Category Archives: Governance and Strategy

Best Practices for Hiring an Interim CEO

Having run several businesses, I’ll say that the process to being a successful CEO in an interim situation includes attention to several key areas. But the change for the owner who is hiring the interim CEO is significant. This article outlines the foci of an interim CEO and also lays out the best practices for the ownership group.

People

There is a plethora of relationships that need attention by the CEO, whether s/he is interim or permanent. The first is his relationship with the ownership group and the Board of Directors (if the board exists in practicality). It is key that these relationships be strong and supportive from the beginning of the engagement. But it is also true that the ownership group and the Board of Directors need to “get out of the way” of the CEO and let that individual run their company. When owners in closely held businesses keep stepping on an interim CEO by making decisions outside their new role (whatever that role is), they “step on” and can, at times, cut the legs out from under their interim CEO. These engagements don’t last long, for obvious reasons.

The second relationship is with employees. Why should they follow you? Why should they trust you? Why should they follow you? What is the direction you’re taking the company? What is your plan? These are legitimate questions that only the CEO can answer and they need to be discussed with the employees in an open, honest way.

The third relationship is with vendors and supply chain influencers. If this business is large enough, a Chief Operating Officer will likely handle these relationships. If it is a smaller company, the CEO will be managing these relationships. A company needs strong supplier relationships in order to thrive. If the previous ownership group or CEO has damaged these relationships through untimely payments or interpersonal dealings that were negative, the new CEO’s presence will be a welcome breath of fresh air.

Depending on the situation, other relationships will need to be addressed, such as media, trusted advisors, partners and so forth.

In short, the CEOs job is one of building positive relationships. If they cannot be built properly, the interim engagement will not succeed.

Potentials

Every organization has potentialities that are unleveraged. The question is not whether they exist, but where they are and what opportunities to they represent? In discovering an organization’s potential, one will also uncover (perhaps systemic) problems that need to be resolved. In other words, what are the problems we must resolve in order to pursue new opportunities. These two elements – opportunities and problems – usually exist together. An interim CEO will need to discover both and then figure out A) is the pursuit of the opportunity worth the cost (financial, cultural, systems and so forth) of solving the problem? Interim CEOs are usually presented with tradeoff decisions where the value of the “trade” is often not fully understood either because the interim CEO simply doesn’t have the depth of experience in the organization that is needed or the systems and people in the organization are so dysfunctional that the information needed to fully understand the trade is not available.

For example, one organization had the opportunity to move their existing product line into a new customer vertical. But the problems to resolve in order to pursue this opportunity were twofold: A) the products would need to be redesigned to meet this vertical’s specific requirements and B) a long-standing relationship with a reseller in that vertical that represented more of a good friendship with the family that owned the business. Moving into this new vertical would mean permanently damaging that relationship and then spending resources on redesigning their product. Overall, it would take 6-9 months before any sales were realized. Was the tradeoff worth it?

In this true story, I concluded the tradeoff was worth it and authorized the sales team to move forward. We resolved the relationship issue by offering this individual’s company an opportunity to participate with us. We resolved the design issues through normal processes by gathering requirements and ensuring we had the proper specifications against which to design. Before I came on board, the family was unwilling to consider or discuss going into this vertical because the personal relationship with the reseller was long-standing. An interim CEO needs to understand the emotional dynamics of a situation before taking action. What he will discover is that most of the long-standing problems in an organization exist, in part, because of emotions within the leadership he is replacing and as a result, the potential of the organization is never fully realized.

Processes

How we get things done is a result of our processes, whether or not they are codified in writing. Healthy management has healthy processes that are both repeatable and lean. An interim CEO will find that he likely is inheriting broken processes that need to be fixed. In our technology saturated world, this usually means the computer systems are either outdated, disconnected and/or inferior. In niche markets, you’ll find that industry-specific technology platforms may be immature, regardless of which vendor is writing the code.

When computer systems don’t talk to each other, you’ll necessarily have manual processes to move information from one system to another. Those manual processes represent your Centers of Mistakes. Expecting people to get “it” right every time is nonsense. People make mistakes. Computers execute code. The two are not synonymous.

Fixing processes may mean capital outlays. An interim CEO will need to understand what costs are recovered from improving the processes. Some recoveries will be obvious – others will not. Estimates may be based on judgments that come from experience. In the end, there will be a decision and the interim CEO may need to work hard to make his decision the right one.

Cash Management

Like it or not, the first thing we do at Platinum is get our hands around cash using the Break Even and our Cash Flow Forecast. Coming into a business as an interim CEO, one must understand the company’s cash position because almost all decisions involving either spending or saving cash. Usually, it is not as good as what was first presented. Knowing how to stretch vendors, how to work with the bank and so forth is essential to the success of an interim CEO.

What the Business Owner Needs to Understand and Do: Best Practices

If you’re a business owner and you’re hiring an interim CEO to run your business, you need to understand the following:

  • You’re adding (what is likely an) unanticipated cost to your budget. Interim CEOs are not cheap. They parachute in on quick notice, are handed difficult problems to resolve and they rarely even get a “thank you” from anyone in the organization. Make sure you get a great ROI on this investment by doing what you need to do (more on this in a moment)
  • Your world is about to change – dramatically. Do not hire them if you expect him to simply do what you were doing. Only hire him if you need significant change in order to solve significant problems and achieve big opportunities. Do not expect that much will stay the same in your business. Some of it will, but more likely, most of it will not. Your culture is going to change. Processes are going to change. Cash management is going to change. Problems are going to be resolved. Key relationships are going to shift to this interim CEO. Your world will change.
  • You’re no longer in charge. I can’t stress this enough. If you’re the owner and you’re hiring an interim CEO, then understand you’re no longer in charge of your business. Your interim CEO is. If you get into a power-struggle which him, you’ll win because you’re the owner. But you’ll also lose because you’ll either leave him in place but render him ineffective or you’ll let him go and will have wasted serious dollars on his tenure. If you’re not ready to give up power in your business, then don’t hire an interim CEO. If you enjoy the power and prestige of being an owner, being in on all the decisions, telling others what to do – and you can’t let all this go – then don’t hire an interim CEO. It will end up being an exercise in futility.
  • It’s no longer about you, it’s about your business. An interim CEO will be there to improve your business, not your ego. He will make difficult decisions, some of which you were unable or unwilling to make. His focus, if properly placed, will be on improving the value of your business.

What you need to do is pretty simple but often very difficult to do:

  • Empower the interim CEO to do his job well. This means giving him clear spending authority, hiring/firing authority, contracting authority and so forth. What would a CEO normally have in terms of power and responsibility? This is what you give to your interim CEO
  • Have clearly identified, measurable goals for your interim CEO to achieve. Remember, he is interim, which means he’ll be there for a few months or even a few years. What is he to accomplish? Hold him accountable to these goals.
  • Get out of the way and don’t meddle in his affairs. Hold him accountable to achieve his goals. How he achieves his goals is up to him. Don’t micromanage and don’t meddle in his day-to-day work. You need to get out of the way. If you’re an owner and yet your position reports to the interim CEO, then understand that you cannot put on your owner hat during the day. Stay in your swim lane and don’t cross over into your CEO’s swim lane. Have the self-control and maturity to put your owner hat on only during the Board meetings.

Summary

Hiring an interim CEO can be a positive experience for you and your business. Interim CEOs can often accomplish goals that owners of closely held businesses cannot. An Interim CEO is a great idea when a family is transitioning the business but the next generation is not ready to lead or when the business needs to be turned around or when the current owner has a health event and you need someone to step in and run the business. Interim CEOs bring a wealth of experience and knowledge that an owner will never have. But hiring an interim CEO will also ask the owner to step outside his or her’s comfort zone and relate to his/her business in a fundamentally different way.

Bill English

When you Think about your Business, Think about the BOSS

When most people think about their boss, they think about an individual. Some bosses are great – others – not so much. But in this post, I want to propose that a Christian Business Owner should use the BOSS as a way to think about the fuller system in which their business exists and interacts.

You’ll recall that one of the four purposes for business is Productsthat business exists to provide a means to produce goods and services that allows the community to flourish. When one considers the ripple effects of a business within the broader system context, it easy to see how attention to delivering products and services that builds-up the community is serious business.

So, what is this larger system? It’s called the BOSS (Note: I am using this term as it is used in the training materials published by Interpersonal Communication Programs, Inc. 800-328-5099):

Business

Others

Self

Stakeholders

A comprehensive look at any business will include consideration of at least these elements:

  • Cash flow
  • Break even
  • Profitability
  • Process
  • Product and Service mix
  • Organizational structure
  • Plant and equipment
  • Employee morale and satisfaction
  • Risk mitigation
  • Governance
  • Business Development
  • Core Values
  • Short and long-term goals
  • Strategic plan

But often, the ripple effects of the business are not considered – at least not in a strategic sense. I would suggest that the wider system includes:

  • Extended family
  • Customers
  • Partners
  • Vendors
  • Shareholders
  • Board of Directors
  • The general community
  • The next generations (if family owned)
  • Church, ministries and charitable organizations supported by the payroll and profits of the business

When we consider the larger BOSS system, we start to realize that a single business with 40 employees (for example) doesn’t just touch 40 families, it like touches 100 or more families to one degree of intensity or another. Each part of this system contains its own critical information. In order for your business to function well, all parts of the system must be in place, functioning as they should. For example, if you’re not good at finding reputable vendors who deliver products and services at a decent price, then you’re likely to overpay for goods and services or purchase inferior products or services. Supply chain management is a serious aspect of having a well-functioning business.

What you’ll find is that your actions and decisions will seldom involve or impact only one part of the system. And if differences across the system are not managed well, the potential for conflict will only increase.

So, the next time you take your team off-site to do long-term planning, place your business at the center of the larger BOSS system and take a look at the ripple effects of your business within the BOSS system. Then ask the difficult question: is God pleased with the effects my business is having in the marketplace? Do I have a well-functioning system? He’ll answer you directly and clearly. Celebrate what you’re doing write and ask the Lord (and perhaps some outside advisors) what you can do to improve.

Bill English

Pursue Righteousness before a Tax Code Change

In a recent Wall Street Journal article, In Illinois, Tax Increases Become an Article of Faith, Heather Wilhelm outlined a current effort in the State of Illinois to have their flat income tax system replaced with a progressive income tax. Quoting extensively from this article:

“In Illinois—a state plagued by epic budget woes, a pension crisis, byzantine taxes and the nation’s second-highest unemployment rate—politics is rarely associated with godliness. Four of the past seven governors, most recently Rod Blagojevich, have been sent to prison. Locals will tell you that corruption is practically a sport. But on April 8 more than 500 Illinoisans showed that they, at least, were keeping the faith.

Donning orange T-shirts reading “Faith in Action,” a coalition of religious groups flooded the state capitol in Springfield, singing hymns, shouting “Hallelujah,” and praying for higher taxes on the rich. Their goal: replacing the state’s long-standing flat income tax with a new, progressive “Fair Tax.”

“The gospel tells us that ‘For everyone to whom much is given, much will be required,’ ” Rev. Jason Coulter, a Chicago pastor and board member of the Community Renewal Society (which organized Faith in Action) told me.” I’m called by my faith tradition to speak truth to power when I see injustice being done. And a flat tax is an injustice.”

“This is a moral imperative,” said Rev. C.J. Hawking, executive director of Arise Chicago, a workers’ rights group. “There are over 400 passages in the Bible that talk about God’s special concern for the poor. Our current tax system, which favors the wealthy, is so off kilter, so skewed, and so contrary to the vision God has set before us.” “

From the Community Renewal Society web site, we quote:

“”The Illinois Policy Institute is being dishonest when they claim a Fair Tax is anything besides a tax cut for the overwhelming majority of Illinoisans.  The smoke and mirrors about future rates if we drove off the fiscal cliff are designed to confuse and scare voters, all in an effort to protect an unjust status quo,” said Rev. Jason Coulter of Ravenswood United Church of Christ.

Documents exposed in a December news report revealed that the Illinois Policy Institute has been serving as a conduit for the national State Policy Network, a group financed by America’s wealthiest corporate interests, including billionaires David and Charles Koch. The documents revealed funding to IPI from the group as earmarked for the purpose of making a Fair Tax “politically toxic” to Illinois voters.

“We, the citizens of Illinois, should decide tax and budget policy, not lobbyists and lawmakers backed by the wealthiest corporate special interests in America,” said Rev. Coulter.

The Illinois Policy Institute is responsible for many false attacks on the Fair Tax, including claims it would raise taxes on low- and middle-income families—claims which have been thoroughly debunked.  The truth is that a Fair Tax – implemented with a rate structure proposed by the Fair Tax Act‘s chief sponsor, Sen. Don Harmon – would cut taxes for 94% of Illinois residents, including everyone making up to $205,000.

Today’s attendees emphasized that tax relief for the overwhelming number of Illinois families and the protection of vital public priorities were both vitally important to the success of their communities.

“I can’t possibly pay any more taxes than I already do, and we won’t stand for any more cuts to my kids’ schools.  Enough is enough!” said Tammy Jordan of Shiloh Baptist Church of Waukegan.

“As a home healthcare worker, people’s lives depend on my care.  If there are any more cuts to the budget, I’m afraid what will happen to those seniors,” said Monique Cooper of the First Baptist Congregational Church of Chicago.

Rev. Coulter noted the unfairness of Illinois’ current tax and budget system that requires low and middle income families to pay a tax rate that is two to three times more than that of the very rich, factoring all state and local taxes paid.

“This is backwards.  Our faith calls us to fight for a Fair Tax because we believe in a community where everyone pays their fair share.  Jesus said, ‘to whom much is given, much is required.'”

Core Issue of Fairness

After reading these two articles, it seems to me that the core issue is really not one of taxes, but one of fairness. People inherently want what is “fair”, but how that concept is defined can vary widely. One wonders what the Bible has to say about the concept of fairness. Do the Scriptures speak to this concept such that we should inform our own perceptions and concepts first from the Bible? Are disciples of Jesus Christ called by God to pursue fairness? At what point do we accept injustice as part of our call to suffer – if ever?

What Does the Bible Say About Fairness?

Fairness is something we should strive to achieve, but it will not come from political lobbying, but rather from living a righteous life. In the bible, living a righteous life is a perquisite for understanding fairness. In Prov. 2:9–10, we read: “Then you will understand what is right and just and fair – every good path”. This type of understanding only comes after one has been living righteously before the Lord (2.1-8). This is reinforced by Deuteronomy 29.15, in which we learn that when we live in sin, God sends on us rebukes, confusions and curses. Living in sin leads to confusion. It would stand to reason that one cannot understand what is fair in a given situation if one is confused. Moreover, reading and learning the proverbs of the Bible will help you and I learn and understand fairness. In Prov. 1:2–3, the writer tells us that the purpose of the proverbs in the Bible are for “attaining wisdom and discipline; for understanding words of insight; for acquiring a disciplined and prudent life, doing what is right and just and fair…” If you want to know what “fairness” is, I would point you to the book of Proverbs.

The prophets linked fairness with righteousness (Isa. 11:4; cp. Ps. 98:9) and saw that when fairness was lacking, life became tenuous and uncertain (Isa. 59:9–11; Mic. 3:9–12). Biblical persons who exhibited fairness in their words or actions include Jacob (Gen. 31:38–41), Solomon (1 Kings 3:16–27), Jesus (John 7:53–8:11) and the thief on the cross (Luke 23:40–41). Biblical injunctions uphold fairness in matters of business (Lev. 19:36; Deut. 25:15; 1 Tim. 5:18), law (Exod. 23:3; Deut. 16:19), speech (Exod. 23:1), and family relationships (e.g., Deut. 21:15–17; Eph. 6:1–9). God’s fairness in His treatment of sin was fulfilled in the person of Jesus Christ – who was unjustly accused and wrongly killed for our sins but who willingly bore them because of His great love for us.

Fairness and Suffering

The Bible tells us that suffering is part of our call to discipleship: “For it has been granted to you on behalf of Christ not only to believe on Him, but to suffer for Him.” (Phil 1.29). Suffering for the gospel is foundational to our call to believing in Christ. When (not if) we suffer for the Gospel, we’re going to live with injustices committed against us (and Christ – John 15). Suffering and injustice often go hand in hand. For the Christian, we look forward to the day when God will make everything right and will true justice to all – including you and I.

What is the role of Government?

The Bible doesn’t endorse any particular form of judgment, though we do know that in the future, God’s form of government will be a righteous dictatorship. In the Bible, God is the ultimate ruler, and He gives the responsibility to execute justice to the king (government), particularly for the weak (1 Kings 10:9; Prov. 31:8–9; Ezek. 34:1–6, 23). However, government needs limits; ruling is a function, not a status or class (Deut. 17:14–20). Government is divinely established to encourage and maintain what is beneficial and to discourage what is harmful and disruptive. Hence, believers should honor and obey governing authorities as instituted by God (Rom. 13:1–7; Titus 3:1–2; 1 Pet. 2:13–17). But let’s remember that all governing authorities are made up of fallible men operating in a world that is intrinsically opposed to Jesus and hostile to his followers.

Pursue a Righteous Life First

There is nothing wrong with lobbying the government to right a wrong – to bring justice to an unjust situation. But it seems to me that Christ took a position of counseling us to accept the powers that be while focusing us on a transcendent commitment to God alone. There is a place for Christians to lobby our government to bring justice and fairness to an unjust situation, but our focus should be on the church righting the wrongs whether or not the government intervenes. We might lobby the government, but we trust God.

As Heather wrote in her article, corruption is nearly a sport in Illinois. I merely ask the question: Are there louder, more persistent calls to our society to repent of our sin and live in righteousness before God? I suspect that Reverend Coulter and his friends would disagree that a call to a progressive tax and a call to righteousness are two different things. But I don’t see how they are synonymous. It seems to me that for the Christian, lobbying the government for changes in the tax code should take a back seat to calling our nation to repentance. Such a call would include repentance from hoarding wealth and oppressing the poor by the wealthy. But it would also include a call to repentance from the holocaust of our age – abortions or sexual promiscuity or the forsaking of our commitments in our families and community through fatherlessness and divorce or even our own arrogance in believing that we are somehow better than others. Is it not true that the millions of abortions are an anathema to God? Should we not be lobbying our government to change the law to protect the unborn, even at the expense of taking away a woman’s right to choose? Are not the lives of the unborn worth more than a civil right? Is there anywhere in the Bible where a civil right is elevated over the sanctity of life?

As I read the home page of the CRS web site and then read the WSJ article, the situation comes across to me as a political one wrapped in religious clothes. Hence, my response to these groups in Chicago is simple: be sure that God has called you to lobby the Illinois government for this specific tax law change. Be very sure of His specific call on your life to do this. And above all else, pursue God and a righteous life first. Without this, you (and I) will never know what “fair” really is.

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