When you take your company public, say CEO's on the Inc. 100, you change your job forever.
When you take your company public, say CEOs on the Inc. 100, you change your job forever
You create and grow a company. Even if you have your eye on going public at some point in the future, you still run your company today as one kind of CEO. When you make decisions, you consider the interests of customers, employees, investors, perhaps even your community. Ultimately, though, you know it's your customers alone that you most need to please. Unless you serve them, your business dies. So you spend your days and your energy trying to understand -- and satisfy -- their desires before anyone else's. But when your company goes through an initial public offering and you become head of a publicly traded entity, that balance shifts. For one thing, you're suddenly forced to zero in on the interests of shareholders -- not to mention the interests of all the lawyers, analysts, and underwriters who pave your road to them. The focus on shareholders and their cupbearers is inevitable; it comes with the public territory. Customers and employees -- along with whatever other concerns dominated your pre-IPO workday -- can begin to get lost in the shuffle. Back then, your main external concern was your competition; now you become vulnerable to the ebb and flow of the stock market at large.
With those changes, you become a different kind of CEO. And the conversion starts during the IPO process itself.
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As new concerns vie for your attention, your time for running the business gets stolen.
From the minute a company begins thinking about going public to the day the offering hits the street, the executive becomes absorbed in the process to one degree or another. There are demands to bring in new personnel, pick an underwriter, oversee the prospectus development, set an offering price, pitch the company to the investment community, and get analysts to understand the operation. Judging from the comments of CEOs we interviewed, it's hard for most executives to anticipate the magnitude of the challenge.
William H. Brehm, who had stints in the corporate echelons of several major health-care companies before becoming CEO of CliniCom Inc. (#44) in 1988 and helping to take it public last year, says he underestimated the amount of his time and money the IPO would take, even though his chief financial officer took the main responsibility for overseeing the process. That sentiment is echoed by many. On average, the CEOs on this list spent 33 hours a week on their offerings, for an average of four and a half months. Even those who did know what they were getting into found their time eaten up: "I was totally consumed with the process," says Granite Broadcasting Corp.'s (#61) W. Don Cornwell, who had been vice-president of Goldman, Sachs & Co.'s investment-banking division for 12 years.
A chunk of that time and energy goes to basic self-education. If running a private company already requires a continual reeducation of the chief executive, moving into the world of public ownership demands a proportionally gargantuan leap forward. David Hale of Gensia Pharmaceuticals Inc. (#32) confers the deceptively simple advice that CEOs should "really understand the process, understand the issues, and know what the variables are that can affect success."
Generally, the CEOs of companies on this list tried to do that: all but a handful consulted accountants and lawyers, and the vast majority say they both read up on the subject and spoke with other executives who had taken companies public -- particularly useful, Cirrus Logic Inc. (#67) CEO Michael L. Hackworth says, because of the evenhanded perspective they offer. Almost three-quarters of the CEOs say they felt educated about being public by the time they filed.
After a CEO takes that first step of self-education, the pre-IPO preparation takes many forms. Synopsys Inc. (#9) began planning for its 1992 offering a year earlier by drawing up a to-do checklist. The main priorities, says CEO Harvey Jones, included filling gaps in the electronic-design-automation company's management team and enhancing its information systems. Getting those aspects of the company in order helped relieve pressure on the work force, which wouldn't be able to rely on the executive team to solve operational problems during the IPO process. Not only were Jones and the company's cofounder, current president Aart J. de Geus, occupied with bankers and lawyers during the months before the February offering, but both their wives also had babies in that time. "Part of getting the management team right was making sure the company could live without us," Jones says. "It was only during the road show that some of us were incommunicado. Still, it was the rest of the executive team that really carried us through that whole period."
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You have to please a new set of people.
On the upside, you get to make new friends. On the downside, those new friends are lawyers, underwriters, analysts, the investment community, and the Securities and Exchange Commission.
"It takes real introspection," says C. John Schoof II, founder and CEO of local-area-network maker Artisoft Inc. (#29) "Especially for an entrepreneur, it's very difficult. Because when you're building a company, you're always looking outward: you're looking for new ways of doing things, new products, new services. And the IPO process and what happens thereafter forces you to be introspective -- how good are your systems, how good are your people, how good is your schmoozing -- as opposed to focusing on what the next product is."
Companies with new products and technologies may be confident that customers will accept their products, but getting other constituencies to buy into the ideas can be another issue. At least 20 CEOs on this list say some analysts don't understand the nature of their companies. Among those are the heads of First Team Sports Inc. (#26), a maker of in-line skates that compete with Rollerblades, which went public in 1987, when the industry was still nascent; Video Lottery Technologies Inc. (#78), which sells computer systems to run lotteries; and Curative Technologies Inc. (#66), which makes biopharmaceutical products that help heal wounds.
