Why CEO Peer Groups?

 

Mavens completed its two years today! While we are busy wishing & complimenting each other for all the intense entrepreneurial initiatives that we have jointly executed, we thought that we should also take this opportunity to evangelize the concept of ‘CEO Peer Groups’.

 

I was having a conversation with the founder CEO of a very large Pune (Hinjewadi) headquartered IT organization who also was one of our prior The Senate Talk Show guests. He is a strong sponsor of Pune chapter of a large global entrepreneurship fostering organization with which even I had been closely associated with. He wanted to know why did I prefer to start Mavens when we could have driven these (/some of these) initiatives under that group. I explained to him that Mavens is a CEO Peer Group and has a very different objective. Mavens aims at creating ‘a large impact on a number of entrepreneurs’ while ‘that group’ brings about ‘a small impact on a large of entrepreneurs’!

 

I have been actively associated with various entrepreneurial groups during my 8+ years of journey as an entrepreneur. I had the fortune to be associated with BNI, world’s largest business referral organization. Of course, there are umpteen organizations which copy the BNI model, and make it cost effective, with (or without) minor terminology variations. Then there are organizations, though much fewer, which regularly host seminars, conferences, knowledge sessions etc which certainly add value by enriching the audience. However I always felt that these inputs, most of the times ad-hoc, are like cooking khichdi with fire kept a few meters away as in Akbar-Birbal’s famous story!

 

What entrepreneurs/CEOs need is a trusted group of peer CEOs who can form a ‘backbone of support’ for each other. As SMEs, we have a very limited appetite to digest failure. Likewise, we also may miss out on leveraging (or fully leveraging) the opportunities that are offered to us. A ‘backbone’, in the form of a CEO Peer Group, has an immense potential to ensure success and reduce/avoid failures. A CEO Peer Group plays a threefold role in ensuring success of an entrepreneur:


(1) as an Advisory Board (/informal ‘Board of Directors’),
(2) as a Learning Platform and
(3) as a ‘mirror’

 

As an Advisory Board

For this informal ‘Board of Directors’ to work as the backbone, it’s essential that peer CEOs meet very regularly with structured agenda as small, intimate, highly-engaged group of entrepreneurs over a long period of time developing fantastic bon-homie, chemistry & therefore trust. With a ‘perfect’ & conducive environment like this, various initiatives can be driven which transcend much beyond ‘learning’ to form a strong & effective advisory platform that members can rely on for smallest to most strategic advice.

 

What CEO Peer groups should ensure is to cumulate knowledge & learning that each member has and through effective brainstorming translate this combined body of knowledge coupled with cumulative experience of the group into ‘direct application’ to a member’s business. The advice gained through these discussions make a lot more sense because fellow members know each other’s businesses very well. This can happen in reactive mode by picking up various business problems & opportunities of a member for discussion. However, even greater gain results when the group induces the member to think beyond the boundaries and to think of innovative offerings, minor/major improvements, newer & effective ways to do things etc.

 

A well advised entrepreneur will make lot lesser mistakes. A CEO Peer Group with good diversity will have all the skills in-house because some of the members would be CAs, lawyers, consultants (from various spheres) and of course entrepreneurs with a wide gamut of experience. As a result, every discussion topic will get vetted in every possible angle.

 

Most SME entrepreneurs are stuck in operational rigmarole, many times out of compulsion but also because they lack a strategic mindset. They hardly have time (& many times orientation) to spend on strategic dimensions of the business. Even if some of them do so, this happens in an ad-hoc manner. A CEO Peer Group ensures that entrepreneurs stay wired and keep doing justice to all functions of an organization including strategy. It also ensures that Peer CEOs complement each other and fill in for shortcomings of others.

 

The above benefits can accrue, if and only if, members consider their CEO Peer Group as one of their topmost strategic priority rather than treating this as one of their low ranking side activities. After all, would you think twice while attending your Board of Directors meeting?

 

As a Learning Platform

 

While direct, relevant advice to fellow members forms the cornerstone of a CEO Peer Group, continuous learning is another crucial objective. Successful people never stop learning. Lifelong learning is the first step in becoming an outstanding performer. A famous quote by Gandhiji says “Live as if you were to die tomorrow. Learn as if you were to live forever.”

 

You take formal training for everything – your formal education, swimming, driving, music, dramatics etc. However, something that every entrepreneur spends several decades on, we never take any formal training. This is absurd isn’t it? A CEO Peer Group brings the benefits of an educational institute to entrepreneurs by serving as a B-school for entrepreneurs.

 

As a ‘mirror’

 

CEO is a lonely job. One of the major causes of loneliness is self-induced and is known as the Founder’s Syndrome symptomized by lack of communication with other people about their problems. The intensity of the CEO's job, coupled with the scarcity of peers to confide in, creates potentially dangerous feelings of isolation among chief executives. However, if you want to succeed, you’ll have to find ways to tackle this problem head-on.

 

Leader’s actions reverberate and therefore leader’s feeling of loneliness becomes a larger problem for many other stakeholders. For a leader, feeling lonely in their post negatively affects their ability to do their jobs leading to poor decision-making, negativity, fatigue and frustration. After all who wants to work with an unhappy person?

 

Isolation limits opportunities for increased self-awareness and blind spots develop. Stanford management professor Bob Sutton explains a situation in which people who gain authority over others tend to become more self-centered and less mindful of what others need, do, and say. The problem is compounded because a leader’s self-absorbed words and deeds are scrutinized very closely by his or her followers. Combined, these tendencies make what he terms as Toxic Tandem.

 

It is very difficult to break this toxic tandem if the CEO doesn’t have trusted sources to rely on for holding mirror up to them and shedding light on their blind spots. This makes it important for the CEOs to find one or two trusted sources who will provide the CEO with unvarnished feedback. Trusted board members or peer CEOs can often play this role. This precisely is the need that a CEO Peer group can fulfill.

 

On a closing note, a CEO Peer Group ensures that a CEO’s longest and most challenging journey is fun-filled and certainly not alone!

Why SME Entrepreneurs Can’t Get Away Without Knowing Accounts?

 

Most entrepreneurs are passionate about business functions like Strategy, Marketing, Branding & Sales. However, you would find very few who have a liking for Accounts. Most entrepreneurs quickly absolve themselves by declaring that they do not like Accounts and that they have left it to their Chartered Accountants (CAs) and to their internal Accounts function. The mistake they make is not thinking about how they can use well maintained books as tools to better manage where their business is headed tomorrow.

 

How things go wrong?

 

1) Your Chartered Accountant

I have come across many entrepreneurs who simply maintain some excel sheets of their sales & expenses (some do not even maintain these!). They simply handover these excel sheets along with their hard copy invoices files to their CAs for their book keeping. This is generally done in preparation of some statutory compliance (Income Tax/Service tax/VAT returns etc).

For a CA, an SME entrepreneur is generally a not-so-important client and one amongst a few hundred of them. Naturally, some junior level CA intern (in CA’s office) who neither has the skill nor the will to do a good job, is assigned with this task. Most important, these fresh interns have no idea of your business & domain and no idea as to what does an SME entrepreneur look for in his books (of course, many entrepreneurs do not even looking for anything :-)!). These fresh interns follow a ‘garbage in, garbage out’ principle and simply produce something that merely addresses the statutory compliance requirement (& in most cases erroneously).

Most SME entrepreneurs do not have licensed Tally software. For some who own, they lack the skill to meaningfully navigate through their books and the will to even demand their Tally backup files from their CAs.

 

2) Your internal Accounts

Most SME entrepreneurs do not have any in-house accountant/s. In many cases, they simply expect some unskilled person to double up as an accountant. In an SME setup, given limited pay scales, very senior & skilled accountants cannot be hired. Since most entrepreneurs have a very step-motherly approach towards the Accounts function, they end up leaving the entire bookkeeping to these unskilled/semi-skilled accountants. In addition to the skills gap, these accountants majorly lack the perspective and business understanding required to design and maintain books which can serve as strong MIS for business. Most of them are not mature & disciplined enough to maintain books meaningfully ultimately leading to a ‘garbage in, garbage out’ approach.

What can be done?

 

1) Spare a budget for an accountant & maintain books internally: First & foremost, it is important to hire at least one accountant with a fairly decent level of accounting skills. This would also ensure that books (most likely in Tally in an SME setup) are completely maintained internally. Also, make sure that the accountant keeps your books updated at all times. Only when this happens, your books will serve as a good MIS for you. Well maintained & up-to-date books result into organizing data meaningfully for you to analyze. It offers you a gauge of your business’ current performance in almost every aspect. Your books provide you with hard facts and figures on what your business has been doing and how it’s faring to date. Through accounting, you get a good measure of where your business is at and how far or near you are to where you actually want to be.

 

2) Build basic level of accounting skills: If you’re like many entrepreneurs, you likely went into business to pursue a passion and not to become an accountant. Nevertheless, you cannot be totally hands-off and you need to closely work with your CA and your internals Accounts team. This would require that you have a basic level of understanding, if not more, of Finance & Accounting concepts.

 

3) Be involved at a day to day (/regular) level: Keep reviewing your books at a day to day (/regular) level not only to ensure that they are maintained well but also to keep getting a holistic view of your business. Keep overseeing your accountants work, and challenging when required, at periodic intervals to ensure that he/she is doing a good job with it.

 

4) Work closely with your CA and challenge him where required: Most entrepreneurs do not have a direct access to their CAs. It is important that an SME entrepreneur regularly interacts with their CAs and work closely with him to ensure that his books are meaningfully maintained. He should ensure that completely ready Tally backup files are provided to the CA as an input for his value addition and review. Various computations (Income Tax/Service tax/VAT/PT) etc be done internally and provided to your CA. Understand what changes/value additions the CA is carrying out and discuss those with him. A CA has limited time/bandwidth available for your work and therefore he may miss out on various things. Your detailed review would help you point out these gaps to your CA. At times it may be required to challenge your CA too.

 

5) Maintain your records carefully: Ensure that you have an intuitive folder structure on your server (/centrally) where you save your Accounts related files (challans, computations, Tally backups etc) with correct naming conventions. Ensure that, as a practice, your files are backed up and regular intervals.

 

We are all in business to make money (though this may not be the sole aim). However, by turning a blind eye to crucial business functions like Finance & Accounts, we are jeopardizing our most vital business goal. Can SME entrepreneurs (equally applies to any entrepreneur) really afford to do so and get away without knowing Accounts?

 

Warm Regards,
Vikrant Vartak

MD – The Senate Business Center
Founder - Mavens