Many high-end professional services firms, such as investment banks, venture capital firms and strategy consulting firms, view the CEO as the primary client contact and the ultimate decision-maker for which firm is selected for an engagement.
Having the CEO as the decision-maker for your services creates a unique challenge: these CEOs come to the job with a variety of experiences and personalities.
Unlike a marketing firm or accounting firm where the advisor speaks the same language as the client executive, firms serving CEO clients must understand the unique traits and tendencies of each CEO client in order to successfully build a relationship.
It is hard to categorize CEOs into distinct types. Instead, it is best to think about CEOs along several dimensions, each of which has implications for how a particular client needs to be developed and how that client will select an advisor.
Here are several dimensions of CEOs and how these dimensions affect their selection of and working relationship with professional services firms.
1. Self-Defined Role
While CEOs take on many roles as part of their position, they also have tendencies to fall back into one particular role with which they are most comfortable. These roles include:
- Chief Creator/Builder – A Chief Creator will get most involved in R&D and product testing to ensure a top-quality product is created. Creators and Builders tend to be conservative in selecting outside advisors and like hiring people who are detail-oriented and can provide clear direction and insight.
- Chief Salesperson – This person is a dealmaker and will get personally involved in a significant number of customer relationships. Salespeople tend to put more weight on the personal connection with the professional services practitioner. They may also appreciate someone who understands the art of the deal in crafting an engagement.
- Chief Doer – Chief Doers like to get their hands dirty in all aspects of the organization and may micromanage. Chief Doers appreciate firms that demonstrate extraordinary responsiveness during the relationship development process.
- Evangelist – The Evangelist views himself or herself as the chief marketer of the organization. Unlike the Chief Salesperson, the Evangelist would rather be marketing and networking than dealing with the nitty-gritty of getting deals done. Evangelists tend to pick advisors who are well-renowned and have strong professional networks.
- People Manager – The People Manager views his or her job as consensus-building and enhancing the capabilities of the management team. People Managers prefer to seek consensus among the executive team in selecting an advisor.
- Technocrat – The Technocrat CEO believes his or her primary role is a decision-maker. While cost-conscious, Technocrats tend to be conservative in selecting professional services firms, preferring to go with a “branded name.”
The CEO mindset is the perspective the CEO and his or her team have in how the project should be executed. In some cases, CEOs and executive teams will have strong ideas on how a project should be executed. In other cases, the executive team relies on the outside advisor to structure the project and lead them through it. The three mindsets are:
- “I Know the Way” – The CEO comes into the engagement with a very specific idea of how to execute the project. Such a CEO will want to work with a firm that provides a project plan very consistent with the CEO’s vision.
- “My Team Disagrees on the Way” – This is often a situation that a strategy consulting firm faces in developing a project with a prospective client. In these situations, the CEO is looking for a service provider that can create a consensus-driven project plan.
- “I Don’t Know the Way” – The CEO and the management team have no idea on how to execute the project and are relying on the advisor to provide a project roadmap and lead them through the engagement.
3.CEO’s People Strategy
A CEO’s people strategy tends to influence the process for how the CEO selects outside advisors. The three people strategies are:
- Work with the Best – CEOs who hire premium employees also tend to have the same approach for advisors: they want the most well-renowned firms and advisors, and they can be less price-sensitive.
- Pay for Value – CEOs who like to pay for value like to set up win-win structures with their advisors.
- Cost-Conscious – These CEOs not only view cost as an important factor in determining which firm to select for an engagement but are also reluctant to hire an outside advisor unless absolutely necessary.
The ownership structure of a company plays a factor in how the CEO chooses and works with advisors.
- A Single Outside Major Shareholder – This situation is prevalent for companies owned by private equity firms or family trusts. In this situations, the owners of the company very often play a deciding role in the selection of an outside advisor. Consequently, it is important for the advisor to have a personal relationship with the major shareholder and provide support to the CEO in persuading the board to select your firm for the engagement.
- Concentrated Outside Ownership – This situation is typical for venture-backed companies and some companies owned by private equity firms. The dynamics here are similar but more complex to a company with a single outside major shareholder. The selection of an advisor is usually the consensus of the board and the executive team, with the board having veto power. Personal relationships with the shareholders are helpful, but it can be challenging for an outside advisor to develop strong relationships with all of the investors.
- Diversified Ownership – This situation covers most publicly-traded companies. CEOs of these companies have significant leeway in the selection of advisors, but usually need the blessing of the board to engage an advisor.
- CEO Ownership – CEOs who maintain a majority equity stake in the company obviously have the least need for outside approval of the selection of an advisor, but they sometimes still need board approval if there are outside investors.
5.CEO’s Expectation-Setting Style
Finally, the expectation-setting style of a CEO plays a significant factor not only in how CEO’s pick advisors but also in how CEOs work with advisors. CEOs have a tendency to favor one of two styles:
- Expect the Extraordinary – Expect the Extraordinary CEOs ask for their employees and advisors to work against stretch goals. These CEOs always ask for more because they feel it leads to the best performance even if the stretch goal isn’t met.
- Meet and Beat – Meet and Beat CEOs prefer a conservative approach in setting expectations with their stakeholders. In working with employees and outside advisors, these CEOs want a realistic perspective on project timing and outcomes so they can manage their stakeholders’ expectations appropriately. However, these CEOs become very irritated when advisors fail to deliver on what they promise.
In building a relationship with the CEO, actively discover what type of CEO you are working with. Ask probing questions to identify where the CEO sits along these five dimensions – this can inform how you should engage with the CEO going forward and what capabilities you should emphasize as part of your client development.