Why You Should Invest in a Chief Transformation Officer
From a growth in technology, to an increasingly competitive marketplace for C-suite hires; companies are evolving faster than most can keep up with. This growth is driving firms to hire Chief Transformation Officers to remain competitive while driving outcomes. However, some companies are reluctant to implement new executive roles and are sticking with their traditional governance structure. Boutique private equity firms have demonstrated this through their reliance on manually analyzing deals instead of leveraging the benefits of digital innovation. An openness to new technology and internal change is becoming an imperative factor in the success of firms today. To achieve tangible outcomes, these are three reasons why it’s beneficial for CEO’s to invest in Chief Transformation Officers.
New Executive Leadership
A transformation executive with the right balance of consulting and industry expertise can play two roles to create a results-oriented CTO. Often, a new CEO is hired and given a list of outcomes to achieve. This creates a hectic transition with various expectations. A transformation executive would assist the CEO in developing a sufficient plan to achieve optimal results within the first two years.
As an Internal Strategic Advisor, they have the ability to counsel the CEO throughout this defining time in their career, gaining a detailed understanding of the boards’ or even financial sponsor’s expectations. The head of transformation will prioritize the desired outcomes to effectively deliver and integrate the strategic direction. With proper delivery, the new transformation leadership will own milestones and ultimately the success throughout the firm. Additionally, a seasoned background in the specific industry, paired with a well-developed strategy will allow the CTO to become the lead program manager. This way they can drive the execution across each business unit, working directly with the BU leaders. The elimination of the strategy “hand-off” to the execution team, mitigates the risk of losing sight of the intended outcome, resulting in significant success.
Driving change at the Business Unit Leader Level
There are two types of problematic business unit leaders. They’re either incumbents who excel at running their units but, are reluctant to change or leaders who lack the experience to drive changes themselves. These individuals introduce problems that could be solved with a transformation executive. This is common in a strong enterprise with a solid track record of year after year revenue and EBITDA growth. Business unit leaders are loyal and qualified, some with tenure of over 20 years. Extensive experience like this can make executing change difficult. On the other hand, they may not have the expertise or know how to drive change. A CTO who has the gravitas to navigate this dynamic and the ability to convince the business unit leaders that change is necessary, will make this a win-win situation for the firm as a whole.
The firm could have a sound, strategic roadmap but has faced challenges in driving the outcomes across the enterprise because ownership is fragmented. This happens when there is a lack of accountability among the business unit leaders. There are only so many hours in the day and the executive team often will have their attention pulled in different directions. This creates a broader business challenge, causing some BU leaders to attempt to execute on the strategic vision and a few others that don’t. If the entire organization is not swimming in the same direction, the outcomes will be inconsistent causing confusion. By hiring a Chief Transformation Officer, the ability to focus on the strategy design and execution to achieve favorable outcomes across the organization can now be accomplished. Ultimately, allowing for the end goal to be attained in a more efficient and effective way.
In conclusion, the successful Chief Transformation Officer brings these three attributes to the table:
- A foundation of experience from a top tier strategy or management consulting firm. This background gives them the ability to fully understand a CEO’s agenda from a broader view, with insight on how to go from strategy through execution.
- In addition, a CTO should also have experience running a group P&L, practice, or BU. This expertise grants them credibility among the business unit leaders from an operator and leadership perspective. Alternatively, an executive who is in a similar role at a competing PE firm often can attain similar command.
- Experience in or a strong affinity towards the specific industry in which he/she is expected to drive the outcomes in. This will create a better understanding between the CTO and the business unit leaders, which will enable the relationship to gel faster creating an optimal environment for change.
A company who demonstrates a willingness to embrace change, coupled with an effective Chief Transformation Officer will create the idyllic setting for success across the company.