What Makes a Great CEO: Part II | Executives Bill Clendenen & Michael Burcham on Excelling as a Shore Capital CEO

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What Makes a Great CEO: Part II

Executives Bill Clendenen & Michael Burcham on Excelling as a Shore Capital CEO

In this episode, seasoned executives Bill Clendenen and Michael Burcham discuss what it takes to become a successful CEO within a Shore Capital portfolio company. They highlight the importance of having a bias for action, grit, and determination, as well as the capability to lead and mentor simultaneously. They emphasize the need for true humility, acknowledging limitations, and engaging with board members for continuous improvement. The discussion also covers the critical role of storytelling in communicating vision and strategy throughout the organization.

Transcript

Introduction

Anderson Williams: Welcome to Bigger, Stronger, Faster, the podcast exploring how Shore Capital Partners brings billion-dollar resources to the microcap space. This episode is the second in a series in which I talk with Shore Executive Partner Bill Clendenen and Shore's Chief of Strategy and Talent Development Michael Burcham.

We will focus on what makes a great CEO specifically in a Shore Capital Portfolio company. In addition to their own experiences as multi time private equity backed CEOs, both Bill and Michael serve as Lead Independent Directors for multiple Shore portfolio companies. They also both formally and informally support and mentor numerous CEOs across the portfolio and beyond.

Essential Attributes for Success

Anderson Williams: Based on what you've shared about your own experiences and what you've seen as a Lead Independent Directors in those coaching and mentoring types of roles. Will you just describe what it means to be a CEO of a Shore portfolio company, meaning private equity backed, microcap, hyper growth? What does it mean to be a CEO in that environment? Bill, maybe I'll start with you.

Bill Clendenen: Well, first, it means you're not going to get a lot of sleep for the next five years. That you sacrifice a lot of your me for the we.

And you do that full knowing what it entails. And again, we talked about the burden and the obligation. It's really a gift that you have this opportunity. I was happily retired as a former private equity backed CEO and partnered with Shore because I thought that Shore provided me the opportunity as CEO to deliver on a growth strategy investment that would make a difference in the community that I lived.

I thought that investing in urgent care in rural underserved markets was a recipe for success. I was excited about the opportunity to serve those patients that were not getting the medical care they needed. Providing best-in-class medical care, best-in-class customer service to these patients was something worthy of getting out of bed four. And so that was my why as it relates to Shore.

I think the first thing that you have to have as a CEO for Shore, or quite frankly, any private equity backed company, is a bias for action. This bias for action is waking up every day. And knowing not only how are you going to work on the business, but where are you going to work in the business to get the most return for your team, for the company and for your customers.

I think personally, one of the things that has worked very well for me is I have a tremendous amount of grit and determination. You can knock me down 10 times and I'll get up 11. I don't really care about falling down. What's more important is getting up and during this five plus year journey as a private equity backed CEO is Shore with another private equity firm, you're going to make mistakes. And it's not that you make the mistake. It's how do you respond to it? How does your team respond to challenges? Those bits of effort, grit and determination, I think, help provide the fuel for success. In microcap businesses, particularly for Shore.

I think the third element that is really important is being a player coach. I talked earlier about being an educator and motivator, and I think in the microcap space, you've got to be able to coach and lead, but you also have to be able to get in the game and play. And so how are you going to step into the game as CEO and help lift your team up in those moments when they need you most? So being not just a coach, but being a player coach in the microcap space, I think is critical.

The fourth attribute that I think people often maybe not understand about being a CEO is having true humility, knowing your limitations, understanding your blind spots, being able to accept help from Shore, from your Shore Resource Team, from your COE, from your Strategy and Talent Development Team, from your boards of directors.

Do you get on the phone every quarter and talk to each one of your board members about how they can help you? They will give you the feedback if you ask for it. So how do you engage with them in a meaningful way? Not because you know better, but because you want to be better every day. So asking for this help is not a sign of weakness. It's actually a sign of strength.

And the last thing which we've talked about earlier was storytelling. How do you communicate both up the organization to the board to your investors? And then down throughout the organizations from your N-minus-ones to your n-minus-gives, how do you communicate the vision, the strategy, your purpose, your goals? Those elements, I think, really are key to being Shore CEO and possibly a CEO at other firms as well.

Michael Burcham: The very nature of microcap typically means we are acquiring small businesses. Every one of those small businesses has a founder, CEO, and it may have been their life's work or 5, 10, 15 years of blood and sweat and tears they put into something. I think to succeed in the microcap space as a CEO, you have to have a deep respect that you're bringing together a collection of small businesses that were very important and personal to someone.

And while you're putting them together, never forget the magic that they created in that one little company. Because if you lose that magic across 10 of them, you've lost 10x of magic, and that's what makes microcap so special. So to succeed as a CEO at Shore, you have to respect founders. You have to respect what you're trying to achieve. And what you're trying to achieve is almost daunting, because in five years you're gonna take this collection of companies that may have taken 15 years to get where they are, and in five years you're going to four, five, six, maybe even 10 times scale what has been built before.

That inflection speed is very challenging on a good day, and keeping that in mind as you focus on what you're going to prioritize and what's the nice to do's that you're probably not going to prioritize is the life of a private equity backed CEO. It's easy to come up with a million to do's, it's very hard to strategically boil down to the three to five key things that are going to make this company or this collection of small companies that has now become one big company, very successful. And to really create success as a PE back CEO, that's what you have to do.

Key Traits of First-Time CEOs

Anderson Williams: And Michael, as you guys described this, a lot of Shore CEOs are first time CEOs. What are we looking for, particularly when we're thinking about a first time CEO that we can't look at a CEO track record for?

Michael Burcham: I think for all the challenges, let's start by saying this, the journey from the beginning to an exit at shore with a company is probably the most challenging and rewarding thing a human can do.

It's incredibly powerful. So I applaud anyone who wants to step up as a first time CEO and say, I accept this challenge, because their life will be transformed. The things they will learn, how they will change, how they will grow and improve as a human. Nothing comes close to that magical experience. I think for first time CEOs what we look for is this rare combination of grit, adaptability, because we don't know all the things we don't know.

The ability to really pull a team together around a mission and a vision to keep setting priorities and focus on those priorities and to live each day realizing that I have a very fine, finely defined objective ahead of me. What am I going to do today to meet that objective and grow it? That's the recipe for success, and I don't think, historically, your track record as a CEO when you had a million resources around you means much in private equity, particularly at Shore and microcap, because you're starting with a very small team.

You are doing the work and planning the work early on, and you slowly start adding the team around you. But often, CEOs who've had the pleasure of running really large teams and large organizations will struggle in a microcap environment because they don't have the resources around them at their disposal and they have to be creative and nimble at reading a market and actually doing the work while they build a team.

That's a rare gift, and I find people who have overcome adversity, who grew up a bit without, who had to earn their way where they are, it honestly make some of our very best CEOs.

Anderson Williams: And Bill, some of that relates to that player coach, right? That idea of you've got to get in the business, but then going back to something Michael said, balance on the business too.

There's no standing back and delegating amongst a large team of talented, seasoned executives in microcap.

Bill Clendenen: And it evolves over time, right? So the early part, when you don't have the team, it's you and a couple people. You have to be more of a player coach and lean in more. But as it scales and the company develops, you have more people to actually do all those things.

So, it does evolve over time. I think a couple of things that Michael touched on is this entrepreneurial sense and ability to adapt and adjust to what's happening in the market. But I think also a commitment to process. I think successful, Shore CEOs commit to developing processes for scale, whether that's creating a de novo machine or an acquisition machine or a sales and marketing machine for commercial excellence, all those things take time and resources and effort.

And so being of a mind that you'll improve every day is critical to success. To go back on generally what Shore, I think, looks for at the same time of all those attributes, is they're looking for athletes. And so, when we say athlete, we think people who have a high capacity for growth, a high motor engine, both intellectually, emotionally, who've had success in their own field. And so I think having an athlete who's got a superpower, who's got a high engine, who's empathetic, who can lead coach play, they're rare. And in my experience, most first time private equity CEOs don't succeed, and that's not a criticism of them or their opportunity.

It's just it's a very, very hard job, and success is difficult. And in my experience, those challenges never go away during your investment hold with your partner. Every day, that's the challenge. And so finding the person that can do all of those things and do all of those things well, it's very rare.

Anderson Williams: So there's obviously a lot there. If I were just going to distill this as much as possible, Michael, if you had three words to describe a CEO who succeeds at Shore and in the microcap space, and maybe three words that you would use to describe the CEO who isn't going to make it, what would those three words be on either side?

Michael Burcham: I think my first word is vision. I have to know where I want to go. My second word is alignment. My team is not aligned, vision doesn't matter. The third word is execution. If we don't do something and accomplish something, vision nor alignment matter. So, vision, alignment, execution are my three words. The three that likely lead to failure is ego, me, and I have to come back to one third.

Bill Clendenen: Let me add your third word and you can say it because I agree with your first three. I've got, those are the exact three I was going to say. I would say people not accepting help. So my third, not successful CEOs that say, I got this. I don't need your, I don't need the short research one word for I got this is exactly what I said.

So like, I don't need to do a strategic plan. I don't need the SRT's help. I've done this before. Like, that's not one word. But it's almost like resistance for help, lack of humility.

Michael Burcham: Yeah, I said ego because you think you got the answer. Me, because you think you are the sun and everything revolves around you, which is insanity. And this sense of assuming your past success is almost prescriptive of your future success. And I think the reason sometimes we hear, I don't need the help, is they think, well, I've done this before. I've done a strategic plan before. Yeah, but you've never done a Shore strategic plan.

I know how to prioritize. Really? How are you going to prioritize a 10X growth in 60 months? Tell me about that. You know? And Shore is a really powerful playbook of how to do that. And I find individuals who come into a CEO role who are dismissive of those lessons learned don't last very long.

Bill Clendenen: I couldn't agree more.

Leveraging Shore's Resources

Anderson Williams: There's a certain resourcefulness that you guys are describing in terms of thinking about what Shore is bringing to bear to really help de-risk your role as a CEO in the company you're trying to build.

And so I'm curious if you guys could just give a couple of examples from where you sit from the Lead Independent Director's seat. Of where those shore resources really make a material impact or provide a critical insight or an outsized opportunity for a CEO in a microcap space.

Just any examples of where that support shore brings really makes a material impact.

Bill Clendenen: I've worked with a number of private equity firms other than shore and all have been amazing relationships. But I think Shore's playbook for success of these microcap businesses is one that as an operator, I would want as well. And so if you think about the journey of a CEO and the company through a 60 month journey with Shore, there are three phases that we talk about regularly.

The planting, the growing, and the harvesting, and to give an example of that, in the planting phase, the most important things you need to do is hire your team. And we have a COE for talent, not only development, but recruiting, so that if you need a CFO, if you need a VP of commercial excellence, they're here to help you accelerate that growth in finding that person.

If your thesis for growth is M&A, we have a PDT team here that'll help source and find companies for you to acquire, and we'll tee that up for you so that you can accelerate your growth. If you need to hire a head of M&A and you haven't been able to find them in a short period of time, there's a COE for business development here at Shore who can step in and fill those shoes until such time you find that person. And so in that planting phase, diagnose your problem and what your challenge is, tee up the resource at Shore to get what you need. And I think that is unique in this microcap space.

In the growing phase, once you've made these investments and you're trying to grow, there are other resources like the SRT and the Centers of Excellence who can help you accelerate and optimize your operations in that mode of continuous improvement.

And then as you go towards exit, there are other resources within Shore's network, including your board, including more COE, your investment team, outside parties to help you prepare your management presentation to help you through that harvesting phase. And so the Lead Independent Director's role in that is to help the CEO and the investment partner get the right tool at the right time for the right project along that journey with the company and the CEO.

Anderson Williams: And I think Michael, that's important to build on that as Shore, even as we hire a, bring on a new CEO for a platform and you have the pressure that you've described of the growth in a particular window of time, we're not just going saying, okay, here you go, go make it happen. Good luck. There's a ton that's coming in behind it, right?

Michael Burcham: You're right, Anderson. Here's something I say to any new CEO that I get to spend time with at Shore. You have to understand, Shore started as an entrepreneurial venture all its own. There were four guys, by the time I arrived there were six of us working in sublet space, trying to figure it out, just as any young entrepreneur does.

But each year we have memorialized our lessons learned, what we would do differently next time. We've created operating processes and playbooks that amplify the success we saw. We've made copious notes of things never to do again that we know do not work. And now we have 14 years of that knowledge here at Shore.

I simply want a first time CEO to take advantage of those lessons learned. You're going to make some mistakes, you're going to face things we've not seen before. That's perfectly okay. But don't make the mistakes we made five years ago because you didn't bother to use the resources to follow the processes to apply the lessons learned.

And I think that's one of the things that is so incredibly valuable. I mean, we have many different areas of value at Shore and areas of expertise, but if I had to distill it to one simple truth, it's that the entire vault of lessons learned here would take five lifetimes as an individual to experience on your own.

And you've got about a five to six year window to create something magical. Take advantage of the lessons learned that are all memorialized in the way Shor does the things we do, the processes we have, the resources and experts we've hired to support you so that you can have the success we want you to have.

Advice for Aspiring Microcap CEOs

Anderson Williams: In addition to taking advantage of those resources and making the most of that, Bill, what other advice would you offer someone considering being a CEO in the microcap space with private equity backing at Shore specifically, what advice do you give to someone who's even thinking about this job?

Bill Clendenen: The advice I would give to an aspiring private equity backed or shore backed CEO would be these few things.

One is, know what you're getting into. There's loneliness, there's exhaustion, frustration, disappointment. Plus, we talked earlier about your compromises in physical and mental health. It is not an easy job. You will live and breathe the business 24/7, and it's a burden. We've talked before about the role of the LID and the LID is there to be your coach, counselor, mentor in this journey.

And quite frankly, except for your LID, nobody else is going to care. Your spouse has got their problems. Your employees have their own problems. The only person that's really going to care is your dog. And what your dog is really looking for is just a biscuit. So nobody's going to care except you and your LID. They're your problem. So it's a big burden. We talked about it, but it's a tremendous opportunity and gift. That's the first thing I'd share.

The second bit of advice I would give to somebody is ask yourself the question. Are you personally set up for success? Are you mentally, physically? Is your world in a good spot? Is your relationship with your significant other good? Your kids? Because this is going to be an all consuming journey. And think about yourself. Are you a growth minded CEO? Are you a turnaround CEO? What are your skill sets? And are they right for this position? Because oftentimes it may be a great opportunity, but you might not be the right person for that job.

So really do that self analysis before you step into that role, because if you don't, you actually put the rest of your life at risk when you do that. And not only the risk to yourself and the people you love, but also the company, the investors that are counting on you to take that journey with them.

The third thing I would challenge CEOs to think about is, are you able to attract talent in the microcap space? It's all about talent arbitrage. Can you attract outsized talent to do a job? It's very difficult. It's going to be very challenging. And will they join you for this journey? If you can't attract and retain and motivate talent, the likelihood of success is even less than what it is if you can do all those things.

And so know that you can attract, retain and grow talent. And I think the other thing that challenges me when I think about talent is understand where value is created in the company. Know what are the things that are actually going to drive outsized value for your customers, for your partners, for your investors, so that you as CEO are set up to drive that value creation because that's your number one job.

And lastly, I would say as CEO, if you are blessed with getting that opportunity, make bold moves early. If you're going to break something, if you're going to challenge assumptions, if you're going to make mistakes, make them early in the investments that you have time to make up and learn from those mistakes as the investment goes on.

So in my experience, I have been often hesitant to make bold actions for not wanting to upset the apple cart challenge assumptions. And in hindsight, I've never regretted moving faster to challenge the underlying assumptions that are within a business or within people. And so I just would think about, do you have a mindset to challenge the art of the possible so that you can get outsized returns

I think that's how it works. So those would be the four things that I would challenge somebody who's thinking about being a CEO to prepare themselves for that job.

Anderson Williams: What about you, Michael? Any thoughts, additions, advice for someone who might be considering this as a career direction or considering a role actively to be a CEO in a microcap environment?

Michael Burcham: Sure, Anderson. I've got a couple thoughts here. The first thing I would do is a really thoughtful assessment of my strengths, my blind sides, areas that I'm weak. Get to know yourself really, really well. Because once the race starts, you don't have time to go do a reflective weekend somewhere.

The race is now begun. So do that before you begin. I would say the second thing I would encourage anyone thinking about this, It's that recognize you need to professionally grow faster than your company is growing. And there's different skills required as the company scales and grows. Bill mentioned the planting, growing, harvesting phase.

You could think about it as just different sizes of revenue and cash flow or different sizes of teams. But you quickly go from leading a small group to a growing group that has to have you nurturing their professional development, to leading through others, to managing their KPIs. And so the job by the time you exit five years out is not at all the job you started with at year one.

If you do not professionally grow yourself, the company will outgrow you.

The Accelerated Lifecycle

Bill Clendenen: When I think about the journey, 60 months as a private equity CEO in partnership with a private equity firm, probably the thing that surprised me the most is the pace of the journey.

Approximately every month is one and a half to two percent of the hold period. And so understanding what has to be done every day, every week, every month, every quarter, you add that up over 60 months and it can drastically transform the business. We say it's a marathon, not a sprint, but it's a marathon going at a two hour and 30 minute pace, which is pretty darn fast. Sometimes it's a two hour pace.

My point is, I think you don't understand that cadence and pacing until you're in the seat. And you have a private equity partner who is challenging you to grow as fast as you and your team can go. And so I think probably the most enlightening or eye opening experience I've had is learning to run the company at the pace of growth that that requires.

It was one of my biggest lessons and one of my biggest challenges.

Michael Burcham: Bill mentioned that each month is about two percent of a whole period. You can't take 45 days to make a decision because the business is going to react to the market or not react long before you've decided if you're waiting that long.

And you can become a bottleneck for your team really fast. I think we had rather you, as a CEO, make an error than not make a decision, so being decisive is a key attribute of a CEO, particularly in a fast paced private equity marketplace.

Another thing that comes to mind as we talk about this is magic around a board meeting. They happen each quarter. The preparation you put into a board meeting, just reporting what happened the previous quarter, if it's done well and with thought, memorializes your own lessons learned of the past quarter. It allows you to practice storytelling of what we're doing and where we're going. And a well run board meeting will also have a final segment thinking about what will the next quarter look like.

So you walk out of that meeting aligned with your investment team, board members, and your management team of what will we do the next quarter. And then the following board meeting, you get to do the same thing. You get to memorialize your lessons learned, and your new insights from the previous quarter. You get everyone in the room aligned and you get to talk about what we're going to achieve in the next 90 days.

I sometimes think CEOs fail to recognize how valuable that is, and so they're simply preparing as though they have to report out what they did without understanding that this is probably more powerful for them than anyone in the room, if it's done well.

And the pace at which we move is one of the few times you actually get to catch your breath and reflect for about a half a day, because our board meetings are typically about four or five hours. What you accomplished last quarter, realign based on what we've learned, and let's set a plan for the next quarter to move us closer to our five year goal.

If that's done well, a lot of other things just come together.

Bill Clendenen: One of the mindsets, in particular, working with Shore Capital Partners, I think, is having a mindset of being completely transparent with your partner. Shore knows what it's like to be an entrepreneur. Shore is a very entrepreneurial firm. So be transparent with your challenges, your joys, your failures, your successes, share those with your partner, with your LID, with your company. And I think having that mindset of being transparent is very important.

To the downside, avoid surprises. The last thing you want to do is surprise your partner. The most successful CEOs at Shore are two or three steps ahead of their partners in running the business.

Anderson Williams: If you enjoyed this episode, check out our other Bigger, Stronger, Faster episodes at www.shorecp.university/podcasts. There you will also find episodes from our Microcap Moments as well as Everyday Heroes series, each highlighting the people and stories that make the microcap space unique. This podcast was produced by Shore Capital Partners, with story and narration by Anderson Williams, recording and editing by Andrew Malone, editing by Reel Audiobooks, sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Bill Clendenen and Michael Burcham. 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.