The “Executive Chairman” Concept
Introduction and Overview
Preamble & History
Conceived in 2003 and developed in cooperation with the Wharton School of Business at the University of Pennsylvania, and noted Lauder Professor Emeritus, Dr. Jerry Wind and Ephor Group Inc., and its Managing Partner Garry E. Meier; this relatively new (over the past 17+ years or so) and emerging concept within the strategic management and corporate governance arena has become a “defacto” standard and a prerequisite for many institutional investors, especially for emerging service business models.
The Executive Chairman Concept will become even more of a prerequisite in the near future and a critical success factor as a result of the COVID-19 Pandemic “reset and restart” of the economy 2020, and the post-election uncertainty, as a result of an administration change.
As we march towards all the uncertainties of 2021 and beyond, what is certain is due to the complexities of globalization, rapidly changing markets, increased competition, increased regulatory influences, escalating bankruptcy rates among small businesses, etc.
Success, and in many instances Survival, will be a result of more knowledgeable, experienced, and increased skills competencies illustrated by C-suite executives.
The Executive Chairman role, simply stated, augments the gap between the skills that today's complexities, market requirements, and institutional investors require, and those that are present in the C-Suite level in the majority of small and emerging services businesses. The simple reality is:
The CEO role now has evolved into an almost impossible task!
It is well known and statistically proven when businesses commit and implement the Executive Chairman concept, the results include increased revenue growth rates, improving EBITDA performance, thus resulting in institutional-level shareholder returns, significant exit optionality, and lower execution risk profiles.
At a micro level, just within Ephor’s limited “book of business”, over the past 12 years concepts of this nature have yielded ~$1.6B of shareholder wealth being distributed to stakeholders, in just 12 business services organizations.
What is more important is that of the 55 service businesses that Ephor follows or have been involved over the years, and/or we have deployed leadership concepts of this nature; we know they not only survived “the disruptive year 2020” but no doubt will thrive and prosper in 2021 and beyond.
Of special note, numerous successful, emerging small service business organizations have utilized the Executive Chairman role not just as an extension of the Board of Directors; often in smaller organizations (<$12m of revenue) it is very effective to implement a single-person board concept, more commonly known as the “Board of One Concept".
Successful Applications & Utilization of The Executive Chairman Concept
Historically over the past 17+ years and experience has told us this concept provides the highest probability of success when utilized in environments that exhibit the following attributes:
The stakeholders have unanimously made the commitment to be a growth-oriented, “institutional wealth-creating entity”, versus just a “lifestyle” business.
The stakeholders are committed to partially “surrendering the sovereignty” to a Governance Concept that includes the Executive Chairman role and execution.
The company’s performance has stagnated or declined, which includes increasing execution risk profiles. This is especially prevalent of recent due to COVID and all the “trickle-down” vicissitudes of the recessionary economy.
The history of the company has been “Founder-Centric” and autocratic. For the good of all current and future stakeholders, a partial surrender of control and leadership aspects needs to occur.
The company historically has been too internally focused, as such the market opportunity has not been fully realized or addressed.
The company has failed to create scalable marketing, direct sales, and alternative distribution venues, beyond the capability of the Founder, or one or two pure sales types.
The shareholders and/or governance processes have proven to be ineffective as illustrated by: significant executive & key personnel turnover, failure to recruit talented senior leaders, failure in creating informal leaders within the organization, and ineffectively building the organization’s capability, capacity, and culture.
Internal Operating Management is unproven in high growth environments and is not institutionally bankable.
Operationally, the company does not illustrate the concepts of operational leverage and scalability.
The organization will require institutional capital for growth and/or shareholder liquidly initiatives in the near-term to reach its growth and wealth creation objectives.
Exit Planning & Wealth Transfer initiatives are unplanned and unpredictable
Executive Chairman “Near Perfect” Candidate Profile
The career attributes of the “Near Perfect Candidate” that have led to successful outcomes when implementing the Executive Chairman concept include the following:
Strategic knowledge of the sector, required market differentiators, and value proposition needs to satisfy current & future demand curves.
Proven experience in understanding and managing exogenous factors that influence a business and its sector. (i.e. government regulations, economic cycles, exit value attributes, etc.)
Multiple Board of Director assignments in both small emerging entities and larger entities that illustrated effective stakeholder balance, and effective governance processes.
Chairman experience in formal governance processes, where operating management have been “insiders” on the board.
Functioned successfully in an Executive Chairman or Board of One role on more than one assignment.
Illustrated CEO or C-level experience & success in strategy development and implementation that led to exponential revenue growth, operational scalability, resulting in institutional EBITDA levels.
Needs to illustrate proficiency in strategic finance, and corporate finance & corporate development initiatives.
Illustrates strong and committed values and principles, and the “highest professional standards”.
Must have been institutionally bankable in a minimum of 2 institutional endeavors.
Has successfully raised institutional capital.
Overview of the Executive Chairman Role
Work with and “mentor” the CEO and Leadership Team on the implementation of the near-term and long-term initiatives of the organization through the utilization of best practices in the areas of governance, stakeholder balance, business model development, business process development, leadership, and executive management effectiveness.
Executive Chairman Responsibilities
Provide ongoing oversight and advisory activities consistent with a “Chairman of the BOD” role, including but not limited to:
Implement Consistent Communication Rhythms and Process to all Stakeholders
Be the Company’s “Resident Expert” on Industry/Sector Trends, Exogenous and Economic factors, and Market Opportunities
Sector Representation and Sector Monitoring and Evaluation
Operational & Strategic Outcomes Evaluation
Strategy Review and Strategy Implementation
Setting of Organizational Near-Term Priorities
Monthly and Quarterly Performance Reviews with Executive Management
Organizational Development Initiatives
Tactical Decision-Making
In addition, the Executive Chairman should work closely with the CEO and the Leadership Team in developing near-term action plans and tactical initiatives to effectively implement the organizational strategy elements and achieve budgeted and expected outcomes.
Organizational Development
Provide the CEO and Leadership Team: leadership guidance and development initiatives through the utilization of Ephor’s Leadership Development Tools, which include:
The Organizational Clarity Concept
Attributes of Success for Service Company Executives
Attributes of Successful Service Organizations
Targeted Business Model Attribute Development Methodology
Ephor’s Yellow Brick Road (YBR) for Institutional Capital