Stepping back: How to appoint your first CEO

No matter how brilliant or successful you have been to date, at some point of the disposal cycle you need to step away. You need to ensure that your departure from the business enhances your value rather than diminishes it. It seems mad doesn’t it? But any single member of a management team that has the amount of control and involvement that you almost certainly do, in the eyes of your acquirer, is a liability. Suddenly the imminent risk of your departure (otherwise why sell?) now serves only to diminish the value of your business.

So, 18 months ago I finally bit the bullet and appointed my first CEO. I’d love to say it has been easy, but I can’t. It’s actually been one of the hardest things I have ever done. Has it been successful? Hell yes! We’ve seen EBIT growth running at 100% year on year, but having a “second parent” to look after your baby has some significant challenges, emotional and operational.

So here are a few things that I would absolutely do, and couple that I may not.

1. Where do I start?

Well I started with my contacts, because above everything else you need to absolutely trust this person. The relationship will fall over at the first hurdle if you, or they, have the slightest doubt about either person’s integrity. Jon (my CEO) was an old client and a friend. He’d done this sort of thing before very successfully and knew our business for many years. It took us about three years to actually agree and the deal was a simple one in that his value is inexorably linked to mine, the better I do the better he does.

2. Employ someone who is much better than you

What you are trying to do here is convince a buyer that the business will continue to deliver its revenue lines and grow its IP/Asset value for many years to come - without you! Never forget that. So someone who can leave you in their wake would be a really good idea. That said; having complimentary skills is even better. Jon is a really good manager, a great negotiator and much calmer than me. Me, I'm the communicator. I drive marketing, presentations, PR, ideas, concepts, (not so calm!). Between the two of us we have become a formidable team. But remember: don't be so good at your side that it cannot be replicated by someone else.

3. Who is going to do what?

This one’s harder than you might think. Agree between the two of you where your relative strengths lie and do what is best for the business. Then when you are agreed, write it down and share between each other. That way, when you over step the mark, he’s got the agreement on paper to remind you. We have found that as long as you are both linked to the value of the business at disposal then the decisions actually become a lot more black and white.

4. Hide nothing

As tempting as out might be to say to yourself ‘he doesn't need to know about that’, make sure he does. Your candidate needs to know everything before they decide to come on board. Some of the conversations that Jon and I had were eye-wateringly honest. In my view, the worst conversation you could have with your new CEO would start with the words “if only you’d have told me about...” because from that point on they will be asking “what else didn’t they tell me!?"

So what would I avoid?

Agencies

You will spend weeks, months, possibly years trying to find the right CEO. I’m not sure how you could ever know if this person was right or not only having just recently met them. Think of my parent analogy - how well do you need to know someone before you would allow them to parent a child of yours?

Promoting internally

I tried this a few years ago and it failed. So having seen it from both sides, I can confidently counsel against it. The objectivity that a high level CEO brings along with ‘their’ way of doing things is gold-dust. Add that to a lack of any internal baggage and they can arrive in an enigmatic flurry to get started.

In my experience taking a step back has had a hugely positive impact on the company. Having someone to chew the fat with, who brings fresh insight and ideas has not only revitalised the business, but has also allowed me to use my time to drive a strong, focused future for the company and help him by interrogating his strategy and ideas from day one.

This is not something that should not be knee-jerked; it needs you to be absolutely sure. But if you are intending to hand over your ‘baby’ in the next three to five years then it is never too soon to start preparing for this change.

By Mark Roy, founder and chairman of REaD Group