The CEO’s Biggest Ally for Building an Amazing Executive Team
Building leadership teams is most successful as a team sport. High-performance leadership teams don’t necessarily materialize after highly talented executives are recruited, and they don’t necessarily evolve as team members get to know one another. Instead, a great top team is designed, recruited, fine-tuned and upgraded.
Originally posted on Forbes online: https://www.forbes.com/sites/robertsher/2015/01/19/the-ceos-biggest-ally-for-building-an-amazing-executive-team/
Building leadership teams is most successful as a team sport, as private equity firm Genstar Capital has found in its 20+ years of business. High-performance leadership teams don’t necessarily materialize after highly talented executives are recruited, and they don’t necessarily evolve as team members get to know one another. Instead, a great top team is designed, recruited, fine-tuned and upgraded. The person with the time, training, focus and responsibility to partner with the CEO on this critical endeavor is the chief human resources leader on the executive team.
Genstar should know. The San Francisco-based PE firm has 16 companies in its portfolio. And while the sole focus of PE firms is on improving the financial performance of its companies quickly, Genstar holds developing management as its top priority and a core tenet.
Katie Solomon, who joined the firm in 2011, is the director of human capital. Her mandate is to partner with CEOs to ensure that the c-suite and boards of all 16 Genstar companies are ideal for the growth challenges they face. Yet, in accelerated growth situations common in private equity backed companies, most CEOs are stretched for time given innumerable competing priorities. Without someone in the C-suite dedicated to developing great leadership teams, they often find themselves reluctant to shake up the status quo and can be tempted to tolerate a dysfunctional team.
Yet not every HR leader with a lofty title has the interest or talent to play this crucial but difficult role. Nor is every CEO willing to partner with their top HR leader to this end. So much of the time, midsized company CEOs build leadership teams on gut feel with hit-or-miss results, costing the company millions in bad decisions and lost opportunities. Without a focused, highly experienced human capital leader whose charter is to drive the building a high-performing leadership team, CEOs take a much higher risk of an under performing company.
While most midsized firms don’t have a PE partner that supplies such talent management support, they can do it on their own. Three steps will get them moving in the right direction:
Hire the Right HR Leader
Before choosing your new HR leader, create the right description for the job, one which emphasizes building a first-class leadership team as the number one priority. Require verified past performance in building great executive teams. This HR leader must simultaneously counsel the CEO on hiring, firing and assessing the top team, while at the same time building trust as a peer with those individuals. If she excels, a CEO may make her responsible for designing changes to the board together with the CEO, even when the board has hiring and firing authority over her. This is a very difficult role to fill, and at times, it may feel thankless. To succeed at it, the HR executive must have exceptional emotional intelligence and a strong yet supportive approach to making changes that enhance performance.
During your search, be on the lookout for HR candidates who talk more about tactical HR issues with which they may be comfortable. These are great skills for your #2 HR executive. They are not skills that Solomon focuses on at Genstar’s companies. She’s laser-focused on making sure the top team is firing on all cylinders. Solomon says, “My goal is to keep talent management front and center, to think holistically about talent across our portfolio and to proactively build relationships with top executives in our verticals. I am kind of an ad hoc member of different deal teams and portfolio company boards. I work closely with them and our CEOs and heads of HR across the portfolio to ensure that we are thinking strategically and proactively about organizational needs and building the best leadership teams in our industries. That partnership model has worked very well.”
Choose Your Performance Level
Many companies don’t choose to grow as aggressively as PE-backed companies must do. That’s OK. Yet firms should be honest with themselves about their minimum performance level so they can evaluate their leadership team accordingly. An HR leader who is out of sync with the CEO’s growth goals will become frustrated quickly.
For maximum growth, only the best leadership team will suffice. I realize that a midsized firm without stiff competition whose CEO runs it as a lifestyle business won’t want rapid growth. For these CEOs, having some lower-performing friends and family on his team may be acceptable. But for every firm, some level of poor performance must be unacceptable, and the HR leader needs to recommend action when team members breach the minimum standard.
Listen to the HR Head’s Advice
What’s the point of hiring an expert if you don’t listen to her advice? Your HR department is no different. If you’ve retained a strong HR leader and are clear about the level of performance you require, then you must listen and take action even if their recommendations are difficult. That’s not to say CEOs must act on everything their HR heads tell them to do. But developing a great team should be a CEO’s highest priority. That means giving it attention, resources, and action. A great leadership team is the foundation of high performance.
One company in the Genstar portfolio—Acrisure, a Grand Rapids, Mich.-based insurance brokerage—needed to strengthen its C-suite after acquiring eight companies in four months. “As we spent more time with the CEO, it was clear that while he is fantastic, there was no way he could continue the torrid acquisition pace without a larger leadership team,” Genstar Managing Director J. Ryan Clark, also board member of Acrisure, told me. “Given our experience in other portfolio companies that grew rapidly through acquisition, we encouraged him to build his team and delegate.”
Acrisure CEO Greg Williams fully agreed. “Genstar clearly understands the challenges of a CEO who wants to grow aggressively. They place a high emphasis on having the right people in the right chairs at the right time.”
It’s a lesson that Genstar has learned over its 20+ years, especially in acquiring and merging small firms in highly fragmented industries (so-called “rollups”). “A high-growth firm executing a rollup can’t just do five acquisitions then get bogged down,” Clark said. “It has to become a continuous acquisition machine. I told Greg, ‘Let’s formalize a leadership hiring plan at the board level. By the way Katie can work with you on that.’”
Williams welcomed the partnership with Solomon to build out and optimize his team. “She was crucial. Her human capital expertise helped us justify the corporate investment to grow the executive team as the company grew,” Williams explained. “She helped frame what we really needed, then managed a lot of the recruiting firm interaction, initial outreach and screening for the CFO, COO and general counsel hires.”
A strategic HR leader can stand back from the frenetic day to day activities and provide a much-needed perspective on optimizing the leadership team for where the firm is heading, not for where it is now.
Great Leadership Teams Don’t Last Forever
Teams need constant attention. Sometimes key players leave. Companies grow, requiring new skills and often new talent. Circumstances change, requiring different approaches. The CEO and HR leader should regularly assess the performance of each executive, coaching them on how to improve, or identifying where new blood is necessary. Moreover, such HR leaders should constantly nurture an external bench of executives who are ready and waiting for a call.
It’s a job that Solomon relishes, one whose demands keeps her refreshed. “I stay very close to what is happening in each of our companies,” she said. “We spend as much time hunting for great leaders as we do hunting for great investment opportunities. We have a lot of internal discussions about our leadership teams. How can we best support our CEOs? Given growth or new initiatives, are there new roles we should create to give the CEO more leverage? Do we have gaps we need to fill? Are there industry experts in our network who could provide support as Board Directors?”
High-growth firms quickly run out of leadership bandwidth. In many cases, CEOs lack the time to hire or train, which kills medium-term growth prospects. A strong HR leader who focuses on building and maintaining the right leadership team can serve as a crucial ally of the CEO. Such HR executives ensure the leadership team is pulling the firm forward, rather than struggling to catch up.
If investing in top HR talent is good enough for PE firms that must deliver outsized returns to their investors, it’s likely good enough for other midsized companies as well. CEOs are well advised to steal this page from Genstar’s playbook and make it theirs.
Tags: finding and retaining talent, human resources, leadership acumen, leadership infrastructure, mentoring leaders, people practice, senior leader development
Robert Sher is founding principal of CEO to CEO, a consulting firm of former chief executives that improves the leadership infrastructure of midsized companies seeking to accelerate their performance. He was chief executive of Bentley Publishing Group from 1984 to 2006 and steered the firm to become a leading player in its industry (decorative art publishing).