CEO Job #1 – Aligning stakeholders for value growth

Operating Partners from 20 top funds recently met to discuss how to align managers and employees to deliver the value creation plan. Humatica facilitated the discussion with Stijn Vos, CEO of Esdec Solar, a Rivean and Blackstone portfolio company. Stijn led the extraordinary growth of Esdec from €13m to over €1b in five years. It could not have been done without great alignment of diverse stakeholders along the way. With 20 years’ experience helping PE buy-out teams organize for success, Humatica notes five typical misalignments that delay value creation.

It all starts with alignment between the deal team and management. Aligning on objectives is fundamental, but also on the implication of PE’s entrepreneurial governance on the way of managing. Sponsors do surprisingly little to re-set expectations on speed, execution and risk tolerance with management.

Alignment between senior executive team members is also critical. Even subtle divergent signals from the top can derail collaboration at lower levels in an organization. The toughest alignment of all is between management and employees, where divergent priorities have to be overcome for effective collaboration.

Alignment is also needed between financial, strategic and operational topics. And the challenge is multiplied in international firms by cultural and language differences. Finally, when M&A is part of the value growth story, misalignment between company cultures can torpedo value growth.

CEO’s are at the fulcrum of these diverse alignment challenges, and they have few levers to master them. Aligning on goals and objectives is the starting point to get different stakeholders on the same page and moving in the right direction. Goals need to be consistent, but formulated in ways which resonate with each stakeholder group. An inspiring purpose to save the planet may motivate young millennials, but beating the competition may resonate with others.

Communications is a CEO’s second lever to get alignment. And here, listening carefully to understand stakeholder’s needs is more than half the battle for alignment success. Finally, aligning incentives with simple, transparent, rules-based approaches is a last step.

Maintaining alignment is another on-going challenge. When asked how he kept diverse stakeholder alignment throughout Esdec’s 70x growth journey, Stijn noted “you need to re-invent your leadership style every 2-3 years”. And, in times of significant organizational change, wise CEO’s selectively engaged external support like Humatica to facilitate alignment between stakeholders and drive change at pace.

This article was originally published as the Humatica Corner in Real Deals magazine.