Recently, through SBI’s Executive Growth Forum Program, the team hosted an invitation-only event for independent board members to better understand, from their respective lenses, how they view CEOs preparing for 2023. With SBI’s 2022 CEO growth planning survey as the foundation for discussion, they captured critical insights from the board members serving one or more companies with market caps between $500m-$1B, mostly PE-owned companies in software, technology, and business services.
Three key takeaways the group uncovered:
- Proper CEO Board Management is key to getting value out of BoD members
- There is broad consensus on feeling shareholder pressure to prepare for a downturn
- Those making a productivity pivot, not focusing solely on financial and budgetary cutting will surpass the competition in this market cycle
Proper CEO Board Management is key to getting value out of BoD members
In collecting survey responses from SBI’s annual CEO growth planning survey, we asked CEOs their views on board member effectiveness and if their respective boards are deriving value from members’ expertise. We were surprised to find that only 38% agree with the board’s overall value and improvement to their companies as compared to others. We asked the group to react and respond to the survey data for a robust discussion on board member effectiveness.
CEOs do not feel their Board of Directors are providing outstanding value to their organization, but this is a two-way street. CEOs need to learn to manage their board members’ effectively in order to derive value from them. And BoD members need to be proactive to partner and advise the company and individual leaders on a regular basis.
SBI recommends utilizing BoD members as subject matter experts in a specific area. Partner the BoD member with the company leader in the area where they are an expert. For instance, if you have a BoD member with a strong knowledge of Sales, partner the BoD Sales expert with the CRO.
“The best CEOs are the ones who are open-minded, listen, and are willing to accept help” – Independent Board Member.
Creating tailored custom score cards is an effective tool to help make sure both parties are fully aligned with one another. This tool also provides a crucial starting point for finding key areas that BoD members can help to improve.
There is broad consensus on feeling shareholder pressure to prepare for a downturn.
While there are mixed views, most board members foresee inflation and rising interest rates as having a negative impact on their businesses, mirroring our latest CEO research. The consensus was that companies are much further along in the market cycle than most business leaders are letting on.
The members agreed CEOs are feeling external pressure from shareholders/investors to create contingency plans and cost-cutting playbooks. Participants serving companies in the tech sector see the missed growth targets and hazy future outlooks as not fully baked into the market yet because of heavy backend bookings for most tech companies towards the end of Q2. Two-thirds of CEOs in the SBI Annual CEO Survey admit to having developed contingency plans for their businesses.
Those making a productivity pivot, not focusing solely on financial and budgetary cutting will surpass the competition in this market cycle
During our interviews, the research revealed that contingency plans are overly focused on rapid cost-takeout to preserve earnings in the face of a recession. In our view, contingency plans lack clarity on defending growth bets or reallocating expenses to protect – or even accelerate – growth in the face of recession.
As many companies focus on the productivity pivot, they are moving budgets and allocating away from individual contributor roles, like Account Executive, and towards roles that drive efficiency and effectiveness. An example of this is Revenue Operations and Sales Enablement, whose roles impact every single quota-bearing individual.
As companies shift from active investment in growth to a more conservative posture, three growth imperatives should be prioritized. These include exercising pricing and packaging leveraging, improving customer retention, and optimizing the go-to-market model. CEOs driving near-term, durable growth, even through a potential recession, will focus on a small set of growth imperatives related directly to their value creation strategies.
Are you an independent board member seeking to understand how you can become more effective and build better relationships with your CEOs? Let us know. Our team wants to hear your perspective.