In 2004, I purchased my first company, a wine packaging business fast approaching $20 million in revenue, growing 10%+ per year in unit volumes with profitability surpassing $4 million. With the benefit of time, in the early days of running this business I truly thought to myself, “Life is Good”. Anyone looking at me from the outside world would likely think most, if not all, of the necessary proverbial “check boxes” were marked for me professionally, at-the-time:
Profitable/Growing Business. CHECK!
$4B+ Private Equity partner. CHECK!
CEO Title. CHECK!
Harvard MBA. CHECK!
Experience at GE’s Crotonville Campus. CHECK!
Wall Street, PE and M&A experience. CHECK!
What no one knew (myself included), or fully comprehended at the time, was that I was a “Young” CEO. At the time, the concept of a “Young” CEO in 2004 was not topic du jour and was little understood; not actively discussed amongst Boards of Directors. The Search Fund CEO model hadn’t yet exploded in popularity and growth and “twenty- or thirty-something” CEOs were not yet prolific. In fact, twelve years ago being a “Young” CEO was simply a risk factor identified by my PE fund; notated in an internal investment report.
During that period of my life I was “Young” at many levels. Age-wise, I was 33. Experience-wise, I was the equivalent of an early teenager: feelings of immortality and consumed with lots of new ideas. At times, I imagine my youthfulness was quite refreshing to a business whose idea of technological adoption when I arrived was migrating from answering machines to a company-wide voicemail system. However, what was sorely missing on my part was significant volumes of business judgment – which, at its core, is simply a collection of experiences that only time would allow me to develop. I had no REAL experience with how to effectively manage many aspects of my (newly acquired and rapidly changing) business that included:
- Managing a Board of Directors with two private equity Partners, a publicly traded company CEO and Board observation rights held by a $200B+ multi-national debt provider;
- Dealing with the former CEO of my company with decades of industry experience and who was now sitting on my Board of Directors; appropriately skeptical at every turn of my operating and strategic decisions;
- Doubling the manufacturing foot-print of our operation to keep-up with continuous growing demand;
- Contending with eroding EBITDA margins due to the fact that 2/3 of my variable costs within my COGS were denominated in Euros – which moved 15% – 20% swiftly and negatively against the US dollar at the time with little/no ability to contractually pass along necessary price increases to customers.
As a CEO you MUST perform! The business, competitive dynamic and my investors weren’t going to spend time waiting for my judgment to develop. Debt obligations needed to be met, IRRs achieved and many operating challenges required my attention. All of these issues needed to be met all the while not knowing that I was a “Young” CEO!
Why is it important for a CEO or a Board of Directors to fully embrace and understand this concept of a “Young” CEO? It could mean the difference between life and death for a company!! Don’t believe me?
The most recent and clear example includes Zenefits – a company with a founder/CEO that was in his early 30’s who grew the company in three short years to 10,000 customers and approaching $100 million in revenue. Today, the company is fighting for its life! Why? In an email distributed to employees by interim Zenefits CEO, David Sachs, “The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong.” This all lies squarely at the feet of a “Young” CEO. The questions that should be asked include could this situation likely have been avoided with an increased level of awareness or understanding by the CEO himself that he was a “Young” CEO? Additionally, might this have been a different outcome for the Company or the CEO if there was also an awareness, understanding and support of this “Young” CEO by its board? Unequivocally, yes!
After having bought, funded and become CEO of two different businesses, served in several Board Director roles and now Executive Chairman of a 3rd company I’m building (alongside a very talented “Young” CEO), I strongly believe there are special and unique responsibilities that demand for Board of Directors to have a heightened level of awareness and need for action to ensure our “Young” CEOs are being properly supported –experience gaps (both strategic and day-to-day tactical) need to be addressed, a more active and complete board discussion on the specific needs for their “Young” CEO needs to occur and developing an understanding of mental health needs is critical and needs to be addressed for this cohort as well.
Of course, these are not issues faced by Directors of Fortune 500 companies – they have deep, experienced leadership benches with decades of judgment and wisdom.
This is, however, a very real issue faced by the vast majority of middle-market companies; and is particularly relevant for businesses with $1 million to $250 million in revenue.
As a CEO, I always believed (as I do today) that there is a solution for any problem; however complex and daunting it might appear. Fortunately, my private equity partner was one of the biggest ($4 billion+ in assets under management) and most forward thinking PEs in the middle-market when it came to supporting its businesses – it had developed what it coined a “Toolkit” for its CEOs – providing vetted consultants that provided “key assistance with critical areas like sales and marketing, pricing optimization, lean manufacturing, sourcing, and many more.” I was lucky and grateful to have these resources. The reality, however, was even these “tools” were not adequate enough to fully support me as a “Young” CEO in all of the ways that I needed support – particularly with managing my own emotions, day-to-day key decision making and strategic initiatives.
Each CEO will have his or her own support system that works for them – some will involve specialized functional “Toolkit” providers to buttress particularly weak experience areas, others will include involvement in CEO networks that meet monthly or quarterly and yet others will need a 1:1 CEO Coach who will meet and provide availability weekly or even more regularly to address day-to-day operating issues, urgent dealings with their board or processing deep-seated fears that are prohibiting their ability to attain necessary levels of peak performance sought. Many “Young” CEOs will need all of the above to survive the climb up this steep Experience Mountain to increase the probability that they not only simply survive; but also succeed!
Is ensuring, providing or questioning that these “Young” CEOs have the necessary support systems around them to make this climb a legal or fiduciary responsibility of the board or just simply good business? Having climbed this mountain myself more than once, as well as being a key component of several “Young” CEOs support systems, my belief and experience is its BOTH!
Top Must Reads
1) Smartphones: How we Use? [Infographic]
2) Leadership Decision Making in a VUCA World
3) Executive illusion of effectiveness
4) Are Your Employees Stuck at the “Kids’ Table”?
5) Distance Training, Video Conferencing, and Other Ways to Simplify Your On-Boarding Process
6) PRO EMPLOYEE RETENTION
7) Jugaad Leadership in the Age of Executive Uncertainty or How to Implement Frugal Thinking across the Spectrum
By James Bergeron, CEO Coach and founder and Managing Partner at 108 Partners, LLC.