Taking the Top Spot

The learning curve for a rookie chief executive is notoriously steep. They will have to adjust to an unprecedented level of accountability as they assess the talent within the organisation, build strong relationships with the board and articulate a strategy that captures stakeholders’ imaginations.

Conventional wisdom focuses on making your mark in the first three months, but many CEOs will tell you it’s not so simple in practice. In most cases, the job is never quite as advertised, even if you are promoted from within.

Matthew Blagg, CEO at Criticaleye, says: “There is a lot to accomplish as a new CEO. While you should go in with a strong understanding of the business and what you hope to achieve, you will also have to spend a lot of time uncovering hidden truths and evaluating your team.

“You will need a strong network around you, including a leadership team that you can trust and collaborate with, and external confidants whose experience and knowledge you respect. Never hope to go it alone.”

Here, we share advice from a range of business leaders on the skills and actions new CEOs need to address.

Listen Before You Act                                                                                                                              

Debbie Hewitt, Chair at Moss Bros Group, advises new CEOs to spend time reflecting and listening to the board before taking decisive action.

Usually first-time CEOs have worked in the business before, which can bring its own challenges. They have a track record, style and approach that was conducive to a different role. As a chair, I always advise people to spend time thinking about how they will adjust.

Most new CEOs were previously commentators on what their predecessor didn’t do well. The natural inclination is to go in and fill the gaps as they see it, so I encourage new CEOs to think about the business, not what their diagnosis was under the previous leader.

It’s also common to want to jump in and make new hires or lose people they don’t think are right for the business, but I urge them to think first about the strategy and then build the team around it.

NEDs are an invaluable source of input – I recommend asking a lot of questions as it’s essential to get feedback on the leadership team from the board. Far too often new CEOs want to illustrate that they know the business and its problems, but actually once you’ve got the job it’s really important just to listen because the board has an impartial view of the business, your team and your predecessor.

When a new CEO is not used to working with NEDs they need to balance how much information to give versus drowning them in detail. Some CEOs worry that information will be used as a stick to beat them, but the board doesn’t need to hear about what’s going perfectly.

Get Your Team ‘On The Bus’                                                                                                                

Matthew Dearden, former President for Europe at Clear Channel, reveals how he got his team on side.

You need to be very clear on your expectations for performance, as well as the behaviour and values that will get you there. As a leader you will have some non-negotiable requirements – make sure people understand them and then bring in the team to agree the rest.

A polished appearance doesn’t necessarily equate to underlying talent. You have to figure out exactly who you need and show patience to those who possess real ability but are rough around the edges.

I found it useful to bring in a small number of external hires – partly because of what they brought to the team and partly because of the signal their appointments sent to the rest of the organisation.

Over the first year, about half of my senior leadership team changed. It was important to do that with respect and humanity. You need to have clear, honest conversations about the direction you’re going in. That will usually excite those who fit your needs, and those who don’t appreciate it will decide they should move on. That’s better for everyone.

I talked a lot about emotional commitment and used the question: ‘Are you on the bus?’ It became a motto, so when I took the top team away for an off-site trip, I hired a double-decker bus to take them to dinner. I acted as conductor handing out tickets for those committing to coming aboard. Some thought it a bit cheesy, but five years later they still talk about that magic moment of accepting the ticket and getting on the bus. It built a sense of drama and that’s critically important if you’re going to get people to come with you on a tough journey.

Create a Culture of Ownership                                                                                                      

Peter Sephton, CEO of The Parts Alliance, discusses the dynamics of being a new CEO under private equity backing, and how he created a culture of ownership.

One of the first things we did was to create a founder mentality by involving a wide group of people in defining and building our strategy. We branded it the ‘10 steps’ as it was designed to keep us 10 steps ahead of the competition.

We broke our business into divisions and introduced new performance management metrics with real-time updates throughout the day. Regional directors were assessed against those metrics so performance was highly visible. This was an important aspect of building a founder mentality.

I also took the opportunity to distribute sweet equity widely. One of the key advantages of being a PE-backed CEO is the ability to do this. Through this, behaviour changed as people realised they were in effect running their own business.

We kept a sense of ownership at a local level by deciding not to change the operating brands of the businesses we acquired. Local branding is critically important to your buy and build strategy – too many opportunities go wrong because of corporate arrogance and the ‘conqueror syndrome’.

Prepare Early For The Role                                                                                                                

John Goddard, Partner and Member of the Global Leadership Team at LEK, explains that CEOs typically have only six months to really make an impact, so early preparation is vital.

The CEO’s chair can be an uncomfortable place to sit. As well as more scrutiny and higher expectations, you will have limited time to make your mark in shaping the business.

It’s popular to say that the first 100 days are make or break for new CEOs, but we have a different metric: you have six months to fail and two years to succeed. In other words, you need to make significant progress in your first 180 days. If you do this convincingly, you’ll be given more time.

There are four very practical steps you can take before your first day: identify and address any gaps in your industry knowledge and how the business competes; start developing some strong relationships with the board — you will need them; find a confidant outside the business who can provide a broader perspective, such as a fellow CEO or a trusted advisor. Finally, begin to formulate a high-level narrative, which you will need to inspire confidence both internally and externally.

Some of the individual team members may resent you as the newcomer, a few may even have applied for the top job. They may be waiting for you to make your first mistake. A quick way to assess the team is to commission an external executive audit, but there is no substitute for spending time with them yourself.

By Mary-Anne Baldwin, Editor, Corporate

What are your experiences, thoughts or concerns about being a first-time CEO? If you have an opinion you’d like to share, please email me on maryanne@criticaleye.com

Don’t miss next week’s Community Update on the importance of 360 feedback as a leader.

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5 Traits of a Bad Leader

Often, it’s the simplest behaviours that can embitter and drive away employees from an organisation. Criticaleye spoke to range of executive and non-executive directors to reveal the most insufferable leadership traits they’ve encountered and their advice to overcome them.

“Leadership is changing and it’s being driven by many factors, such as increased transparency and new technology,” says Charlie Wagstaff, Managing Director at Criticaleye. “You have to look at everything you’re doing and assume that what you did before is no longer relevant. Leadership is no longer about what you do, but why, otherwise it has no purpose.”

At our recent HR Director Retreat we surveyed attendees, 96 per cent of which agreed that the requirements for leadership are changing, while 86 per cent believe that a lack of leadership capability could be a potential barrier to company growth.

“It’s extremely important for leaders to learn from one another because you are required to adjust and adapt; you can’t do it all at once. By observing others and hearing about their experiences you will uncover best practice at speed,”Charlie adds.

Now over to those leaders for their behavioural bugbears and how to avoid them:

1. Being too Controlling

Bill Caplan, Criticaleye Board Mentor and Chairman of Weldex International and CSH Surrey, says it’s vital to let go of the reigns.

“If you’re a micro-managing leader and have very tight controls over people they will not grow or develop. Good leaders allow people to stretch themselves, make decisions and a series of mistakes that they can learn from. They should encourage an environment of learning and examination.

The better leaders I’ve worked for have given me that space to make decisions, supporting my business case proposals and succession plans for key members of my team. Those have been my best opportunities to develop as a leader.

The same applies in my current role as Chairman; if I’m making too many day-to-day decisions I’m either an ineffective Chairman or I have the wrong CEO. I liken it to the conductor of an orchestra. The conductor doesn’t play an instrument, yet wants the best and most collaborative musicians. It’s up to the conductor to draw out – through a leader-follower relationship – the best possible music from them.”

2. Thinking You Have All the Answers

Romana Abdin, CEO at Simplyhealth, reflects why leaders should learn from their mistakes.

“It’s so easy to think that you have the answers and to stop listening and learning, which is actually what you need to do most as a leader.

We’ve spoken to thousands of customers and corporate clients, practitioners and staff to help shape our future and strategy. Now continual listening is just something we do as the norm. We have a panel of 2,000 customers who we talk and listen to on a monthly basis.

As a leader if you’re not capable of being coached and coaching, or of learning with your teams, then how can you be successful?

For me, part of learning is sharing where I fell over, mistakes I’ve made and what I’ve learnt from them. Many organisations do a ‘lessons learnt’ assessment after a big project but how many of us actually share those across the organisation?

We fool ourselves as leaders if we think people don’t see everything. Our people see our strengths and weaknesses, they know what we’re about – there’s no point trying to kid them.”

3. Tunnel Vision

Michelle Scrimgeour, Chief Risk Officer at M&G Investments, explains why it’s good to look at every angle.

“Good judgement is a really important leadership trait; you need to able to balance what you’re hearing and seeing, and then make a call.

As a leader you need to be able to filter out what’s important and sometimes make decisions without all of the facts – some of it is gut feel.

The need for wise assessment and decision making can play out in many ways, particularly in a market crisis when tough decisions are required. I have seen poor decisions being made because they were the easy choices; leaders sometimes need to be brave enough to back a strategy for the long term.

It’s important to ensure that you’re really staying in touch with the organisation and judge the quality of the information you’re receiving – some of it will be biased. At the end of the day, good leaders listen well, but it doesn’t mean they’ll necessarily be swayed by opinion.”

4. Shying Away from Tough Calls

John Allbrook, Criticaleye Board Mentor and Chairman at Franchise Finance and Cellesce, tells us why leaders must be confident decision makers.

“Leaders are there to make decisions. They don’t always get it right but it’s easier to deal with those who make decisions with confidence based on the available information.

In a previous role, the CEO before me was perceived to be weak and indecisive on the tough calls and was losing the confidence of his leadership team, the shareholders and the employees. Those calls related to cutting back the cost base of the company and had major implications on headcount. The uncertainty created an unproductive working environment.

Leaders need to be confident but also self-aware. It’s about striking the right balance and not second guessing yourself. It’s important to remain true to yourself.

I’ve worked for lots of leaders with many different styles and I think you naturally gravitate towards people who you believe are doing it the right way; who are genuine.”

5. Trying to be Something You’re Not

Charlie Wagstaff, Managing Director at Criticaleye, discusses the value of being authentic.

“Leadership is hard work. While you’ll find many words of wisdom, tools, techniques and practical applications that focus on improving leadership skills, all are empty if not implemented with both substance and passion.

To determine whether you are truly ‘fit for purpose’ – transparent, energised and confident – your leadership style must be consistent with who you are. This means being authentic and honest.

You should constantly challenge what success looks like, and know the difference between managing by influence and managing by authority. Don’t build more followers, build more leaders and ensure the success of those around you.

As Gandhi said: ‘Be the change you seek.’ You should understand what it is that you are passionate about. After all, when you look at your organisation, you are really looking at a reflection of yourself.”

By Mary-Anne Baldwin, Editor, Corporate and Dawn Murden, Editor, Advisory

What are your thoughts on leadership? If you have an opinion that you’d like to share, please email Mary-Anne at maryanne@criticaleye.com

Read our coverage of Day One and Day Two of the HR Director Retreat

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Cyber Security and the Board

You don’t have to be on the board of TalkTalk or Carphone Warehouse for cyber security to be at the forefront of your mind right now. The reality is that no company is immune to hacking and executive and non-executive directors need to address cyber risks thoroughly by asking the right questions.

Last month, TalkTalk was victim to a significant attack on its website, with fears that customers’ bank details were hacked. Also in August, the personal details of 2.4 million Carphone Warehouse customers were reportedly compromised by cyber criminals.

Both incidents created a storm in the press and the companies are yet to determine how much reputational and monetary damage was caused.

The problem is far-reaching. According to the latest data from the UK Government’s Department for Business, Innovation and Skills, 81 per cent of large corporations and 60 per cent of small businesses reported a cyber breach in 2014, with the worst costing between an estimated £600,000 and £1.15 million.

“We’re seeing some very sophisticated attacks on critical infrastructure. It’s no longer a matter of just covering the basics,” says Justin Lowe, Cyber Security Expert at PA Consulting Group.

The board must be asking the right questions to mitigate risks, Justin adds. “They need to be gaining confidence that their organisation has a good grip on what personal and sensitive information it holds. Then they need to build confidence in shareholders and stakeholders that they are adequately protected,” he says.

Estella Judson, Key Account Director for the Advisory Practice at Criticaleye, comments: “Cyber security is a risk that boards must tackle comprehensively. In fact, it should be a top item on the risk register. No company is exempt from the threats.”

Criticaleye spoke to seasoned business leaders to reveal the top five cyber security questions they’re posing in the boardroom:

1) Which of our assets, if breached, would have the biggest impact on our business? 

According to Paul Brennan, Chairman of OnApp, a board needs to define the company’s most valuable assets. “Every board director should be asking how they can protect the assets of their business, clients, customers, partners and employees,” he says. “Inevitably the more we enable people to interact and transact in an online world, the more we expose their data to attack.”

You need to think about all the different threats the company faces, says Crawford Gillies, Non-executive Director at Standard Life and Barclays, and Chairman of Control Risks. “It might be intellectual property, or strategic plans, or customer information,” he adds.

2) Do we think our protection mechanisms are proportionate and accurate? 

By starting with the assets and their value, boards can then look at what defences should be in place. Justin comments: “So many times I hear security managers say: ‘I’ve proposed this but it never got approved.’ You need accountability at board level to support those important investment decisions.”

Paul notes that a lot of companies now have their chief information officer on the board. “They can’t just be someone who is coming to the board to present. They need to understand the strategic goals and imperatives of the business… and as a peer, be held to scrutiny about what is being done to control risks.”

There should be an assessment of the vulnerabilities and a clear strategy to defend them. Alastair Lyons, Chairman at Admiral Group, says: “One would expect a presentation to include the standard protections, such as penetration testing, encrypting, locking down laptops and having very limited access of company devices to the internet.”

3) Are we adequately prepared to respond to a security breach? 

When it comes to cyber attacks, boards should think in terms of ‘when’, not ‘if’, notes Sarah Bates, Chair of St James’s Place.

“All of us, both privately and [in a business environment], rely to a greater or lesser extent on the internet, which was designed to be open and [as a result] can be vulnerable. There are many people with harmful motives who are very clever and determined, seeking to use the internet as a back door into our lives,” she adds.

There should be clearly established protocols for reaction to a cyber attack, both in terms of internal actions and external communications. Alistair comments: “In the event of an attack there may be need to inform customers, suppliers, regulators and the media; who should do what, how and when? There should also be a realistic assessment of the cost, in particular the reputational damage.

“Similarly, if a hack disables the company’s systems it should have a disaster recovery programme in place. How fast can it get itself working again? How up-to-date and reliable is that backup?”

4) Do we have a suitable risk culture? 

The weakest link is often the people, not the systems, says Jeremy Lloyd, Chief Technical Director at ICSA Software International.

“Board-level executive sponsorship is vital. The executive in charge will need to ensure a cohesive strategy is adopted across a variety of departments, such as IT, Risk and Compliance, and HR,” Jeremy continues. “Most importantly this person must be able to break through the traditional departmental boundaries to execute cross-organisational culture change.”

Crawford notes that companies are putting more emphasis on risk culture, especially those in the financial services, which are under regulatory pressure.

“Focusing on the technological barriers is necessary but not sufficient, which takes you to the whole issue of risk culture,” he explains. “How do you get people to be aware of cyber risk at all times, particularly those with access to valuable data or valuable assets?”

5) Are we constantly improving our understanding and implementation of cyber security? 

“Breaches like that of TalkTalk are big news for a week and trigger discussion. However, there is a worry that as the headlines fade so may vigilance,” says Estella. “Cyber security can’t be something ‘over there’ in the IT function. Threats frequently change so you need to constantly update the information at the board level.”

Boards should discuss cyber security at least on a quarterly basis and every board report should have a risk update and commentary of assurance.

Jeremy comments: “With the significant number of cyber breaches this year it’s clear that, even in these modern digital times, organisations are not properly taking account of the potentially devastating effects on their share price, reputation, and especially customers. It should be a top five item on the risk register.”

By Dawn Murden, Editor, Advisory

Do you agree with the questions posed above? Would you ask something different? If you have an opinion you’d like to share, please email Dawn at:dawn@criticaleye.com

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Reinventing the Role of the HRD

In the face of new technology, shifting demographics, the need for greater diversity and international competition, the boards of global companies expect a lot more from the Human Resources Director (HRD). While process and compliance matter, the fact is that the HRDs which provide the most value are the ones who understand why the talent and people agenda must be mapped to the business plan.

Matt Stripe, Group HR Director for food company Nestlé UK & Ireland, says: “The transactional element of the function can’t be ignored. You have to undertake performance development reviews, pay rises and so on, but that’s not the stuff that adds value to the organisation.

“What businesses are really looking for now, and I think line managers and business leaders are far more people-savvy than they’ve ever been, is for HR to participate in determining and shaping business strategy.”

Yetunde Hofmann, former Global HR Director for Imperial Tobacco, agrees that the “traditional terrain of HR” of policy, well-being, employee relations and health and safety, are not going to disappear. At the same time, because of HR’s critical role, it will need to align its agenda so it’s simultaneously operational and strategic.

In essence, it’s having the ability to facilitate the development of an organisation’s capabilities and culture in order to deliver on strategy. Debbie Hewitt, Chairman of retailer Moss Bros, comments: “HR Directors are increasingly around the top table… If you’re having the debate about whether they should be, you’re 20-years’ behind. Great HR Directors have a huge contribution to make in many places across the business.

“The challenge for a HR Director is to make sure they’re not at the board table just for HR. I take it for granted [that] they will do a brilliant presentation on talent, succession and HR strategy. Where I get massive added value from a strong HR Director is when they contribute to issues other than those specific to HR, such as if there’s an acquisition to be made or an investment – they can bring a unique perspective.”

Stuart Steele, Partner for Human Capital Consulting at professional services firm EY, says: “Chief HR Officers [CHROs], HR business partners and subject matter experts need to understand context… [and] have an appreciation of the organisation’s strategy, its competitors, [the wider] economic trends and how these are forecast to impact [the] current and future workforce. I meet practitioners who demonstrate this capability on a daily basis – however, they are probably still in the minority.

“Interestingly, we are increasingly seeing the appointment of CHROs who have not come from the HR function… In part, I believe this underlines the importance being placed on understanding business strategy and operations. As good leaders, these individuals are expected to be able to mobilise the HR function to develop and execute people initiatives in direct support of the business strategy and plan.”

Deborah Cooper, Director at search firm Warren Partners, says: “The strongest HR directors have had experience outside the HR function… They tend to have more business credibility and ask different questions, rather than having a narrow skill-set purely through HR. Those who are rounded and have broader business experience tend to be meeting demands more effectively.
“The most effective HRD is one who can bring strategic thinking, real enterprise vision and business understanding and not one who’s necessarily technically strong in siloed skill-sets.”

The role will continue to evolve in this manner, especially as the more process-driven elements of the function become easier and cheaper to outsource. For many HRDs, the question has to be: Unless they are involved in harnessing capabilities and culture to deliver against strategic goals, what value are they really adding?

A person of influence

The use of data and proper information management are a prerequisite for efficient HR functions. For Matt, the insights provided by technology to enhance performance need to be watched closely: “It’s exciting to think what analytics will give us in a very short period of time – we have bits of it, so I can pull off good information now but in the future, and we’re probably only talking a couple of years, you’ll be able to look at so much more.

“It won’t just be whether a business leader is delivering on their results; you’ll be able to add the 360 degree evaluation to that, plus some others tests to check on emotional and social intelligence, including an ability to measure employee stress levels. It will be a lot more holistic.”

Nicola Pattimore, HR Director for business process outsourcing concern Equiniti, comments that “the use of data analytics to help drive decision-making has increased hugely”. However, in order for this to be meaningful, HRDs need to be commercial in their thinking and strong-willed when presenting information to the top.

If this isn’t the case, there is the danger of data simply being used to create added layers of bureaucracy, or for HRDs to shy away from discussing harsh truths about performance. “It can be a lonely job because often you’re having to act as the conscience of the business, challenging senior leaders and sometimes telling them things they might not want to hear,” says Nicola.

“When you’re sat at the table with a CEO, CFO and COO, you need to be able to inform and help make strategic decisions. A lot of that will entail providing a perspective on people, but you need to have that impact and influence.”

Charlie Wagstaff, Managing Director of Corporate & Public Sector at Criticaleye, comments: “While being technically and commercially competent, effective HRDs are unerring in their focus on how talent can be utilised to deliver against the business plan, both for the short and long term.

“The very best HRDs are distinguished by their ability to collaborate and form partnerships across an organisation – they understand how to influence the CEO and the board.”

It’s a case of having a full appreciation of what levers need to be pulled in order to improve performance. Stuart says: “I aspire for CHROs to contribute to the determination of business strategy, however, where they can really come into their own is during the development of the organisation’s business [plan]…

“CHROs can also challenge untested assumptions around the business… As an example, if an organisation is [setting] up a new business in a new geography, should they implement along the lines of the existing operating model, or use this initiative as an opportunity to adopt a different approach?”

The difference in value lies in a HRD being involved in the formulation of plans, as opposed to merely responding to operational necessity. While some HRDs are functioning at this high level, it’s evident that others have a long way to go.

I hope to see you soon

Matthew

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