What Makes a Great CEO: Part V | Executives Bill Clendenen & Michael Burcham on What Gets a CEO Fired

Anderson Williams: Welcome to Bigger. Stronger. Faster. the podcast exploring how Shore Capital Partners brings billion-dollar resources to the microcap space. This episode is part of a series in which I talk with Shore executive partner Bill Clendenen and Shore’s Chief of Strategy and Talent Development, Michael Burcham.

In this series, we’ve talked about what makes a great CEO, how a CEO should think about building a team, what strategy is and isn’t, and how to use it well. In this episode, we get down to where the rubber meets the road. We’re going to talk directly and honestly about what will get you fired as a CEO.

Bill and Michael, thanks for joining me today.

 

Michael Burcham: Always a pleasure.

 

Bill Clendenen: Good to be here, Anderson.

 

Anderson Williams: All right, Bill, what’ll get you fired as a CEO?

 

Bill Clendenen: Before we started, like, what’ll get you fired? I think it’s good to frame, you know, very quickly what the CEO’s job is and their role. And I think, you know, we talk about this at Shore a lot, but the first thing is that they set the vision for the company and drive the results. So that’s your job number one.

Job number two is to hire your team, your N-1’s, the people that are actually going to do the work, right? So I think that’s the second thing you need to do. You need to do that well.

The third thing you need to do is hold people accountable for the results that you’ve committed to.

And then the last thing the CEO does, and this is where I think the art of a CEO comes into play, is create a culture or environment for success. How is the company going to operate? What is your cadence? How are people going to be rewarded? How are people going to be encouraged? So I think those four things, setting the vision, hiring your team, holding them accountable, and then creating a culture for success are the critical pieces parts of being a CEO.

 

Michael Burcham: I agree with Bill on those. If you cannot set a vision that’s compelling, great people do not want to join you and so you fail at point two. If you hire the right people, holding them accountable gets pretty easy because they’re fully bought into the strategy. You’ve given them the right resources and they want to win.

If you do those things well, you can actually spend quite a bit of your time thinking about the culture and the environment within which people have the privilege to work. If you do those first three wrong, you’re so busy reacting to chaos that you have zero time to think about culture and environment.

So I think they cascade into a set of chaos if the first two or three are not really done well, Anderson.

Anderson Williams: And what does it look like? I mean, I think it seems pretty straightforward to say that a CEO holds or casts the vision of a company. And we’ve talked a bit in our episode on building the team about how to think through that.

What does it look like when that’s not working? How do you know if you’ve got a CEO who’s failing to carry the vision or failing to cast the vision? What does that even look like in practice? We know what bad hiring looks like in practice. We know maybe what bad culture as those things cascade down. But if the top is that vision carrier, what does that look like when it’s just not working

 

Bill Clendenen: For me and this is actually one of the top reasons why CEOs get canned. ghSMART, a Chicago based management assessment and recruiting firm, one of the top firms in the country. They have three main reasons why private equity CEOs fail and one of those is just that, right? CEOs fail to set the right priorities or initiatives.

And in addition to that, they often set too many. We’ve talked in a previous podcast about strategic planning and goal setting. And sometimes having too many priorities confuses the team, confuses the market, confuses your customers. So setting the right priorities and initiatives with the right resources is one of the ways to not get fired.

 

Michael Burcham: Anderson, I will take a slightly different approach to how do you know that the vision casting isn’t working. The majority of our companies at Shore must acquire in the first year or two. To me, if you as the CEO are failing in acquisitions, you’re failing to cast a vision that’s compelling enough that no one wants to join you.

Or You’re not coming across authentically credible and people are a bit skeptical of whether you can actually pull this off or not. So I think the evidence of having all the right ingredients to be a great CEO means you successfully get the work done in the first year or two that an acquisition based concept requires.

And the same thing would be true if your primary driver is an acquisition, but organic growth. If you can’t open the next three to five de novo’s successfully on time on budget, fill the store with customers, you fundamentally failed at casting the vision correctly. Because had you done those things, the stores would be open and you would have customers there.

So I think the evidence shows up in the failure to execute. But the vision casting is really important because it’s not just about the thing you want to accomplish. It’s also your compelling story about how you’re going to do it and why this is the right group to do it and what will be better for everybody including those acquisition parties join you and your industry and your customers if we do this.

Do that part well. You’ve cast a great vision and you’re going to have early success. You fail at doing those things and you’ll probably get fired.

 

Bill Clendenen: And I think vision casting, as Michael talks about, is critical for your hiring. And I think one of the main reasons why CEOs fail in all private equity firms and specifically in Shore is if you don’t hire the right team fast enough.

And Shore has high expectations, our boards do, our investors do, and if you’re unable to create a vision for the future, that’s real, tangible, attainable, you’ll have a hard time attracting talent to join you on that journey. And so I think the number one reason, at least I see, why Shore CEOs fail is they don’t hire the right team and the right team fast enough.

 

Michael Burcham: I think another reason CEOs get fired is not being brutally honest to where they are. You can’t kick the can down the road. If you’ve got a problem, you’ve got to say so. You’ve got to engage the board early. You’ve got to make sure your investment partner knows what’s not working. You don’t just report a problem, you report the problem and what you’re planning to do, but you actually engage your board and your investment team that if they have other ideas, let’s hear them now because this is not working and we’ve got to address it.

You can’t ignore problems and hope they go away. They never do. You have to build momentum with your team. If you don’t build momentum, you will get fired. If you’re unable to retain your talent, you will get fired. People leave bad bosses. And if you have a massive turnover problem, everyone knows it’s likely you.

 

Bill Clendenen: Agree exactly. And the inverse of that, like how not to get fired, right, is to be brutally honest about your talent, get ahead of your investment partner, get ahead of the board. The best CEOs in the Shore family are up talenting all the time, all the time. I come to ELA every year and I see new managers and teams.

I look at some of the productive turnover, right? The turnover that we want to have, because look, not everybody can go from $3 million of EBITDA to $40 million of EBITDA. So how do we scale appropriately? So CEOs need to be up talenting all the time.

Michael Burcham: I’ll give you a little story. My first company, Theraphysics, first two years, I so had it. It was great. Things were growing along. Beginning of third year, I realized this thing is outgrowing me. I had a hard personal decision to make, and that was, was I gonna talk to the board about this or is I gonna keep trying to do something until the board recognized I probably couldn’t do something? I had a great friend and colleague I trusted completely that I knew was quite capable of being a great CEO.

And I talked to the board at that meeting that while I love what I was doing, I think I would be better served as the president and running the operations and bringing in someone to be the CEO. And we would lead this company together to great success. But I was getting over my skis. I was young. I was early 30s.

I think the board kind of smelled it already. And it was almost relief around the room because I’d done so much. They wanted to respect me. They were all venture partners, not private equity. So no one of them could fire me. In fact, I was still the majority shareholder at that point, but it was almost visible, visceral relief that I’d recognized my own limitations.

We brought in someone I trusted and together, John and I. Created a massive success out of that business. And I know sitting here today that business would not have been successful had I buried my head in the sand and not recognized my own limitations as the founding CEO. Also, my experiences in working with John and that company positioned me then to successfully run the next three companies.

And I would not have gotten those reps, that knowledge and that experience had I lied to myself about where I was.

 

Bill Clendenen: I think self reflection is one of the critical skills that CEOs had, and Michael’s story there just shows that he cares more about the company than himself, and I think, you know, you have a fiduciary responsibility as CEO to your shareholders, to your employees to earn N-1’s, and that commitment came through in that story.

 

Michael Burcham: Yeah. It’s also, if you’ve got a functional area that’s not, performing. Get ahead of it. You don’t have to wait till the next board meeting for the board meeting members to tell you this isn’t working. That’s a failure. You should be planning ahead and letting the board know, hey, at the next board meeting, there’ll probably be an empty chair at the table because this person isn’t performing.

We’ve tried these things that aren’t working and um, we’re not going to allow that to limit the company’s growth. So if you wait for the board to recognize, particularly in an investor model, if you wait for the board to recognize you have functional dysfunction, It’s your company, you’re probably putting your own self at risk because boards want you to take actions, be decisive and grow this company and be a good fiduciary leader.

And if you aren’t willing to do those things, the board begins to question your ability to lead.

Anderson Williams: So just a couple of thoughts that I’ve heard and to play back for any sort of last reflections, I’ve heard brutal honesty, not trying to hide things. Being decisive, understanding and knowing your own limitations and seeing your team’s limitations and top grading and being aware and Michael and your example of where you may need to be top graded or just moved to a different role. Focus, so that it’s not all the things that are all the priorities so that nothing is really the priorities. Which the flip side of that for me is knowing what you’re going to clearly and decisively And brutally, honestly say no to.

 

Bill Clendenen: Totally agree.

 

Michael Burcham: I understand. I would add one last element to that. And that is always keep your eye on what creates enterprise value for the business. If you are creating enterprise value, it means not all your priorities, correct. You understand what you’re doing. That’s a key point of difference that other competitors cannot touch that will make your business the most valuable.

 

And if you do that, the other items you listed typically fall in place, because if your real aim is my job. here is to deliver an enterprise value that is better than even the investors expected when they first wrote this investment thesis, you’re going to win.

 

Bill Clendenen: The last thing I think I would add in terms of how you can get fired is that the expectations of the private equity firm and your board are very, very high.

 

So it’s not just the performance goals, the growth goals, but it’s the pace. And so I think when I look at CEOs that have been unsuccessful and not made that journey, they’re not prepared for the financial rigor, the pace rigor. The process rigor, they’re just not ready for it. And that may be that they’ve just been in a large company and they haven’t had to be a player coach.

 

They’ve had their HR department hire their N-1’s. Well, now you actually have to be the Chief Hiring Officer, right? You have to be the Chief Business Development Officer when you’re trying to close an acquisition, right? They’re just not ready for it. And so I think the expectations of being a private equity CEO are so high that many people just aren’t prepared for it.

 

Michael Burcham: Nor prepared to make the personal trade offs and sacrifices to do the job.

Bill Clendenen: Agreed. I got one last thing if you want them. All right, here’s Bill’s top seven tips on how to not get fired.

Tip number one, hit or exceed your performance targets. Results matter.

Tip number two, avoid surprises and share bad news early.

Tip number three, hire an A team, particularly your CFO, train and develop your leaders. They’re the key to your success.

Tip number four, lean on your Shore partner, the Shore number two, your LID and your board. They’re there to see you be successful.

Tip number five, engage your board proactively. They are your assets. They are your friends. They are the ones who want to see you be successful. So lean into your board hard.

Tip number six, embrace your founders. Shore is a very founder friendly firm. What is the founder’s highest and best use? Incorporate them everywhere you can.

And tip number seven, be yourself, be it tough or gentle, just be you. Remember, be flexible on people, but hard on process and results.

 

Michael Burcham: Amen.

 

Anderson Williams: If you enjoyed this episode, check out the other episodes in this series at www.shorecp.university/podcasts, or anywhere you get your podcasts. There, you will also find episodes from our Microcap Moments as well as Everyday Heroes series, each highlighting the people and stories that make the microcap space unique.

This podcast was produced by Shore Capital Partners, with story and narration by Anderson Williams, recording and editing by Austin Johnson, editing by Reel Audiobooks, sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Bill Clendenen and Michael Burcham.

This podcast is the property of Shore Capital Partners, LLC. None of the content herein is investment advice, an offer of investment advisory services. Nor a recommendation or offer relating to any security. See the Terms of Use page on the Shore Capital website for other important information.