Leadership Principles for Successful Growth and Scaling of Middle Market Companies

Episode Transcript

Intro  0:06

Welcome to the Growth + Exit podcast where owners of privately held middle market companies talk about founding, scaling and exiting their businesses successfully. Learn how to maximize and monetize your business on your own terms, let’s get started.

Heather Bennett  0:31

Hello, I’m Heather Bennett, your host for Growth + Exit, the podcast featuring middle market owners and experts talking about founding, scaling and exiting businesses successfully, we have a very special guest today. I am incredibly excited to have him on the show, and was definitely one of the first people we thought of to have on the podcast. So I think you will find what he’s going to share incredibly important and useful. Just a reminder, this episode is brought to you by Newport LLC, a team of seasoned C suite executives who help CEOs of privately held companies grow de risk and exit their businesses successfully. To work with us here at Newport, please visit our website at www.newportllc.com we look forward to talking with you. So today’s guest is actually the CEO of Newport. He’s been a wonderful partner to work with, and I think you’ll enjoy the conversation. Kevin Poole is a seasoned leader with diverse expertise as both a senior advisor to CEOs of middle market firms and as an operating executive at Fortune 500 companies. He was a senior partner with Ernst and Young and Capgemini advising executive teams in the high tech, life sciences and retail industries in driving profitable business growth, and I know since then, he’s worked in many, many industries beyond those. Early in his career, Kevin spent 20 years at General Electric as an operating executive, delivering consulting services and technology based solutions to Fortune 500 and middle market companies. As I mentioned, Kevin is the CEO of Newport LLC, and as I said before, an outstanding person to work with. Kevin. Thank you so much for being today’s guest on Growth + Exit Well, thank you for having me, Heather. So to get started, as I mentioned earlier, Kevin’s expertise is in leadership and leadership development of executives. So tell me a little bit about what it’s like to work with CEOs in the middle market.

Kevin Poole  2:53

Well, that’s a that’s a great question Heather, and I think what I’ll do is I’ll contrast that to the work I did earlier in my career, working with CEO senior level executives at Fortune 500 type companies. So at Fortune 500 type companies, the top business leaders are what I would refer to as professional managers, folks who’ve been highly schooled in the dark arts of business and come at decisions from a highly rational perspective. Now in the middle market, certainly with the clients Newport deals with, we’re generally dealing with entrepreneurs, founders who oftentimes have only ever worked at the company that they are leading, and they may not have had as a broad based background. And when you’re running your own business, there’s a much stronger emotional attachment to the business, say, than when you’re a an executive at a publicly held company. So the decision making process is therefore oftentimes much more emotion based. And what we also find is that entrepreneurs tend to be a bit more material, I guess is the word that I would use. So trying to lead, guide and help a middle market founder scale their business is very different than working with a professional manager at a publicly traded company. But I’ll have to say, having been at Newport for about 14 years now working with these absolutely amazing entrepreneurs who’ve built these beautiful businesses, I find it so much more rewarding and the benefits and so much more personal to me when I’m able to help a business owner scale their business, as opposed to the work that I was doing at say, EY or GE, when we’re working with large publicly traded companies for the most part,

Heather Bennett  4:47

excellent. And I know Kevin, you’ve created an e book on the principles of leadership, which we’ll make sure is included in the show notes for this episode. Could you highlight a few of those? Principles that may not be the first ones to come to mind to help these CEOs.

Kevin Poole  5:08

Yeah, happy to do that. So the first thing I would say is that I think it might even be principle number one in ebook, which is leadership is, from my perspective, part art, part science, but the one thing it isn’t is ad hoc. And by that I mean I’ve always taken time whenever I’m stepping into a new leadership role to be very deliberate about the approach that I think is required to be successful in that role, based on the context of the organization, the operating model that I’m expected to to form in. So I’m very deliberate in thinking through my personal leadership style and then adapting that to the specifics of the situation that I’m in. So there’s that principle again, part art, part science, but it’s never ad hoc. That’s that’s probably principle number one. I think another important principle is that good leaders take the time to surround themselves and develop other strong leaders. If I think back to my days at GE, which was way back during the Jack Welch era, when GE was known for all the great things that they were doing in the 80s and 90s and early 2000s as a leader at GE we were expected to spend at least 50% of our time on people related matters. And by that, I mean we were expected to spend time attracting, retaining, developing and managing the performance of our staffs. So that really helped give me a good grounding in the in the importance of leadership and understanding that you know this, this concept of investing in good people, surrounding yourself with people whose skills are complementary to you, and being comfortable with having extremely talented people around you, because when you when you are able to make that happen as a leader, it just makes your job a lot easier. But it takes a little bit of confidence in being able to be comfortable in surrounding yourself with people at least as knowledgeable, if not more knowledgeable than you

Heather Bennett  7:18

could you give me an example of one time that you were able to advise a CEO to help them build the staff they needed when they didn’t really have the team that they needed around them?

Kevin Poole  7:31

Yeah, so that’s a that’s a great question, and I have to thank our chairman, Doug Tatum, who wrote a book a number of years ago, called No Man’s Land, and there’s a section in the book where he talks about this very difficult transition that founders, entrepreneurs, business owners need to go through once their business reaches a certain size. And the size and the timing of the transition is kind of dependent on the industry, but generally speaking, there’s a point in a company’s history where they need to make a very complicated pivot from operating on a culture of loyalty, which is usually the founding culture of an organization, where you’ve oftentimes recruited your best friends to come work for a company, there’s Probably periods where you’ve asked them to defer getting paid because you’re ever having trouble making payroll. So it was very much kind of a loyalty based relationship in the early days of an organization, but at some point as you’re scaling an organization, you need to make that all important pivot to a culture that still maintains an appropriate degree of loyalty, but also starts to layer in an expectation around accountability and performance, and that’s a that’s a very difficult thing to do. A lot of business owners founders struggle with making that that shift. A lot of them aren’t able to make that successfully. So when I’m working with a client, I’ll go to great lengths to explain that concept to them, sometimes from the very first meeting, even before they’ve become a client, so that they’re aware that somewhere along the journey, when we’re working with them, we’re going to be helping them make that pivot, and oftentimes just being aware of the need to make that pivot ahead of time, and helping them think through what some of the ramifications of that are and what, what some of the changes might be required, and how they lead their team, just being aware of that ahead of time and preparing them for that mentally can facilitate them adopting the right behaviors to successfully make that pivot from a culture of pure loyalty to one that continues To include loyalty, but also introduces that notion of accountability and

Heather Bennett  9:43

performance. I think you just touched on one of the most important parts of advising CEOs is preparing them for the tough decisions or the options that are going to come ahead like well, ahead of time. So we. Even if they helping them understand why it’s important to get there, so that when they do get there, when you you have to help them make that decision, they’re already ready. So that level of preparedness is incredibly important. And then you mentioned Doug Tatum, our founder at Newport, and we’ll we have an episode featuring Doug, so we will definitely be linking to that one, as well as his book No Man’s Land, which I personally make a point to read on a regular basis, because there, I mean, you touched on just one aspect of what and Ben did you know, really did a great job explaining like, what that why that makes such a big difference, and how that makes such a big difference in the leadership transition. But there are so many, so much more to learn from that book and and that concept of helping the middle market.

Kevin Poole  10:50

Indeed, I’ll, uh, I’ll make sure to watch that episode once it drops. I

Heather Bennett  10:54

know we’re very excited. Um, so over the years, um, you’ve had the opportunity to lead a lot of different teams. And I know we’ve, we’ve mentioned, you know, arts and young and then, of course, you know, with Newport and your time at GE but at one point you mentioned to me that you had a very early on opportunity to lead a unique group, or a unique team will say, tell me a little bit about that, and then maybe we can talk about how it relates to what you learned as a leader.

Kevin Poole  11:32

Yeah. So it turns out, very early in in my life, I had the opportunity to take on a leadership role when I was about 16 or 17 years old, managing a group of about a dozen lifeguards at a large country club that had multiple pools, so it was a pretty big facility. And the first summer that I worked there, I was just a lifeguard. And then the second summer when I went back to work there, the senior management at the club decided that I had the type of maturity, I think was the word that they use, that would make me a good supervisor or leader of the lifeguards during the one of the two eight hour shifts that that each of the teams work. So during that eight hour shift, I had about a dozen lifeguards working for me, who I had to set up a rotation schedule for them to move between the different stations at the various pools and their breaks and lunches and things like that. And it was just a was a really amazing opportunity for me to kind of understand the nuances of the highs and lows of leadership at a very, very early age. And I’ll have to admit that I was kind of dropped into this situation with absolutely zero training when I kind of look back on it. But I really enjoyed the experience, both the good parts and the bad parts, and it got me, at a very early age, interested in this concept of leadership. And I think that’s what’s really made me a student of the topic throughout my entire career, and one that has caused me to gravitate towards leadership roles at all the places that I’ve worked since then,

Heather Bennett  13:13

we’re certainly happy to have you as the leader of Newport And tell us so going from that early dropped into the situation. What did you learn at Ernst Young and GE? What did you learn at E n y and GE about leadership, maybe that was unexpected, or that you felt was incredibly important for becoming the advisor that you are now.

Kevin Poole  13:43

I think one of the most important things that I learned is that leadership is highly contextual, and by that I mean the environment that you’re operating in influences the appropriate approach to leadership in the individual or individuals you’re working with also should influence your approach to leadership. And let me get a little bit more specific about that if I think about my own leadership journey, kind of setting aside the work I did in the lifeguard very early on, but in the first I’ll call it professional setting as a manager at ge, ge, particularly then back in the 80s and 90s, was a very kind of traditional, top down leadership approach. It was a publicly traded company where everybody that was working for you was an employee. They were all receiving paychecks, benefits, plans, those types of things. So looking back on it, it was actually a pretty straightforward and easy leadership model, if you will, because you had lots of tools to motivate, influence, cajole, get the kind of behavior you wanted out of your employees that you needed to get the job done. And then moving from GE to Ernst and Young, Ernst and Young is what I would. Referred to as kind of a hybrid environment, in that the majority of the people working at large partnerships like that are paid employees, so the junior staff are paid employees. But then you also have this category of individual who are peer partners within the organization, and you’re all owners of the organization, and the approach that you take with owners of an organization who are your peers, even though you may be their quote, unquote, boss, very different than the approach that you take, a much more nuanced type of influence based approach. And then I move moving on, then to the work that we do together at Newport, which is a different model, still, where everyone in the organization is a partner. So in other words, we’re all owners in the organization. Our business model is a bit different in that it’s, it’s strictly performance based. People don’t receive salaries that are accompanying. The compensation they receive is based on the success that we have jointly in the marketplace. So it’s a very it’s a very different approach. When you have you don’t have those kind of traditional tools, those traditional kind of carrots and sticks to use to get the behavior you want out of a colleague that you’re looking for. So as a result of that, I’ve had to adapt my approach to leadership across those three business models, if you will, from kind of the traditional command and control at GE to more of a nuanced model where you had both employees and partners at EY, and now a very different model at Newport, where it’s all partners. And I’ll have to say that of those three environments, the one at Newport is the one that I I enjoy the most, because the leadership challenge is the most nuance is the most complex. So that’s that’s one aspect of contextual leadership. The other aspect of contextual leadership is the person sitting across the table from you, who you’re trying to lead, or the team that you’re trying to lead, and every individual is different. Every team is different. And as a leader, it really behooves you to take the time to understand what makes that person tick, what makes a particular team tick, so that you understand how to motivate them, how to modify their behaviors when those types of modifications are required. So there’s a degree of personalization, there’s a degree of investment of time that’s required. There’s a pretty high level of of empathy or emotional intelligence that’s required to operate at that kind of I’ll call it mass customization approach to leadership, and that’s certainly something I didn’t know when I was leading a team of lifeguards at the age of 16 years and years ago, but it’s an understanding that have developed over the last 40 years operating in those different environments that I’ve just described.

Heather Bennett  17:50

Okay, so as part of working with Newport, we work with a lot of what I would call high growth companies. Tell me what’s important for CEOs to know about leading their teams in a high growth situation. So it may tie back to how you motivate, but also maybe how you build teams who are able to handle that level of high growth.

Kevin Poole  18:15

Yeah, so that’s a great question. Heather, so one of the things that that we try and do with our clients at Newport. I know you do this, Heather, I do this, and our Newport colleagues do this as well. When we begin to engage with a client on a long term basis, which is typically the case, I think our average client tenure at Newport is three plus years, but when we have those initial meetings, we’re putting together that initial multi year growth plan. We certainly focus on the financial aspect of things. We focus on the technology infrastructure, and we focus on lots of different things. And we’re always using this term scalable, scalability. We’re trying to inject scalability into the business so that the business can able to grow in a predictable and profitable manner, one of the things that entrepreneurs tend to not think enough about, so it’s incumbent on us enterprises to really bring this to the forefront of their attention is to need. Is the need to have that similar scalability amongst their leadership team. And you know, as well as I do oftentimes when we begin working with a client at Newport, you’ve got the business owner who usually has pretty good leadership chops, and they may have one or two other people on the team who have scalability in their DNA, but usually that’s about it. And if you’re going to be taking a business from 25 to 50 million, or 50 to 100 million, or even 1 million to 10 million, that business owner, no matter how talented they are, is going to have to surround themselves with a group of individuals who are as scalable, or perhaps even in some cases, more scalable than they are. So I talk with business owners again from that very first meeting about the need to. Think deliberately when you’re trying to scale your revenues of the business over a three to five year. Plan to at the same time in parallel, be thinking about what you need to do to scale the human capital elements of your business during that same period. Because when I when I think about companies that fail, oftentimes it’s not so much that they’ve grown faster than their financial capital will allow them to grow but it’s because they’ve grown faster than their human capital

Heather Bennett  20:29

will allow them to grow. Interesting. Yeah, interesting, yeah. And you talked a lot about the models that Newport uses to assess where a business is and where they’re trying to go because it doesn’t always align their tech stack or the type of marketing or HR, or the way they do their financial reporting could not be, you know, there’s a lot of times they’re not aligned, and it’s trying to encourage the leadership team to work towards aligning those. And I love that you took it back to people, because I find almost all of those end up going back to the team that’s working on them and really focusing on on having the right people doing the right work at the right time, in that that trajectory of growth and scaling. So that’s that’s a really good ad. I know we talked specifically about, you know, gee, could you give me an example of one of your clients, past or present at Newport that you’ve been able to help with growth and and was maybe ended up using something a little unique to help them do that large scale growth that they needed.

Kevin Poole  21:44

Yeah, I can, I can think of one client that that I’ve worked with had worked with him for a fairly long period of time, about four years, and I’ll have to say they’ve done just a fantastic job of making that pivot from a culture of loyalty to a culture of accountability and performance. And what’s really been kind of truly amazing about it is that not only have they been able to make that shift, but at the same time that they’re making that shift in the culture of the company, they’ve also been shifting overall leadership responsibility from gen one to gen two. So you got a lot of moving parts going on that they’ve had to kind of coordinate all at the same time, and they’ve been able to do it successfully. And they in particular, what I’ve liked is that, as a family owned, family led business. They’ve had a certain culture for the 30 years that they’ve been in existence, and they’ve managed to make that that introduction of accountability and performance into their culture, without losing the family feel of the company that really kind of got the business started and propelled the business to the level it’s at today, and has caused them to have the very high levels of retention amongst their employees that they have. So they’ve done a good job of introducing that notion of accountability and performance without losing the kind of warm and fuzzy feel of a well run, family owned business. And I just, you know, really have to give them kudos for making that transitional change. At the same time they were making a cultural change, not an easy thing to do, by any stretch,

Heather Bennett  23:32

right, right? So in this day and age of having so many competitive like the competitive landscape for most businesses is very high, and you talked about culture being one of those areas, like those points of differentiation that can make a difference for a business when they’re trying to serve and attract and retain their customers. What do you think are other ways? What other points of differentiation that middle market companies can focus on in order to stand out in the crowd. We’ll say in their their competition.

Kevin Poole  24:09

Yeah, so great, great question. Heather, I would say one of the most important things middle market business needs to do is to really figure out how they align their entire organization around addressing the needs of their ideal client. So one of the first things that that I do, and I know you do this as well, Heather, when you’re working with your clients, is to help them really understand who their ideal client is. And we we take this the kind of specific step of helping them develop in writing an ideal client profile. What’s the size of their ideal client, what’s the specific industry or sub industry that they might be in, what’s the leadership model at their ideal client? What are the payment characteristics of the ideal client? So there’s, there’s probably a dozen or more characteristics that. Go into defining who your ideal client is, and then being absolutely zealous about finding organizations and developing your brand such that you attract those ideal clients, and every client that I’ve worked with where they’ve been willing to kind of put that time and energy into the notion of developing this ideal client profile, again, in writing, sharing that across the organization, and being disciplined about only onboarding clients who fit that profile, I find two things happen. Number one, the business becomes easier to lead because the clients you’re bringing in fit into your company that’s been optimized to address the needs of that ideal client, and then the other thing that happens is you become more profitable. So I think about clients that I’ve worked with who’ve been disciplined about implementing an ideal client profile, and they are their role as a leader has become easier because the business is easier to lead, and they become more profitable. And you know that we, we eat our own dog food here at Newport, right? So we, we also seek a very specific type of client, a middle market business owner, who we like to say is smart, open minded, and has a bias for action. And we, yes, those are three of the most important things we screen for in considering onboarding a client for the Newport platform,

Heather Bennett  26:27

I love the idea, obviously, expertise in target marketing and building that you know customer persona, that ideal client profile, is so vital for making sure that the business is doing what it needs to be doing, and for finding that ability to scale and grow. So as a great ad. So what we talked about leadership. We talked about, you know, growth, building the companies. Are there any other and you mentioned throughout many of the roadblocks that can happen that that you know, CEOs get around. Are there any other roadblocks that you see are commonly happen in the middle market for CEOs, and especially founders of businesses?

Kevin Poole  27:18

Yeah, I can, I can point to one, in addition to the kind of lack of focus of scaling and leadership team, as I think about all the middle market clients I’ve worked with over the last 14 years, the ones that have been successful in scaling their business really crack the code around two things. One is this notion of building a scalable leadership team, and the other is the ability to extend their planning horizon. So by that, I mean oftentimes, when we’re working early days with a new client at Newport, you’ve got kind of an entrepreneur running around with their hair on fire and their planning horizon. I’ll oftentimes refer to it as being negative, in terms of, they’re focused on fixing the problems that occurred last week, right? So they’re kind of mired, kind of working on the issues down in the bowels of the business, and they’re struggling to kind of raise themselves up and work on the business. So they’re working in the business, not on the business, and they have a very short, if not negative, planning horizon, because again, they’re focused on the issues of the previous week. Now what I found is that business owners who are ultimately successful in scaling their company are able to gradually extend that planning horizon to a longer and longer period. So when, maybe when we start working with them, they’re they’re sus being burdened by what Doug Tatum calls the tyranny of the urgent, again, that running around with the Heron fire. So what we’re trying to do is push their planning horizon out one week to two weeks to a month to a quarter to a year to multiple years. And the clients that I’ve worked with that have been most successful are working on multi year planning horizons and executing against them on a discipline basis. And I find a near perfect correlation between the ability of an entrepreneur to extend their discipline planning horizon and the success of their their ability to scale their business in a professional and profitable manner. So if a business owner, even with the support of Newport or other advisors, aren’t capable of extending that planning horizon and are always kind of working in the here and now, they’re not going to be successful in scaling their business even when they do surround themselves with strong individuals, because they’ll drive those individuals, First they’ll drive them crazy, and then they’ll drive them away, if they’re always running around kind of Herky jerky with their hair on fire. So it’s incumbent upon the business owners, and therefore incumbent on us to really stress the importance of extending that planning horizon. As you know, we have all all manner of tools to help them do that, but those. Two things, the ability to take a strategic approach to human capital management and the ability to extend your personal and your company’s planning horizon, or in my mind, that the two most essential ingredients or a business owner to scale their business and in a predictable and profitable manner.

Heather Bennett  30:19

Excellent, well, I always learn so much from our conversations. Kevin and certainly, this one has been very helpful. I know we’ve only scratched the surface, so I would definitely encourage the audience to get their hands on your e book on leadership principles. I it’s it’s exceptional and a great place to start, and they can find that on our website, at newportllc.com, and addition reading as well No Man’s Land by Doug paid Tatum, excellent way to really, I think, thoughtfully, sit down and think about exactly what you just mentioned, working on their business, as opposed to working in their business. So we’re all lifelong learners at Newport. That’s one of, I think, the great, consistent aspects and attributes of Newport partners. Where do you learn from and where do you go to learn more to improve the craft that we do, which is advising.

Kevin Poole  31:23

Yeah, so that’s a great question. Heather, yeah, I know you’ve you’ve written my e book, and one of those 10 Principles of Effective Modern Leadership is that true leaders are lifelong learners. So I invest quite a bit of time in reading, articles, books, and the latest is watching videos, right? YouTube, different speakers, what have you on the topic of leadership. And I make a point of trying to spend a half hour, 45 minutes, at least four or five days a week, studying up on on various topics, whether it’s leadership, whether it’s, you know, continuing to increase my understanding of business financials, lately, I’ve been going to school on AI, so it’s, it’s important for me, professionally, for sure, to stay on top of things, but But personally, just to keep my mind sharp, it’s just For me anyway, really rewarding to be able to stay on top of these, these various topics, and the fact there are so many different mediums to do that, versus, you know, the the old days where it was, you know, reading, you know, kind of a dense white paper, but being able to see stuff brought to life by the speaker in a YouTube video or something like that, it’s just so much more engaging and interactive, if you will.

Heather Bennett  32:44

Yes, and like you said, this is such a wonderful point in history that we have so much at our fingertips. I was at a conference earlier this week discussing which most of the conference was on AI and tools and just the plethora of options to learn about AI or using AI was fascinating, but I don’t think we can ever discount, like you said, those white papers, YouTube videos, books, you know, Audible books. There’s so many way podcasts, really. There’s so many ways to learn, and I think it’s exciting that we have all of that at our fingertips. Well, Kevin, it has been an absolute pleasure getting to talk to you and learn from you today and hear more about your journey as a leader leading up to, of course, being CEO of Newport. Thank you so much for being a guest on the podcast. I do have one final question, and of course, before that again, ways to reach Kevin to learn more. Go to newportllc.com, and there’s a lot of resources there from Kevin and ways to contact him. So if you do want to learn more, reach out to him. So for my final question, what is hard lesson you’ve learned while helping CEOs to grow their business that you think other CEOs would like to know about so they avoid that difficult lesson?

Kevin Poole  34:19

Yeah, that one for me, is a pretty easy one to answer, and this, I’ll call it school of hard knocks, applies both to the work I’ve done as a leader in the organizations I’ve worked in, and in the advisory work I’ve done with my clients. And that is when you’re working with an individual in an organization and it’s clear that they’re not a fit in the organization, either skill wise, attitude wise, not a good fit culturally, perhaps disruptive or corrosive to the culture of the organization. Once this decision has been made, there’s a tendency to kind of hope that things will approve. Cross your fingers. Simple things will improve, and you’ll end up sometimes tolerating that longer than you should. And that was, that was a lesson that I learned fairly, fortunately, fairly early in my career. And so that’s advice that I give to the business owners that I work with. So once, once they’ve made a come to a conclusion where we’ve helped them come to a conclusion that action needs to be taken on an individual, and that that might not mean having them exit the organization, it might just mean helping them transition into a different role. But once that realization has been made, you are generally better off taking those actions sooner rather than later, because more often than not, if I think back on, you know, some of the early personnel decisions I made in my career, or some of the personnel decisions my clients have made, it’s pretty rare that they’ve ever felt that they’ve acted too quickly. More often, it’s the case that they’ve acted too slow. And what happens in that environment is that if you as a leader, recognize someone’s not cutting it in their role, the chances are the rest of the organizations come to that conclusion as well. And if you’re being viewed as a leader who’s tolerating subpar performance or worse behavior, that’s corrosive to the culture of organization that that represents kind of a ding on your team’s assessment as you as a leader. So again, more often than not, you’re you’re better off taking those tough decisions, those tough actions sooner rather than later. It’s a difficult thing to do, particularly if you know you’re kind of on the front end of moving from that culture of loyalty to a culture of performance. But I can assure you that if you make those changes and do them in a thoughtful and compassionate way, you’ll

Heather Bennett  36:51

be glad that you did excellent. And I do think that that really aligns well with the old adage to, you know, hire slow fire, fast to keep the company going forward. Well, thank you so much, Kevin, this has been the Growth + Exit podcast. I hope you will join us for future episodes and look forward to the next time. Thank you.

Outro 37:21

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