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Brian Ruder is a Partner with Francisco Partners, and focuses primarily on investments in the software and services sectors. Mr. Ruder serves on the board of directors of Foundation 9 Entertainment, GXS, Mincom and Primavera. Recently, he had lunch with Ben Anderson and shared his ideas on the “leading indicators” of successful first time CEO’s in Private Equity backed companies.
We talked about the glut of CEO candidates in some areas that means Private Equity investors are forced to hire “first time” CEO’s. There is risk in all hiring, but when an executive is untested and unproven, the assessment prior to hire is important. I asked Brian what he does to manage the hiring risk and if he has a “leading indicator” list.
Brian does believe that there are leading indicators that over time and formed a pattern in successful hires. Brian’s mentor, Warren Hellman, (Mr. Hellman co-founded Hellman & Friedman in 1984, is the Firm’s Chairman) the “Warren Hellman gut check”. Six weeks after the hiring of a CEO or senior executive, Mr. Hellman would make a gut check – a quick analysis of the executive’s strengths and weaknesses at that point. Brian says that this is usually a long enough period for themes to emerge and a short enough period to do something about the gaps. He believes in confronting the issues head on and quickly is healthy for all parties.
Here is Brian’s leading indicator list:
- The best communicate well – internally and externally
- They come to the Board with solutions rather than naked problems
- They are well prepared – always have the detail and analysis to support decisions
- They are able to engage the Board in advice and support – there is no need for the Board to manage the executive
- They lead vs. manage – they tend towards influencing people and focus on vision, inspiration, motivation, relationships, teamwork and listening
- They are open to feedback and engage in real authentic conversations
Steve McCluski served as Senior Vice President and Chief Financial Officer at Bausch & Lomb Inc. until his retirement in 2007. He currently serves on the boards of ImmunoGen, Inc. Indevus Pharmaceuticals, Inc. and SMSC’s. He spoke to Buster Houchins about how senior executives should look at board opportunities as they rise to the top of their organizations.
Steve believes that you should pick a board that you will learn from – either it’s a field that you are interested in or an industry you are interested in. However he cautions that you also want to be in the position that you know you can contribute.
He then advises you to look closely at the current board. How comfortable are you with the board members as people? How qualified do you think that they are? What will your relationship with the CEO be like? “I have seen situations where the CEO will/isn’t really looking forward to the board meetings. He or she doesn’t want to use the board but just looks at them as a necessary evil. That’s not the kind of situation where you get involved in long term. You hope to have a situation where the CEO respects your views, the other board members respect your views and you can contribute.”
Steve’s counsel is that if you get comfortable with these issues then you go on to other things such as the governance procedures. Do you feel comfortable that it is an ethical company with a lot of the integrity? Do they have the processes and procedures in place? Do they have a future?
Of course as you go through the interview process, there are other issues you should look at but at the heart of it all, if you follow the above process, you will find yourself on a board where you can both contribute and gain from the experience.
If you are already on a board and are being invited to join others, how many should you accept? Here is Steve’s opinion: “I think if you are active business person probably one maybe two is probably the limit because when faced with a crisis, board work can be time consuming. If you are semi retired, I personally feel that three public boards and a couple of private boards is adequate. Any more than that and you are starting to be stretching yourself a little thin. You will run into scheduling difficulties. You won’t be able to devote 100% of your time to all the boards. You will not be an active participant and you would be there in name only and not really contributing.”
