Many ambitious entrepreneurs dream of the opportunity to run a public company. Only a small percentage actually get that chance, so most never learn what the job truly entails. YPO member Ben Brock is one of the lucky (and qualified!) few. As President and CEO of Astec Industries, Brock runs a global manufacturer of equipment used in the infrastructure, energy and mining industries with 2016 revenue of $1.15 Billion.
Brock, was fortunate in that he had the opportunity to watch and learn from his father, who served as CEO prior. Nevertheless, says Brock, "Until you are in a role, you don't really understand it completely. I'm in my fourth year now and there are days I feel on top of it all and others where I feel I'm still learning on the fly." He must be doing something right as he was named National Stone, Sand & Gravel Association's 2015 Grasstops CEO of the Year.
Here are 9 surprising insights about running a public company Brock shared in our discussion.
1. The Board of Directors is a vital resource.
Unlike private companies, public company boards can never be ceremonial. They share financial accountability with the CEO and should be able to help bear that burden. Brock believes a good mix of expertise is key to a successful path forward, and that all board members should be encouraged to use an active 'nose in, fingers out' approach to their work. The CEO should also cultivate the right communication: "One key thing I've learned is that you need to listen individually to board members but communicate to all. Getting in a board meeting where not everyone has all the information from communications is not a good thing" he says. The right relationship, however, brings benefits that the CEO will appreciate every quarter.
2. Core values require constant reinforcement.
Most companies have a mission statement and core values written down somewhere, but keeping those at the forefront of the organization takes work. Brock explains: "Being a listed company, an employee not working in line with our core values could put us in a very difficult position with regulatory agencies like the SEC. So as a public company it's critical that we communicate and live by our core values not just at the corporate level, but at all levels every day. We have over 4,200 employees globally, so we not only need to get the message across in the USA...we have to get it across in several countries where we have employees." That level of consistency never happens by serendipity. Corporations must put in deliberate strategies that are consistent from the mailroom to the boardroom.
3. The needs of all stakeholders are connected.
Most corporations know that they must meet customer needs to survive in the long term, but they may not see the links to employee and shareholder needs. "Taking care of our employees helps us meet the number one goal. As a public company, we are challenged to balance great training and benefits versus costs. We are expected to make a certain range of profit that the world sees every 3 months," he asserts.With no shareholders in the mix, private companies may not experience the same level of pressure; public company CEOs may have to make complex choices with less flexibility.
4. It can be tough to get buy-in for innovative ideas.
Brock offers Astec's use of decentralization as an example. "Our decentralization is one of our competitive advantages, but decentralization is not very popular for public companies. Lots of people love centralized operations, and they are not afraid to tell you. It is easier to run your own company your way when you are private." If you want to make similar innovations in a public company, you will likely have to explain your reasoning very well, and many times over.
5. Private Equity firms and operating companies have different end games.
Astec has done 11 acquisitions over the last 17 years. "Our goal is to operate our companies indefinitely, which is a different end goal versus the PE money out there. As a result, PE has historically paid more in terms of price than we are willing to pay so we miss out on some deals," explains Brock. He has learned to keep his own company's end game constantly in sight, which allows them to choose the right partners. "We have to be close to the owners and/or management teams to execute on our acquisition strategy. We keep acquired companies where they are with the people that are there and with the name intact."
6. Different people have different ideas about what constitutes a good quarter.
"We are a cyclical industrial business. There are ebbs and flows to what we do seasonally and in product development. New products bring lower margins early on. So, a very good quarter for us may be seen as a not-so-good quarter outside our doors." In those situations, especially with regard to long-term strategy, the CEO is responsible for explaining things in a clear, compelling way so that all stakeholders hear the message correctly.
7. CEO does not equal Owner.
This can be especially challenging for leaders of private companies that go public. Making good, sound decisions are just as critical as a public company as they are in a private company. "Regardless of your holdings, you have outside shareholders that own the company with you. You have to make decisions with customers, employees, and shareholders in mind at every step. It's not just your money on the line, others' is at stake as well." This can be an advantage, as issuing shares can help raise capital for strategic growth.
8. Public Company Accounting is Complicated. You'll get used to it.
It is very expensive, too. "I have many friends in private business that have many of the same headaches we do," he admits, "But we certainly have more pure, visible accountability with external audit requirements and the SEC." Private companies often do not have to meet the same legal standards, such as the Conflict Minerals Tracking requirement in Dodd-Frank that Brock must consider. The increased complexity will be daunting at first, but it is important to master as quickly as you can to prevent bigger headaches down the line.
9. Many of the old business adages are true, so learn from them.
Some of Brock's favorites include:
· "It's never as good as it seems, and it's never as bad as it seems."
· "You better love what you are doing or it will eat you up."
· "Treat the company's money like it is your money."
Whether you run a public or private company, the job comes with a ton of responsibility and pressure. Others have been there before you, and have left their wisdom as a legacy. It is available to you when making decisions of all kinds.
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