Published: Jan 24, 2020
Focus:
Insights
Having the right people in key roles plays a big part in the growth of any business. A strong Chair is one of those people who can have a huge impact in helping to achieve future success. Luke Matthews, Investment Director at Maven, examines the attributes you should look for when setting out to appoint a new Chair.
It may be tempting to believe that finding a Chair for an SME is a relatively simple process for an investor or management team, given the well evolved ecosystem that exists to facilitate it. Networking events and online resources, such as LinkedIn, are obvious starting points, and there are numerous specialist recruiters to use if budgets allow. However, the process of identifying a suitable Chair can be very challenging, compounded by the fact that the recruitment for this important role is often undertaken during the pressurised circumstances of a deal process. It may therefore take a long time, post appointment, to get clear evidence as to whether the right choice has been made. Therefore, it is critical to be clear minded about the benefits of a good Chair, the parameters of the role you are expecting them to fulfil (and conversely what they will not be expected to provide) as well as what will best suit a given situation.
The right candidate, as for any role, will bring a range of attributes:
Expertise
Expertise is an obvious requirement, and a common first port of call will be notable high achievers from the same industry. In some industries specialist sector experience is more important than others, such as the specific regulatory environments around healthcare or financial services. Often, however, it is situational expertise that is more relevant. For example, if the company’s key challenge is expansion into the US, or to develop a strong channel partner network, then a track record addressing those issues may be a key requirement, even if their experience is in an adjacent industry. Conversely, an industry expert’s playbook from their time in the sector may prove to be out-of-date or inapplicable.
Independence
A track record in communicating effectively with different stakeholders is key as difficult conversations are inevitable at some stage during an investment, albeit this may be harder to discern straight from a CV. It should combine with demonstrable independence; those conversations will only be made more difficult if some parties are questioning the Chair’s perspective. As an investor, this is just one reason to cast a wide net rather than bring in a tried-and-tested friend of the firm.
An appetite for challenging
A number of ‘softer’ skills are also desirable, they include the ability to challenge, listen and encourage, and raising managements’ heads from the day-to-day to focus on strategy and objectives. These attributes may be harder to identify and require more extensive interviewing and referencing and must go hand-in-hand with a personal style that works with the incumbent team and particularly the CEO, where mutual trust and understanding are essential.
Flexibility
Another obvious, but potentially overlooked trait, is time: a Chair needs to be available to a business when the business needs them, not when it suits their schedule. Whilst a high-quality Chair will undoubtably have other interests and involvements, even the best may struggle to give the position adequate time if they already have half a dozen other roles to juggle. When the unexpected happens, the CEO may not be able to wait until the next diarised appointment and needs to be sure that the chairman can commit the time required.
Diligent
Strong corporate governance is going to be an important feature of any successful investment and it is certainly a Chair’s role to take a lead in this area; standards often need to be raised in a company being backed for the first time and this is an area in which an investor should also be adding value. Maintaining appropriate standards of governance should be a relatively simple matter for experienced board members and is not where most equity value is really generated or earned.
These prerequisites may seem somewhat obvious, but there are other frequently mentioned criterion which should be treated with caution. One example is the value of connections – a management team may look for sector experience, in the belief that a well-connected Chair will be able to make useful introductions. This may be true, to a point, but it is not the role of the Chair to bring in sales opportunities, so a little black book is not a good enough reason, in isolation, to make an appointment.
Overall no Chair will be able to prevent industry headwinds or competitive pressures impacting on a business, nor the inevitable growing pains that strike even the more successful companies. However, the right Chair will help to ensure that the company is prepared and can make better decisions when the unexpected does occur. They will wear their experience lightly, listening far more than they talk, and the CEO will find themselves with a trusted partner to lean on. Any investor will also take confidence from this experience.
There will typically be no shortage of candidates, but a good candidate for Chair will want to take time to get to know the company, the plan being backed and the management team. Their valuable input will be more than worth the time and effort invested to find them.
