The Surrogate CEO

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The Surrogate CEO


Engaging an outside professional to serve a key role in a firm is an uncommon, but often very effective tactic. In many instances, an outsider assumes the role as an interim step, until the firm’s internal leadership capability is established.

A common application has been “Chief Financial Officer.” A firm’s accountant or a financial management consultant assumes the role. Often, a firm’s financial systems aren’t effective, and no one has either the technical ability or the passion to assume the role. A “Surrogate CFO” identifies what financial systems are needed, and works with operations personnel to establish the systems. Once completed, the Surrogate CFO then works with the firm’s leaders to either identify an internal resource or to recruit someone who can perform the CFO role on a long-term basis.

Once a CFO is engaged, and after a smooth transition, the Surrogate CFO leaves. The time required for such a tactic seems to range from six to eighteen months.

An engineering firm of 200+ people tried a unique tactic. The owners were engineers…senior project managers who became firm owners. They realized that their real passion focused on doing great projects, not in running the myriad of things that have to be done to have a successful professional firm. So…

They recruited a president!

The person they selected was an architect who had led his own firm. His firm went through a merger. While some enjoyed life in the merged organization, he enjoyed running an entire firm. So…he took the job as president of the engineering firm. He had no ownership, but was in charge of all operations of the firm – human resources, financial management, marketing, technical excellence, project management, quality. He also managed the owners, as senior project managers. But…

He also reported periodically to the owners, as a Board of Directors. That way, the principals controlled policy issues, such as direction and desired culture for the firm, attitudes towards staff development, and leadership transitions. Operationally, they came to work each day to function in the role they enjoyed most – and a role that maximized their highest and best value to the firm – doing projects.

We’ve recently found the same phenomenon happening in some client firms. Firms of five to fifteen people work out their management style; they function as a small family, with everyone sitting within 25 feet of one another. Firms of several hundred to a few thousand often have leaders who have comfortably ceased to use their technical background, and have enjoyed learning to be effective CEOs. But…

Firms in the middle seem to often be led by principals whose heart lies in doing…projects, not in being “pure” organizational leaders.

In two recent cases, well-established firms were struggling. One lacked operational systems needed to function effectively. Another had older principals with no replacements in sight. Both are in solid markets, can bring in new work, and have reputations for quality work. Both needed better operational management systems, and people willing to assume operational leadership running those systems.

The “fix” uses the surrogate concept. Except – instead of the surrogate being an interim CFO focused only on financial management, or a permanent CEO – the solution became a “surrogate CEO.” The process follows five phases:

I. Diagnostics

Interview every member of the firm, most individually and some in small groups. Asking what’s working, what isn’t, and future professional and firm aspirations.

II. Identifying Prospective Leaders

Meet with owners to identify likely prospective leaders – remembering many owners see staff as they were when they entered the firm, not as they could become.

III. Forming the Leadership Team

Hold a retreat of owners and prospective new leaders, to crystallize a vision for the firm, to identify Strategic Initiatives that need to be accomplished over the next twelve months, and to form teams to do it.

IV. Facilitating Progress

The team progresses with three-tracks. First, two meetings a month to (1) build trust in people doing what they day they’ll do; (2) teach leadership skills (e.g. balancing short & long-term goals, communications methods); (3) address issues surfacing in the firm (e.g. restructuring staff roles, getting time sheets in on time.) Second track is a monthly meeting with each Strategic Initiative team, to ensure momentum in reaching the goals for that initiative. The third track involves a two-hour monthly Executive Coaching session for each member of the leadership team.

V. Phasing Out

In a year, many Strategic Initiatives are complete. New systems are in place. As team members assume leadership, and the Surrogate CEO gradually phases out. It’s an interesting technique for accomplishing leadership transition in firms.

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