full use of industry and wider networking opportunities – None of us are error-free, which makes networking platforms, afforded by the likes of Criticaleye, a hugely valuable space to benchmark with peers and to talk openly about experiences and the challenges that are faced; you should seek occasions not just to represent your company, but to be able to influence an agenda for it, as a good group CEO will be required to influence and drive his or her own team in order to achieve the desired outcome.

Boardroom dynamics

“In displaying your credentials as a potential candidate for group CEO,” Lesliecontinues, “your first challenge must be to square what’s best for your division with what’s right for the business. To succeed, you must show the board that you can be a champion of your business unit, but also a good team member for the group business. This isn’t easy and requires a significant change of mindset.”

Key to this is in understanding your function in the boardroom: accepting that you are moving from being the agenda-setter in your business to, essentially, just another peer around the boardroom table. As such, you’ll have to compete with them as equals to score goals for your business division, while the group CEO acts as referee.

Commonly, divisional CEOs are more focused on day-to-day operations; group CEOs look after the strategy and direction of the entire organisation.

Andrew Taylor, Former CEO of Intec plc, who held a complex divisional role for a number of years before moving to Intec to take up his last role, says: “The [group] CEO’s actions and behaviours cast a very long shadow both externally and internally. This is something that is very different to running a division. It is the CEO that sets the tone for the organisation and employees, the board and all other stakeholders take their lead.”

Once in the boardroom, therefore, divisional heads should aspire towards being a good No.2 to the group CEO. And Leslie believes that becoming a good divisional CEO is not only a job that will determine whether you will make a good group leader; it will also define your future.

“Those that succeed must be able to find the right balance between what is politically advantageous and recognising what is personally important,” he adds.

Peer relationships

As with any CEO succession, the incoming candidate does not necessarily have to originate from within the same company. Enabling an internal candidate to make the leap to group CEO clearly has advantages, including a relatively seamless transition of power at the top and the positive messages that such an appointment sends about career opportunities within the business – especially if their last role is also filled internally.

“However, there are also risks,” says Francesca Robinson, Executive Chairman of PSD Group, “not least in the disappointment and possible departure of unsuccessful peers. Boards will consider carefully the effect of such an appointment on other key senior executives.

Prior to leading an MBO of what is now the PSD Group, Francesca had moved from divisional to group MD of OPD, an international support services business. She was then appointed CEO.

“Clearly such a leap forward depends upon being able to demonstrate in abundance the necessary skills, attitudes and behaviours, but the aspiring candidate should also think about their peer relationships which need to be supportive, trusting and respectful but not too close,” she adds. “Boards want to see the CEO acting independently and not vulnerable to the influence of over strong peer group friendships.”

The aspiring candidate should also think about their relationship with the chairman and the non-executives. “A strong and effective relationship between the chairman and the CEO is crucial,” says Francesca, “and the non-executives will want to be sure that this is the case. However, they will also want to feel that the CEO can think and act independently when required. The newly appointed CEO should also be prepared to face a board that may well have far greater experience than they do. While it is important that they do not feel intimidated by the board, it is equally important that they make the very most of the experience which is on offer.”

Prior to making the leap, gaining sufficient exposure to, and an understanding of, everything ‘group’ might be helpful, as moving from one group function to another could be less of a jump than moving straight from divisional to group CEO.

“As Group Sales Director, the exposure to group responsibility was a valuable eye-opener into the different skills required at that level,” says Adrian Gunn, CEO of AIM-listed Matchtech Group plc.

Prior to heading up the group’s executive team, Adrian made the transition from Group Sales Director to group CEO, having been promoted from his first board role after 12 months.

However, despite this insight, Adrian admits to underestimating the different skills required in the group CEO role. He says: “In a business that is heavily focused on selling, the group CEO still sells, but in a much more subtle manner. As the CEO you are required to shape and to steer the strategy for the group. You must be seen as a thought leader and champion for the group both internally and externally. You need to make clients more aware of your brands. This requires more speculative work, finding opportunities to speak at events and networking with peers, which means the business development phase is protracted and may or may not guarantee a future sale. In reality, it has taken a couple of years to get my head around it, and I’m still honing the skills required.”

Multi-tasking

In a listed space, the clearest difference between the two roles is that, once you become group CEO you are accountable to the City, various stakeholder groups and, of course, the board.

Kevin Appleton, Chief Executive of Lavendon Group plc, who became Group CEO after seven years in several divisional CEO/MD positions, contends that the biggest transitional challenge is to accommodate the added requirement of the corporate finance element of strategic development and management – normally a given at divisional level.

He says: “This relates to balance sheet structures, capital expenditure budgeting and the potential role and structuring of M&A/disposal activities, among others. The divisional role is usually about implementing a strategy within the financial constraints that have largely been set by the board.”

In a private equity-backed business, the stringent corporate governance issues of the listed environment are not there to contend with. However, as Susan Hooper, Chief Executive of PE-backed Acromas Travel ltd, explains: “In private equity, being highly target-driven, you must make an impact by turning the dials available in a portfolio business. At a group level, there are two major challenges: one, to reduce business complexity because, when you’re managing four or five different businesses, you need to be able to stand back and see the wood from the trees; and two, facilitating the pace of change.”

Susan, who spent five years as SVP and international managing director of Royal Caribbean Cruise Line before taking on her current role, believes the leap between divisional and group isn’t such a big one. Added scale, greater responsibility and bigger numbers aside, the role requires relevant experience in taking your ‘hands-off’ the running of the business.

She adds: “If you’ve already reached the role of CEO, you must have made trade-offs, where you have to juggle different operational and strategic priorities, and you will understand that the decision of where to pull back from is in your own hands. It’s as close as it gets to multi-tasking. But, if the opportunity is there to move into the shoes of group CEO, it might depend on your track record in delivering growth while being able to take a step back and see the bigger picture. Have you proved that you have moved from a hands-on to a hands-off mindset? In a multiple CEO role, you can’t run the day-to-day of each business.”

Taking on a non-executive role is one way of trying on a ‘hands-off’ hat. It is also good preparation for the dynamics awaiting you in the boardroom.

Leslie adds: “A NED role will allow you to gain perspective on the boardroom tensions and, by witnessing others wrestle with the twin competing aims, will help you to see yourself, as a divisional CEO aspiring for the group role, in a different light.”

Balancing act

Having participated in the activities of many boardrooms, Leslie has observed the typical types of manager that exhibit the qualities needed to make a good group CEO, and those that don’t have it. Experts, such as manufacturers, internal auditors or marketers, might be exceptional at what they do, but have never functioned outside their silo, so will rarely cut it. Similarly, operational divisional heads, that perform well, but only see the world through the lens of their division of the business, will not make the grade. The true potentials for group CEO are not only good at managing their business, but can also add value across different teams, which includes their own business teams and the wider boardroom team.

“Only these types will have the potential to become a group CEO,” says Leslie. “These are the true candidates because they have the ability to compromise, find solutions for the greater good, manoeuvre people into the right space and negotiate turf effectively in the boardroom.”

Francesca adds: “Progression from a divisional or functional role to that of CEO requires an important shift in perspective. Up until this point, the candidate will have focused primarily upon two important stakeholder groups, employees and clients or customers. They will now need to consider the interests of a third stakeholder group, the shareholders, and will need to demonstrate an appreciation of their needs and, importantly, an ability to balance them with the needs of the other stakeholders.”

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon

Matthew

www.twitter.com/criticaleyeuk

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