Cerius Business Today

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. So, here’s one last question. How, and Merissa you mentioned this, so where do you go to find really good board, advisory board members? Obviously you’ve got some parameters of great board members that you love to have on your board. But where do you find them?

Merissa:               You want me to weigh in on that?

Pam:                      Please.

Merissa:               Ok, so yeah I give a whole laundry list. But the first place that you want to ask is actually any current board members that you have that actually know the organization. That’s one place you can go, you can ask your partners, you can ask your employees. LinkedIn is a phenomenal reference, I mean resource. I mean, I use LinkedIn very extensively and strategically for a lot of reasons and it’s you know a great place to go and connect with potential advisors. The other thing is to attend events where CEO’s are. So smart CEO magazine, I don’t know even if they’re out on the west coast but I know on the east coast they’re all up and down on the east coast and they have incredible events where it’s all CEO’s. You know I mean they have got Fast 50, they have tons of award events so when you go there it’s just a great place to be able mingle with other people. And you want to make sure that you are looking for advisors that are not in the exact same place you are. So if you’re a company of 1 million or 5 million or 10 million, you want to be looking for advisors that have already achieved what you have achieved, and have already hit a milestone that you’re aiming for because when you surround yourself like we just talked about with the people who are exactly like you, or where you are right now then you’re not really stretching and growing and doing the things you need to do to move to the next level. So there’s lots of places you can go. You definitely need to be part of the networking community. You’re not going to connect with the people you’re going to connect with just sitting at your desk, you know being on your phone. You actually have to be out and investing in the relationships that can help you move forward.

Pam:                      Excellent. And on the west coast, Ginger, Jeff any comments? Where do you find great board members?

Ginger:                 Yeah I look for, I try to get the owner of the company to really drill down to what the essence of their business model is. You know just because they sell something or they manufacture something or they offer service, they tend to focus on what that specific services instead of the business model that they have and I would, I recommend that people look for successful businesses, not competitors but other businesses models in other industries where that have gone from stages whether it’s to turn around or it’s a 50 year old family business that needs to jumpstart itself into today’s world. Or if it’s a startup. Look for similar paths. This is paths and then try to bring those folks in because if they’ve done it once they can do it again. And then I also think that if they understand who their core audiences, if they really have an understanding of their business proposition, what they sell and what the value is and then having business advisors who can open doors is very valuable. But not, not linear but look broader. If you’ve got a software platform that is dealing with chronic disease, don’t just look for other people who deal in the disease you’re working with. Look for people whom have grown internet businesses based on software platforms. Look for parallel industries that where their be

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. What are some of the signs, and Jeff I’m going to go to you on this one, what are the signs that you just might have a dysfunctional board?

Jeff:                       Well they’re not following the mission statement of the company. They’re not doing the right things to maximize shareholder value and I think that’s probably the most important things talked about by Ginger that mentioned that if you have a public corporation that’s for-profit that you’re looking not only, you’ve got to make your numbers and you’re there to maximize shareholder value. And if your board is not on that same boat and somebody’s making a bad decision. Or maybe they’re self-serving or maybe they’re part of some other boards that creates a conflict. We also had that situation then it’s time that you have some type of internal vote through a committee normally the executive committee. And you talk about removing that board member if he doesn’t want to resign.

Pam:                      And how do you do that?

Jeff:                       A particular instance I had an experience in is that fortunately for us the board member did resign. He had a conflict of interest with another public company and he was being investigated by the FCC.  And, you know, we were fortunate enough that with all this and our ammunition that we got him to resign. Other than that, I believe there’s typically stuff in the company’s charter or in your board member minutes that allow you to remove a bad board of director.

Pam:                      Merissa, what experiences do you have?

Merissa:               Well with the board of advisors, I mean this is getting back to why you do a 1 year agreement, right? So that you revisit it every single year and again getting back to making sure that you’re doing really strong due diligence when you select. I mean the idea is to mitigate, you know, and eliminate any risks that you’re going to have to actually forcibly remove somebody. So I think that if you are really clear upfront with creating a strong set of performance based parameters and dedicated swim lanes for the board, and you know really what your objectives are moving forward then you can avoid that. I think, you know, regarding some of the pitfalls that can happen on an advisory board that I’ve seen are that, you know, people give you suggestions and you don’t implement them. There’s nothing more frustrating for an advisor than to dedicate their time and energy and they get behind an owner, and they get behind a company and they want to see them succeed and things don’t get done. Now that being said a lot of time board meetings will result in a dozen different action items. So it’s really important that you prioritize the action items and you put some of them in the parking lot and you commit to actually following through on maybe 2 or 3 of the action items in between meetings. So there was some ways you can actually set up a board for success. Just having realistic expectations of what can be done. And as the CEO and the executive team commit to making the changes that the board is suggesting.

Pam:                      Ginger? Any comment there?

Ginger:                 Yeah, a couple of other things that I look for when I’m participating in a board or I’m advising an owner in how to select a board. I will say to them, and I do believe this from my own experience that if there is no disagreement or there are no challenges going on in there then you’ve got to the wrong mix. People tend to hire people like themselves unless they’re evolved and conscious so you don’t wa

Pam:                      So what are some of the big differences between a non-profit board and a for-profit board?  Ginger?

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. So what are some of the big differences between a non-profit board and a for-profit board?  Ginger?

Ginger:                 Well, differences. I, uh, the first thing that comes to mind is not the answer to your question which is similarity. There’s still for board of directors and for non-profit, you have fiduciary responsibility to make sure that whatever monies are being managed properly and used according to the charter and all the agreements, the tenants of the organization. Some of the other benefits or differences I find is that for the non-profit there’s usually some sort of ultraistic motivator that you don’t see very often in the for-profit role. Certainly not in the board room. They’re much more interested in shareholder value than they are you know the other aspect. So there’s a lot of conversation around the ultraistic charter as well as how are we using the money and does it fulfill on the ultraistic side of what they’re trying to achieve. The best run non-profit boards that I’ve ever worked with, one example that comes to mind is the Susan G Komen organization. They are extremely strategic and have as highly functioning leadership and all the way from the way the organizations run, all the way to the advisory board and the board of directors as well. They are extremely professional in the way they approach running their organizations. And they’re very similar to my experience with for-profit public boards.

Pam:                      Interesting you should say that because I have the same experience being on the board of Orange County Head Start. They too are a very professional organization. One of the reasons being they get so much federal money that they really need to be, you know, held liable for what they do and making sure it matches their charter so there are non-profit boards that are very professional out there.

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. So here’s a question that’s always debated. Is it good for the CEO to also be the chairman of the board? So let me turn it over to your Merissa first. Give me your opinion on that.

Merissa:               You mean for an advisory board? Or board of directors?

Pam:                      No. Board of directors.

Merissa:               You know, I would defer to some of the other people on the call. My expertise is really in the advisory board realm and it seems like we’ve got some really good board of director’s experience on here. I will tell you the board of directors that I serve on, the CEO’s are the chairman but I don’t feel that I have enough knowledge on board of directors directly to say whether or not that’s the best practice.

Pam:                      Ok. Ginger, let’s move to you then.

Ginger:                 It is my experience that the CEO is the chairman and for-profit group. There is a practice in not-for-profit group where it is actually different and they do that by design, so that there is a kind of a built-in failsafe if you will. The 4 non-profits that I’ve served on there was a definite, there was an executive director and then a chairman of the board and there was, that made, that created some really good checks and balances.

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. Do companies need either or both board of directors and an advisory board?

Merissa:               You know, I think it also depends on the industry that you’re in and even geographical location. Like we’re on the east coast and I know the east coast is a lot more risk aversive when it comes to investment as opposed to the west coast. On the east coast, a lot of the advisory boards do not have investors on them because the structure and the advisory board members end up constituting a lot of presence from the government. So a lot of the advisory board members on the east coast, people who do business with the government. That is a huge presence on advisory boards. Whereas I know on the west coast where investors play a very large role in advisory boards. I think it really depends on where you are geographically in the industry that you serve. They can really drive the makeup of your advisory board. That’s been my experience.

Ginger:                 I agree with that and like to just add another point in that from my experience. The advisory board can, thinking of the west coast there’s so many startups, so much Silicon Valley and Irvine area startup activity, and the advisors that are typically brought in may or may not have the specific experience for the overall leadership of the company or directional set from the company. From the west coast side of things, my experience is that they can run more myopic, if you will. You know there’s not as much diversity of experience. It’s more narrow. And I think the broader a company can go to include more vast differences in experience in experience and contribution, the more successful the company will be. Now in the near-term that can create more conflict and discussion but the more that can happen from an advisory board level, I think the more successful the company can be. Same with the board of directors but again they have to deal with the pressure of the shareholders and the fiduciary rigor, and sometimes that can limit the range of discussion. You know you’re pretty locked in sometimes.

Pam:                      Absolutely Ginger. And Merissa, if I’m not mistaken, you’ve written on this topic?

Merissa:               Yeah, I have a book out. It’s called ‘Built to Scale’, how top companies create breakthrough growth through exceptional advisory boards. And SCALE is a model I created that when I wanted to put in a board in my first company which is Information Experts, that’s a 20 year old multi-million dollar government contracting firm. I wanted to put a board in place about 7 years ago, and when I went to look for information on how to build a board there were lots of articles that said you should build a board. There was literally nothing out there on how to do it. So I created a model called SCALE and that is Select, Compensate, Associate, Leverage and Evaluate, Evolve and Exit. That is literally the full end and soup to that process on how you make sure that you are selecting advisors that really meet the needs of your company because typically what people do is they meet somebody, that they think is great and they say do you want to join my board but they haven’t really thought about how they sit them in to the board or what role they would play. And that’s kind of putting the cart before the horse, so in my model, the SCALE model, the entire Select phase is very strategic in making sure that you identify who you need according to your holes and your goals inside your organization and you put a very methodical approach to selecting and vetting and then bringing

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. Since you mentioned compensation. How are boards of directors and advisory boards, let’s start with advisory boards first, how will they compensate it? Everyone think that you either give them stock or have to pay them a huge amount of money. What is it in reality?

Merissa:               So for advisory boards in my book, what I did was I interviewed a long-standing attorney that I’ve known for 15 years who is also a CPA and he is a compensation expert. And in there everything is transcribed. And the way I broke it down was monetary compensation, non-monetary compensation – because there’s creative ways to actually compensate your advisory board — and then also with equity. So what weighs out is that the person that I interviewed, he broke it out in 4 different ways that you can compensate with equity but his main role was that you never give more than one quarter to one half of one percent to each board member that you have. And you basically put in a 1 year agreement that with a restricted stock agreement that allows you to buy back that stock, basically at a penny, in the event that you roll off that board member. Because the last thing that you want to do is that you want to give a large chunk to somebody who’s working very part-time for you and if they don’t work out what happens is you’ve got someone who’s walking around out there that owns stock within your, you know, of your company. And getting back to the point that was made earlier about startups. They might have nothing. They might literally be under a million dollars in revenue and they think ‘oh, I’ll just give this person 5% or 6%’. Well 6% of nothing is nothing. But if you build a company to 5, 10, 15, 20, 30, 50 million dollars, that’s a lot of money to be giving to somebody basically part blanch. And you’ve got think that you’ve got a board of 4, 5, 6 people, you have to make sure that you’re very judicious with the amount of stock that you’re going to want to give. You don’t know who you’re give stock to, whether you do like an ESOP, you want to give it to your employees, you want to give it partners, maybe you want to have an LTI, a long-term incentive agreement in place of your employees. So you have to be very, very judicious with the stock. So that’s kind of the, you know, the framework in a nutshell when you’re going to give equity. When you have money that’s involved-

Pam:                      So just for clarification, so at the end of the year you have a buy back for that whole quarter to a half of one percent? You have a buyback of one penny?

Merissa:               Yes. So the way, this what Wayne recommended in the book. Yeah, you put in a restricted stock agreement because in the event that it doesn’t work out and he recommends and I recommend that you basically do a 1 year agreement. Look, you know what, when you bring someone, when you bring anyone on whether it’s an employee or a partner or even a customer, a board member. Obviously when you first bring them on everybody gets along, everybody is, you know, happy and enamored with one another. You never know how a relationship is going to go. And so if you have an advisory board member that is not showing up and is not delivering, it’s important to get them out of your board because they’re taking up a seat that’s someone who actually could be delivering for you. And you want to make sure that you get them out and you get them out clean, so that they’re not walking around with your stock that you can give to somebody else. And also that they’re not a liability down the road when the

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. Great. Let’s move to another topic here Jeff, and we’re going to stay with you for just the moment. I hear a lot of references to inside, outside independent directors. Can you tell the audience what that means?

Jeff:                       To me the inside directors were the ones that were, you know, some had either a family member or a part of the management team that were on the board. We had both where I was. And also the outside where the independent or 3rd party investors or directors that would not have had an interest in the company, but they had valuable insight through their knowledge and experience to give direction to the board and help with the judiciary aspect to running the company.

Pam:                      Is there a ratio of inside directors to outside directors?

Jeff:                       That’s a good, good question. Where I did, we had a… the majority was the management and the family. I think it was like 7 on the board, we had 4 inside management and family members total and 3 outside directors.

Pam:                      Ginger-

Ginger:                 That’s been my experience with family run businesses as well. It’s that there’s a, even though there’s no on an advisory board capacity, there’s no voting situation or fiduciary control aspect to what the action is. But still because of the, I think the commitment from the family and the fear of bringing in outsiders. They may have the courage at some point to say that ok, I’m going to bring in a board of advisors. Still want to make sure that they have a controlling interest in the conversation which makes it challenging for advisory board members to really speak the truth and you’ve got to be very good at debate and consensus building you know to be effective I think. But it’s, so that’s one. And then again, I’ve consulted with others with a startup for example, where it’s not family. There might be one or two operating folks there like a high level executive who’s actually in the business day-to-day but there’s more variety and a pitch more collective.

Pam:                      Thanks Ginger.

Pam:                      I'm Pamela Wasley, CEO of Cerius Executives, one of the largest North American providers of contract executives for part-time, temporary, interim and consulting assignments. These executives are available to step into companies on short notice, to fill a sudden gap in leadership, to run a key initiative which provides specialized skills and knowledge for temporary period of time. Jeff, you actually have been on a fairly decent size board and how did you go about finding and recruiting your board members? You were on the NASDAQ exchange so you had to be careful.

Jeff:                       Right well we used a combination of well knowledged individuals in the industry, so that they could give us feedback. We put a team of financial experts in that knew financials and knew the regulatory requirements. One, another one was a retired accountant that was with the business. And the last one was an attorney that could help give us guidance during the meetings or anytime we publicized or put out anything making sure it was regulatory compliant.

Pam:                      Ok and Ginger, what about the boards you’ve been on?

Ginger:                 They’re different depending on the board and the industry, and the stage of the company also. When the participated in a lot of early stage startup boards and in those situations there tends to be more of a focus on opportunities to open and support the growth of the company, the early stage growth and exposure of the company and risk assessment along the way. As opposed to the more established companies that maybe have the round, well-rounded approach that was just described a few minutes ago. It just, I think the stage of the company really has an impact, and my other comment here is to go back to Merissa’s description of the book, early stage companies would definitely benefit. I think from having a more methodical approach. There tends to be random, in my experience, there tends to be ‘I just met this person and I think they could maybe invest in my company’, whether or not they have a strategic capability or experience that could be a long-term contribution and I think it’s short-sighted if you only look at possible investment potential for an advisory board or a board or directors, but speaking specifically here an advisory board.

Now, Ginger you mentioned startups a couple of times now. So if a startup doesn’t have a VC or investor and they’re just starting up, do they need an advisory board?

Ginger:                 Uh, I believe they do. The primary reason I think is for the strategy and being able to identify gaps, as you said, holes and roles for where the company is going, what it’s going to do, its primary point of difference, value proposition. All of those things can. The board can be a sounding board typically, my experience again, that the folks who have a startup, an idea, an incubated idea, are very, very passionate about what they’re doing. And sometimes that can keep them from seeing the bigger picture or seeing their vulnerabilities. An advisory board can provide that sounding board and be the devil’s advocate for an enthusiastic, zealous startup originator. So that’s one reason. Another reason to have a board of advisors is that it can be a financial, an investment syndicate. You know, where there’s a syndicate of investors, and then there’s representatives from those investors that represent a role on the board. And typically they will request that because they want to make sure that the money that they’re investing is being utilized in a way that is compatible with what they understood the proposition to be. So it’s in a way, similar to the fiduciary response on board of directors but different in that it is different, it is startup and early stage. And they’re basically shepherding their own investments.

Pam:                      Great. Excellent. And one other, since you have actually have a lot of expertise in the family owned bu

BT:          Hi and welcome to Business Today, brought to you by Cerius Executive Solutions. Today we are joined by Kristen McAlister and Matt Sauer from Cerius Executives. How are you guys doing today?

Kristen: I’m great, thank you.

Matt:     Great, thank you.

BT:          Great. So today we just want to kind of get right into it. Today’s conversation is about contract executives, interim executive and consultants who were once CEO’s, C-level executives that are either trying to make the transition, have made the transition or are looking for ways to find more consistent work and some tips that may help them. You mentioned a little bit about client expectations [0:39]and I wanted to kind of get into another question, and it’s still along the lines of things executives need to know to be successful. When I was in college, and I’ll forgive me when I was in college I wasn’t really paying attention a lot, but when I was in college there was this sociology class and in that class we had discussed 3 different types of leaders. One leader was effectively very aggressive and it was one of those you steal, your hand gets chopped off. Second leader was overly understanding and compassionate, and then the third leader was actually a mixture of both. The society that actually ended up lasting the longest was the society that had a mixture of both good strong beliefs in terms of punishment for crime, as well as, a good compassionate understanding personified in general. Now I bring this up because one of the biggest changes that executives go through when they leave a organization and they start their own consulting business, or they start getting into consulting. Even though you’re a good leader in you executive days, one of the airier C-level days, one of your tricks in your back pocket constantly is the ability to become aggressive if needed or become assertive if needed by working on writing employees up, having the final say on their employment status. Kind of being the final word in the organization. Now when you make this transition that goes away. You have any advice on how a former CEO, now executive, can kind of manage client expectations as well as get the job done without having their, you know lack of a better phrase, normal superpowers?

Kristen: Some of that’s going to depend on why they’re being brought in and the type of project. Because looking at the 3 that you described, interim executives or management consultants could be brought in specifically to help change or form the leadership process in the organization. Especially when you’re looking at an entrepreneurial organization [2:38] by the seat of the entrepreneur’s pants not necessarily because they’re a good leader, but because they’re a good businessman as well. So in some cases they actually step in and they take that leadership role and they spread it out throughout the organization. So sometimes Cerius is more of a driver in what a temp, seen as a temporary situation than what they were in a more permanent situation. There’s probably more consistency there. In these situations there’s a lot of inconsistency and the executive is there to bring consistency to the situation. In whatever manner it takes. Sometimes it probably feels like Jekyll and Hyde, and you’ve got multiple personalities in a given day depending upon what situation you’re in, which company you’re in, what that culture is, and who you’re working with throughout the organization. But in most cases, the executives that we work with haven’t made it to the point in their careers by being that aggressive over-bearing type, and there’s a fifth where the individuals who are not looking to do interim executive or management consulting work. So some of that is just a natural selection, they vet themselves out or they’re vetted out at that point. We keep that expectation management separate from that but I’d love to hear Matt’s thoughts on that. I know you’ve come across and you’ve really talked

BT:          Hi and welcome to Business Today, brought to you by Cerius Executive Solutions. Today we are joined by Kristen McAlister and Matt Sauer from Cerius Executives. How are you guys doing today?

Kristen: I’m great, thank you.

Matt:     Great, thank you.

BT:          Great. So today we just want to kind of get right into it. Today’s conversation is about contract executives, interim executive and consultants who were once CEO’s, C-level executives that are either trying to make the transition, have made the transition or are looking for ways to find more consistent work and some tips that may help them. So let’s talk about that a little bit more. I mean, I think that’s kind of a good thing to discuss. As an executive you do have a diverse skill set that you had to have to get the level that you are. How do you focus on that? How do you focus on one specific expertise? For example, let’s say you’re a marketing executive who eventually ran your own company so now you’ve got an idea of sales, you’ve got an idea of marketing and operations, and you’ve done various amounts of business deals that have given you lots of experience in contract law, and so forth. So you see, quite a few different scenarios in front of you. So how do you focus on that? I mean is it focused on per assignment, I mean when you’re out there in the field and you’re trying to find work, you’re looking at some point, the best opportunity whether it’s experience, financial, compensation, whatever it may be. So how do you focus on your expertise without it becoming more of a full-time executive’s lesson?

Kristen: Matt, do you want to take that one? Or do I need to?

Matt:     Well I’ll start and then you jump. One of the things that we do is that, again, our team works with both the client and the executive in creating a statement of work. And in that statement of work, we make sure, we don’t create it when we work with interim to create a statement of work. And we coach them on how to do a great statement of work. So we make sure it includes the beginning date, we make sure it includes an end date. And we make sure that we put in all of the details in between. And the reason for that is that it’s for both sides. It’s the client, as well as, the interim so that no one gets off track. You know, clients have a tendency that when they get a really seasoned, C-level executive with lots of experience they have a tendency to want them to start doing a lot more than what they were originally engaged to do. And because the executives can do more, they have a tendency to veer off track and start doing more. So the purpose behind the statement of work is just to make sure that both sides stay focused. Which is exactly what you just asked Raj. It’s that we help them to stay focused on what the assignment was. Not that they can’t do more. Not that the client doesn’t want them to do more. But really they were brought in to get something completed within a certain period of time. And if they, either side starts to veer off then the time starts to expand, which means it costs the client more money which you know is not a satisfying solution to why they brought us in. So we’re very focused on making sure that that SOW is making a thing or two which helps most sides stay focused on exactly what they were brought in to do. And it also helps the interim stay focused on what their background is. Whether it be marketing or whether it be sales, or finance. Whatever the case may be, it helps them stay focused so that, that is how it’s accomplished.

Kristen: I’d really like to go back to the example that you gave for the marketing exec. And that’s absolutely right. Making it curt. Not just figuring out what that expertise is, it’s making clear to the company here’s what they’re being brought in for. Do we need to expand on that? Do we need to stick to it? And we’ll get to, I’d love to hit on expectation management between interim executives and [3:36] the very subject