What Makes a Great Board Member: Part IV | Bill Clendenen, Charlie Talbot & Michael Burcham on Coaching N-1s and Building Scalable Leadership Teams

Anderson Williams: Welcome to Bigger. Stronger. Faster. the podcast exploring how Shore Capital Partners brings billion-dollar resources to the lower middle market space. This episode is part of a series in which I talk with Bill Clendenen, Charlie Talbot, and Michael Burcham about what makes a great Shore Capital board member. 

This is a follow up to our series featuring Bill and Michael on what makes a great Shore Capital CEO. Bill, Charlie, and Michael know what a good board member and a good board look like from deep experience, not just serving on boards, but working as Lead Independent Directors for numerous Shore companies. In addition to being executives who have had to manage multiple boards themselves over their respective careers.  

In this episode, they focus on the N-1s or the direct reports to the CEO. They talk about why N-1 engagement matters with board members. And what it illustrates about the business and what it illustrates about the CEO. They talk about how to ensure your N-1s show up and work effectively with the board of directors. 

One of the things you all have mentioned in the context of board meetings is the engagement of N-1s and how the CEO should think about that and how you as a board member look critically at how engaged and aligned N-1s are. When you think about that, Charlie, why does N-1 engagement matter to you as a board member? 

Charlie Talbot: I think it’s critical for a bunch of reasons, including succession readiness, depth, you know, the dialogue that’s taking place and that should be taking place in the business. And then just alignment around strategy. Just hearing at the board meetings is really important.  

I think it’s really important that those messages come back unfiltered to a great extent with anyone’s poor intentions, but sometimes there’s a tendency to filter certain messages or potentially just forgot what messages were delivered, and I think N-1s, having that direct feedback from the board allows them to just be more thoughtful and do their job better. And I think they see what good looks like. They see what less good looks like in the context of those meetings, and they’re better prepared for the next one. 

Bill Clendenen: I also think that it’s a great training ground and practice ground for ultimately the exit process management presentations. There are 20 plus board meetings in a five year hold. This is an opportunity for these N-1s to flex their presentation muscles to answer thoughtful questions from experience industry executives to have a seat at the table to understand what goes on. 

It’s also a development opportunity for them because many of these N-1s ultimately would want to become a CFO, a CEO, president of a business and so getting this experience is critical for their personal and professional development.  

Charlie Talbot: One thing I’d add, just to build off Bill’s point, a lot of times they want to become the CEO or continue on their path, but really important part of this is making sure they can evolve with the growth of the company, and so having them in these board meetings creates a platform for self-awareness, but also for coaching as they think about getting from the planting to the growing phase, to the harvesting phase. I mean, you know, when you go through these meetings, a lot of times it just becomes clear who’s ready for that next chapter and who’s not.  

And so having them in that meeting helps the board get a perspective, and it helps the individual have perspective on whether they’re the right person or not. 

Michael Burcham: So many of these CEO direct reports that we call N-1s, they’re very new to this kind of role. Many of them were individual contributors in a company and now they’re asked to step up and learn to lead through others and lead to scale. But that requires a fundamental understanding of what creates value for the business, and it also requires them to be agents of change. 

And if you do not understand what creates value and you’re not prepared to lead change, you probably won’t be successful because throughout our hold period there will be four to five fundamental shifts on how we integrate, how we collaborate with other companies. The acquisitions we will make. Roles and who’s in which seat. 

It’s unrealistic to think none of those change from year one. And so when I am at a board meeting and I’m watching the direct reports of a CEO report out and engaging with them. I’m really looking for can this person learn to lead through others or are they a solo contributor and will they be a good agent of change or are they gonna cling the way things have always been done? And the answer to those two questions tell me, will they be here for the long term or not?  

Anderson Williams: Practically speaking for you all, when you’re observing N-1 engagement, what are the right opportunities for an N-1 to step up and lead in a board meeting or in board preparation or otherwise board communications, and what are maybe some of the wrong places that don’t ring as true or don’t live into the kinds of things you’re describing about showing how these people can grow into a role and into the future of the company. 

So just any examples of what’s really good way of doing it? And then maybe on the flip side, what’s a mistake in engaging the N-1?  

Bill Clendenen: This is where I think the art of the CEO and managing the board comes into play. I think initially at the early part of the hold, so in the planting phase, you probably only have less than a handful of N-1s, and you’re really just building out the organic or inorganic playbooks for value creation. You are actively recruiting your N-1s to build out this team.  

In the early part of the hold, I often find that you have more of your N-1s sort of with you in the room presenting some way, shape, or form. And as I like to think about the N-1s presenting, I think of baseball and where the N-1 should give the play by play. 

So here’s what’s happening, and then the CEO or CFO can be the color commentator. This is what it means, this is how it ties into the strategic plan. And so, what you do is you give your N-1 the opportunity to talk present, share their thoughts, but then you and the CFO are helping guide that strategic discussion as they’re presenting. 

As you move into the other phases of growing and then harvesting. I ask the question, is this N-1 in a growth value creation role, or is it a hygienic role? And so what I try to do is give all of my value creation N-1s the opportunity to speak at every board meeting because that’s all about the strategic plan. Those roles, and again, depends on the company that are hygienic in nature, right? 

Could be compliance, could be, you name it, some companies have, uh, hygienic, hr, whatever those roles are, you try to give them once or twice a year opportunities to speak on the board. So I think about is value creation versus hygiene and give those N-1s the appropriate opportunity to speak to the board in those moments . 

Michael Burcham: As a board member I’d like to see a CEO assign an issue or a topic area to an N-1 at the board meeting. This is a great area we’re gonna assess this over the next few months and bring it back next quarter. I’m assigning this to Mary and uh, Mary will give a report out on that next quarter.  

Not only does it in an enormous opportunity for Mary, but now we all know Mary’s gonna come back and it gives Mary permission to interact with all of us board members throughout the quarter. And I’ll get to see, based on what Mary brings back to what degree can she scale and grow with this business or not. So I think often a CEO just takes on every issue themselves, but I find the CEOs who assign various issues that come up to someone right there in the room and say they’ll be reporting out on it. 

It creates a whole different of accountability of the team and you quickly learn who’s gonna level up and not. And if Mary can’t perform over the quarter. I can always save her as the CEO, but this is a great opportunity to see will this person scale or not. So, and as a board member, I’m always just watch that dynamic between the two, see how they interact and when I see someone step up like that and own an initiative, boy, it really excites me and I know how to then I could even reach out to that person outside the board meeting and further help their professional development as an individual.  

Anderson Williams: So that leads me into one last question just to focus on N-1s. 

When you’re observing these best kind of practices and setting it up N-1s up for the right opportunities, what does it look like for A CEO to support an N-1 in these situations? Assuming they’re putting them into growth roles, putting them front of a board in a way they’d never been before putting them on a project that’s a stretch project. 

Any advice to a CEO about how to make sure you’re setting those people up for success? That then creates a bit more of the flywheel of being able to engage them moving forward even more deeply. Any thoughts on best supporting those N-1s?  

Charlie Talbot: I think it starts with practically setting them up. But by that I mean if they’re gonna be at a board meeting, I think you wanna make sure that you have alignment on how you’re gonna present the materials you’re coaching them through, well in advance of the meeting, if they’re on track or off track relative to where they should be, you know, leveling the discussion, if you will. 

I think your job as a CEO, or in some cases CFO, is helping prepare the materials, is to really make sure people are set up for success through their pieces of the discussion. And that’s a beyond a functional activity. That’s making sure that you have the holistic picture of what you’re trying to accomplish in terms of the messaging and key points you’re leaving with the board and making sure that those individuals who are gonna be presenting are aligned. 

You know, the last thing you wanna do is have someone come in and just look like it’s just an add-on type of presentation. So I think the preparation piece is really critical here.  

Michael Burcham: As the CEO, you are the coach and they’re the player, and you should take that mindset on in preparing for a board meeting and supporting them even during the board meeting. 

It doesn’t mean you always agree with everything, but never forget your role as the coach and some of the best CEOs in our portfolio. Even when something doesn’t go perfect, they’re not putting a negative front of that person in the board meeting, but immediately after, they’re giving corrective feedback so that the next time they’re even better. 

Because none of them are gonna be perfect the first two or three times board members know that as well. Our CEOs who really have the right skills to lead others understand what good coaching means, and they praise in public and they correct in private. Because once you have. Corrected or given negative feedback in a public forum, you destroy any intrinsic motivation and confidence that person has. 

Even if you’ve hired the wrong person, deal with it after the board meeting. Don’t deal with it during the board meeting.  

Bill Clendenen: One tip I have for CEOs and working with N-1s ones is use the pre-board meeting dinner to have like experienced people sit with like experienced people. So have your revenue cycle person, sit next to the person who has on the board a ton of revenue cycle experience. Have the organic growth expert on the board sit next to your head of sales.  

You should facilitate those relationships as best you can. And I used to work with my investment team partner on the seating chart for the boards. I know that sounds really trivial, but it’s so important for those N-1s to develop those relationships that I took that extra step with my investment partner to make sure we were optimizing that two to three hour board dinner with our N-1s.  

Michael Burcham: I think a last comment from me is no one gets it right every time, and you will make bad hires as A CEO, no matter how thoughtful you are.  

A good thing to do if you’ve decided you have to turn over a role is interact with board members to say, what did I miss? What do we need? And what does great look like here? 

Particularly if you’re a first time CEO, you may want to talk to two or three other people from other companies who are very successful in those roles to really think about what error you might have made. 

Perhaps that person just simply couldn’t scale their own professional growth. Perhaps they got in over their skis and weren’t prepared for that kind of responsibility or their whole constitution they can’t handle that sense of responsibility and anxiety that comes with a role, or maybe they just don’t know how to coach other people. 

There’s dozens and dozens of reasons why somebody may not succeed in a role that reports to a CEO, but you want to avoid perpetuating the problem. So if you do end up as a CEO with a turnover of one of your key people or a board member sees something and starts raising questions about it, be thoughtful about what you’re hearing and what you’re seeing. 

And if for some reason the position does have to turn over, really do a thoughtful assessment of what did we miss and what can we do next time to make sure the key individual we put in that role can succeed because you’re messing with people’s lives and their careers.  

None of us want to see somebody not succeed and you have a deep responsibility as a CEO for whomever you bring on the team to give them every opportunity for success. And that not only is true in being their coach and encourage them, but giving good corrective feedback and structure and giving them ways they can professionally advance and improve. because the company can outgrow them if we’re not careful, and let’s don’t let that happen. 

Anderson Williams: If you enjoyed this episode, be sure and check out our five part Bigger. Stronger. Faster. series on What Makes a Great CEO. Additionally, throughout our Microcap Moments series, you’ll find interviews and profiles of successful CEOs, Executive Partners, and Lead Independent Directors, including our one-on-one with Charlie Talbot. 

This podcast was produced by Shore Capital Partners and recorded in the Andrew Malone Podcast Studio with story and narration by Anderson Williams. Recording by Austin Johnson. Editing by Reel Audiobooks. Sound design, mixing, and mastering by Mark Galup of Reel Audiobooks. 

Special thanks to Bill Clendenen, Charlie Talbot, and Michael Burhcam. 

This podcast is the Property of Shore Capital Partners, LLC. None of the content herein is investment advice, an offer of investment advisory services, nor a recommendation or offer relating to any security. See the Terms of Use page on the Shore Capital website for other important information.