Understand upward transparency. From a CEO perspective, everyone knows that to build trust,
you earn it by setting the right
goals and you deliver on that. So
the variation on that is the importance of looking at that through
the lens of the board, and it’s
how the CEO and the management team set the right goals for
the board that are realistic.
Oftentimes, to get the highest
possible valuation, you set goals
that have hockey-stick growth,
and it’s not reality. And the new
investor comes in, and you fail
to meet these goals, and you’ve
just lost your credibility.
Another element of transparency is really making sure that you
can be predictable. It’s all about
being able to be predictable in
what your growth targets are
going to be and then hitting those
growth targets consistently. And
for many private companies,
that’s a very difficult thing to do.
Consistency in hitting the right
target is all about creating metrics in whatever the area is that
you’re trying to get more accuracy in your forecast. So if it’s a
revenue issue, then having a
well-defined structure for how
many leads do you have to have
in the pipeline to convert to
how many proposals to convert
to how many meetings with a
CEO, that converts to how
many closed pieces of business.
Anybody that is thinking about
taking on private equity has to
be able to think through how
they are going to be able to realistically deliver liquidity to the
investor. So you don’t go talking
to investors until you’ve got a
very clear picture of how you’re
going to make liquidity happen
for them.
It goes back to what I mentioned earlier: Entrepreneurs set
themselves up for failure when
they draft these business plans
and have hockey-stick growth.
Learn to wear two hats. If you
think about a founder entrepreneur, as I have been, you have
your CEO hat and your shareholder hat. The board looks at
everything through the shareholder hat; they don’t look at it
through a management lens.
So there are many situations
that come up where it’s necessary for someone who is both to
strike a balance between those
two roles. It’s important for the
board to see that you’re striking
the right balance, that you’re
ready to sacrifice what might
even be in your near-term interest because, oftentimes, as a
manager, that’s what you have a
tendency to gravitate toward,
when the shareholder hat is really more of a longer-term interest.
When the board can see that
you are embracing their goal,
then that increases confidence
and trust in your leadership.
And you need that confidence
at the board level so you can
stay in control instead of being
jettisoned to the sidelines
because you’re inconsistent
with the direction that the board
desires.
HOW TO REACH: TriNet Group Inc., (510) 352-5000 or www.trinet.com
