Are you supporting your CEO clients?

Posted by George Sandmann on Dec 5, 2018 6:07:00 AM

The fundamental role of the CEO is to maximize shareholder value. Are you helping?

Business Advisor Series Article 1

There is a difference between serving as an Advisor versus as a Consultant: Advisors are strategic, Consultants are tactical. If your goal is to be the Advisor to the CEO, you need to serve the CEO job function. To see how, we’ll need to step back and discuss why companies exist, the role of senior management, and where you fit in.Trusted Advisor CoreValue

Quick aside: the definitions set out in this article serve to guide your understanding of your client’s company, professional responsibilities, and goals. Rather than definitive, they serve as lane markers for our conversation.

So why do companies exist? Companies exist to deliver value to their owners, be it shareholders or partners.1  Companies do two things, and two things only: companies make a promise to the market; and then deliver on this promise. Oracle®, North Sails®, Skadden Arps, your dentist: all they really do is (1) promise and (2) deliver. “We promise our sails will make your boat go faster; here is a set.” By delivering, companies generate revenues.

Revenue is the top consideration when discussing financial value --coming full circle, by generating revenue a company is creating value which serves its shareholders. If you think of the business as an engine, and the output of the engine as revenue and profit, you can see that the output in large part determines the potential value of the company for the shareholders.

How does the business engine generate revenues? By executing business process. Business process is developed and executed by the employees; the accountability between revenue goals and process lies with senior management. Senior Management, then, by executing process and attaining goals, serves the shareholders’ interests.

This is neatly summed up in the Private Business Standard, or best practice, for Senior Management:

“The client’s company has a leadership team/individual in place to realize the company's vision and mission while helping the owner achieve his/her objectives.”2

Vision and Mission are set by the shareholders. If the company doesn’t have a Vision/Mission, get a copy of Gino Wickman’s terrific book Traction3 for ideas about creating a mission statement --If they don’t know where they’re going, they’ll stay right where they are. Let’s lump Vision and Mission together and assume for a moment these are driving towards ‘goals’ that will serve the owner’s personal objectives.4 What about the “leadership team in place to realize [the goals]”?

We don’t often sit down and analyze roles within companies, especially those of senior managers. Let’s look at three key roles: the CEO, Chairman of the Board, and President.

  • The fundamental role of the CEO is to maximize shareholder value
  • The fundamental role of the Chairman (and Board of Directors) is to represent the shareholders, and work with the CEO (accountability) to ensure the company is being managed for the benefit of its owners
  • The President's role is to execute day-to-day operations

While the CEO and Chairman set goals and strategy, it is up to the President to set the tactical framework to advance strategy and meet goals.

In middle market private companies your client may be serving in all three roles --plus be the largest shareholder. This is where problems and heartache arise: there likely isn’t a process for delegating responsibility and accountability, therefore owners themselves are a risk to value. This is the top Red-Flag threat to company value, present in 39% of companies analyzed using CoreValue.5 These companies are hard to run, not growing in a predictable and process-driven way, and cannot generate the liquidity needed to serve the shareholders’ goals.

Back to the original question: “Are you helping the CEO?” And what exactly should be your role? The duty of outside advisors and consultants must be to help Senior Management develop and execute crisp business process that drives revenues and therefore value. Are you an Advisor, or a Consultant? The two are often conflated, but each has a different focus.

Consultants work on specific projects, and report to the relevant inside manager. The goal of the consulting engagement is tactical: develop a sales plan; implement operating reports; audit marketing. In short, help the President or other manager by putting strategy into action --in contrast to helping to create the strategy itself.

Advisors serve the company’s existential purpose. Advisors work as a peer to the CEO, essentially as a Fractional Chairman, to help maximize shareholder value. The Advisor can help craft strategy; then gather and manage the expertise required to improve the business process. This includes internal expertise, and outside consultants. By working to improve business process, the Advisor creates strategic value. Do you want this role?

Advisors therefore must have the tools and training to improve business process. Improving business process strengthens the business engine, generating higher financial outputs: growth. To improve the business process tomorrow, you must understand where the company is today. Understanding is created through an operational analysis including all facets of the client’s operation, on both the ‘promise’ (market) and ‘deliver’ (operations) sides. Once you have analyzed the process, you can rate it and report the findings to your client. This establishes a baseline from which to develop a plan which improves business processes and unlocks growth.

To recap:

  • Companies exist to generate shareholder value
  • The CEO sets and executes strategy that maximizes shareholder value
  • The Advisor’s role is to improve strategic performance
  • The process starts by analyzing business processes and the impact on value

The Trusted Advisor discusses, analyzes, and reports on the vital shareholder interest: the link between business process and enterprise value. Ultimately, you’ll be the person who helps the CEO to maximize value. It starts by shining a light on weak processes, and helping to build operational strength. Strong companies are valuable.

Final question: what better way to connect your services to long-term performance than by showing your client the connection between weak performance and risks to enterprise value? There is no better way, because your client will understand that their personal wealth is at stake.

We'd love to know what you think. Please comment below, or email


[1] Strong companies also serve a community of stakeholders including the employees, more on this in ‘Methodology.’

[2] CoreValue Driver #15

[3] Whickman, G. (2012). Traction: Get a Grip on Your Business. Dallas, TX: Benbella Books

[4] Private Business Standards for Mission, Vision and Goals are set out in CoreValue Driver #10:6 Company Overview:Strategic Direction.

[5] CoreValue® data, US Patent 9,607,274.

Topics: Operation value, Standards and Best Practices, "Build a Thriving Business Consulting Practice", Growth Advisor

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