Three tips from a seasoned CEO on how to act when things go (really) wrong…

In this article you’ll learn how you can control your reaction to such external events – with advice from David Leigh, three times CEO (currently AMS, previously Study Group and SHL). Here we share David’s top three tips when things go wrong, that he divulged to members at 2022 PepTalks’ conference.

As PE-backed CEOs we hate or fear extraneous shocks; things we can’t control or influence that slap us in the face and have the potential to sting the business we’re trying to scale. We are staring two such things – high inflation and the threat of an arduous recession – down the barrel right now. And while these will pass, value creation plans will need to be readjusted and stakeholders realigned.

1. Don’t panic – balance problem solving with exploiting opportunity

As CEO of Study Group – part of which focussed on teaching domestic students in Australia – David Leigh experienced not a temporary external shock, but permanent trauma. A regulatory pulling of the plug on an Australian government contingent loan scheme used for vocational education, resulted in Study Group losing around a third of the group’s pre-overhead EBITDA overnight. But, however tempting it may be, David warns of the pitfalls of just firefighting in times of crisis. When re-engineering a plan, he advises being conscious about how much effort and time is spent fixing things vis-à-vis optimising things that are going well.

That was quite a bad day in Christmas week. I quickly learnt a lot about creating a new plan. The first is balance fixing problems with exploiting opportunities. We are all wired to fix problems. But every hour you spend fixing a problem is an hour you can’t spend exploiting an opportunity. And so, getting the balance right between those two things is something I really felt that I learnt quickly about through this experience. Also, don’t panic. Whatever solution you put in place has got to stand the test of time. Never take your eye off the ball.

David Leigh

2. Keep investors involved, but at arm’s length

For Study Group, the investors (in this case Providence) knew the fundamental risk. Thanks to David’s consistent mantra to ‘make hay while the sun shines’ – the turn of events, although seemingly calamitous in that moment, didn’t come as a huge surprise. David was on the phone to his investors within an hour of finding out the regulatory changes that day – informing them of the situation, while strategically buying him and his team some ‘spade work’ time to come up with a (new) plan. Importantly, a plan that hailed from him and his team – then subsequently backed up with buy-in from investors.

We involved them [investors] in the process, but more in terms of refining the plan and refining the investment cases. I haven’t met a sponsor that doesn’t want to feel like they part-owned the re-engineered plan. They need to feel comfortable and accountable and sell into their own internal stakeholder group. Iterating the plan with them becomes critically important as the facts change.

David Leigh

3. Let the team feel responsibility and accountability

Then comes tactics involving the team – so they can deliver the pivoted value creation plan and are fully behind it. For David, accountability is an important ingredient to this; flushing out those who are uncomfortable with responsibility so ‘no-one drops their shoulders’. In this way, teams are built that own plans together, consisting of people who are there to make one another successful. David calls this a strong sense of ONE TEAM.

It’s really important to me that the team feels genuine ownership. Whether it’s budgeting, five-year planning or creating an investment case owned by the team, my job is to create really clear roles and responsibilities, and that there’s a great cascade from what we’re trying to achieve at the Board level all the way through the organisation. But it needs to be owned at the team level. I also encourage the team to have a healthy disrespect for the organisational structure; to do what’s in the best interest of the business, irrespective of what the ‘org chart’ says.

David Leigh

This too shall pass

It’s clear that stagflation will dominate 2023 – and is a key risk for the global economy. These are tough times, of that there’s little doubt. A sense of fear seems to pervade in this febrile period. And yet, as the proverb goes ‘this too shall pass’. And, as David Leigh has demonstrated, continuously exploiting opportunity, keeping investors in the know and empowering teams will stand PE-backed CEOs in excellent stead, as they emerge from the fog of recession.

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