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Dan Cremons – Winning Moves in Private Equity – Ep.222

Dan started at Alpine Investors for 12 years before leaving in 2021 to found Accelera, and his book is an incredibly thorough documentation of everything he learned about the private equity playbook and how it needs to evolve.

Episode Description

Ep. 222: Alex (@aebridgeman) is joined by Dan Cremons (@DanCremons).

My guest today is Dan Cremens, author of Winning Moves, 105 Proven Ways to Create Value in Private Equity-Backed Companies, and founder of Accelera Partners where he focuses on helping private equity groups unlock people-powered value creation. Dan started at Alpine Investors for 12 years before leaving in 2021 to found Accelera, and his book is an incredibly thorough documentation of everything he learned about the private equity playbook and how it needs to evolve.

Dan and I talk about the five buckets of value creation and what the biggest drivers are, what great value creation looks like at a PE firm and company level, traps for first-time CEOs, and interviewing executives to make sure you have the right team in place.

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Clips From This Episode

How the Private Equity Playbook has Changed

Revenue Growth Learnings

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(00:00:00) – Intro

(00:04:13) – Dan’s career background and learnings from Alpine

(00:13:29) – How the Private Equity playbook has changed over time

(00:16:23) – What a 10/10 PE firm looks like

(00:25:40) – Categories of winning moves

(00:30:21) – What have been your biggest learnings about revenue growth?

(00:39:05) – First-time CEO traps

(00:46:36) – Identifying priorities

(00:53:39) – Alex’s perspective on finding focus

(00:58:58) – Dan’s formative experiences

(01:07:42) – Evaluating management teams

(01:15:36) – Upskilling team members

(01:20:02) – Winning the first few weeks in the CEO role

Alex Bridgeman: Dan, thank you for coming on the podcast. It’s really fun to chat with you, and I’m really enjoying your book, Winning Moves, and it was fascinating about our conversation and learning about not just the private equity background, but some of the executive interviewing that you’ve done a lot of and evaluating management teams. I think there’s just a lot to go over and a lot to talk about. But I would love to kick off with some of your career background, especially at Alpine. That seems like a, just throughout our conversation and the book, that’s a clearly a formative time for you. I would love to hear about what that experience was like and some of the things that you worked on at Alpine.

Dan Cremons: Yeah, very much so a formative experience. So just to take you back, I’m a Midwestern Cincinnati, Ohioan, born and bred, grew up in a family of largely healthcare professionals. My mom’s a nurse. My dad was a medical device product manager. So, we didn’t have- unlike some other folks in high finance, I didn’t have that in my blood, didn’t have that in my background. And frankly, it wasn’t really until undergrad when I was starting down a pre-med track and realized by way of my first medical lab experience that I can’t stand the sight of blood and guts and broken bones, that I decided to take a sharp left into the farthest thing from medicine, which is finance. So I got my early career start in, spent a little bit of time in an operations management role here in a local company in Cincinnati, which was a great indoctrination to how to manage people in the most fundamental sense. Then spent some time in investment research. And ultimately in 2007, I think it was, found my way to Alpine. At the time, Alpine was a pretty young firm. I was a pretty young finance professional myself. And credit to a very weak hiring process at the time, I was able to weasel my way into Alpine in ’07. And just to sum up the whatever it was, the 15 years or so I spent, 14 years I spent at the firm, I did a bunch of different things, which probably goes to show you I’m not especially good at anything but had a chance to just play a bunch of different roles at Alpine. I’ve sourced deals. I’ve done deals. I’ve sat on the board of Alpine-backed and PE-backed companies. I helped stand up a lot of our portfolio operations capabilities in the early days as we were starting to become more intentional and thoughtful about how do we add value post-closing. And then I’ve led, as a CEO and CXO, led within different Alpine-backed companies. So, I’m very grateful to have been in a firm that allowed me to get such a diverse experience at a relatively early chapter of my career. And ultimately ended up, we can double click on some of those areas if you like, but just to complete the picture for you, I ended up spinning out of a full-time role in 2021 in the middle of COVID to start my own thing, really taking a lot of the things that I have learned and we had real proof points around at Alpine around how do you build people-first organizations, how do you bring people to the center of the private equity success equation, take a lot of those things that I’ve learned, productize them, and deliver them to private equity more broadly. So, there’s a lot there to unpack, but that at least gives you a thumbnail sketch.

Alex Bridgeman: Yeah. What were some of the things you learned to do at Alpine that perhaps you feel they’ve done really, really well that you’ve continually applied beyond that experience?

Dan Cremons: What Alpine has done really, really well, Alpine’s been quite successful objectively. And so, there’s a lot of different things that need to come together to be successful in private equity. There’s not a single variable to optimize for, as you know. Alpine was very good at, became good at selecting deals, sourcing and selecting deals. Nothing makes an operator’s role more challenging than being seated at a table or positioned in a business that’s not well positioned and not high potential. So Alpine has done an increasingly good job over time of just picking the right deals and businesses. But once we own them, once Alpine owns them, that’s where the real value add, for lack of a less jargony term, has been in terms of just the overall value creation in Alpine-backed companies. And within the post-close period, Alpine has put a big emphasis on people, which is very generic. But let me take you back and just sort of give you the back story here because I think it’s illuminating. This probably takes us back to the early 2010s or so. We’d just come out of a major global recession. I don’t know if you heard about it. But we spent a lot of time during the doldrums of the recession taking a big step back and saying, hey, let’s not let a crisis go to waste. Let’s use this as an opportunity to really codify, where do we want to take this firm? A lot of firms were facing existential crises during the recession. Alpine was no exception. There’s a lot that was uncertain and very challenging at the time. But Graham Weaver, the founder of Alpine, to his credit, said, let’s take this as an opportunity to look over the horizon, assume victory on getting our portfolio companies through this period of time, and figure out where do we want to take this firm. As we took a step back and looked at some of these things, and as finance nerds tend to do, looked at some of the attribution analysis of where are we having success? Where are we not having success? What are the factors that seem to be correlated to success? What are the factors that seem to get in the way of success? Looked at this body of data and anecdotes. One thing that became very clear was when we have been intentional about getting the right leadership team onto the field, we tend to be doing well. And when we have not been intentional or we’ve been haphazard or reactive or slow to the punch on getting the right team on the field, we tend to be struggling. It’s kind of a blinding glimpse of the obvious that the quality of the leadership team on the field would have a direct impact on performance. But it wasn’t until we looked at some of these things where we said, ah, what if- for the first 10 years of Alpine’s journey, we’ve gotten really good at the deal making part of the business, selecting high potential companies and growing industries and learning how to source effectively, et cetera. What if we spend the next 10 years getting really good at the people and leadership part of the investing equation? And so that set off this chain of events where a lot of firms pay lip speak to the idea of leadership’s important, talent’s important, but to our credit, to Graham’s credit, to our credit, actually committed to taking action on that and figuring out what are the capabilities we need to build in our business to get really good at aligning great leadership, great talent with high potential companies. So that set off this chain of events where the first thing we focused on was the CEO. We started the CEO in residence program whereby in every deal we did, henceforth, we brought in our own CEO. And so that required a certain set of capabilities. We needed to build a bench of CEOs. We needed to get really good at evaluating and assessing CEO talent. We needed to get really good at attracting great CEO talent and creating a value proposition for great CEOs to want to join a growing emerging fund. So that was step one is standing up that program. Step two, once we started to get some traction there on attracting really high quality CEOs to the portfolio, we said, okay, well, if we take a 10 year view of our business, the availability of great CEOs is going to become, at some point, the constraint to our success in the sense that we don’t want to be going out to market every time we need a CEO to go hire externally. Wouldn’t it be great if we could create our own farm system of top CEO talent that gave us the ability to scale exponentially and develop them from within, develop them along the lines of some of the skill areas that we’ve seen be most important to CEO success. So, we stood up this CEO in training program, which is effectively a farm system for next generation CEO talent. So the moral of this is over the, whatever it was, early 2010s to present day, Alpine’s just been systematically building out this machine of attracting, assessing, hiring, empowering, and developing great executive talent within these portfolio companies. And there’s a lot of different learnings under each of those headers we could talk about, but that, I think most folks in the Alpine ecosystem would probably attest to this. It’s probably been the most important thing Alpine’s done in its history is just bring people, an emphasis on people and the capabilities required to unleash, to work with, learn from, and develop great people, bring that to the forefront of the investing equation. It’s really paid off big time.

Alex Bridgeman: Yeah, there’s definitely a lot to drill down in that kind of walkthrough of creating a CEO recruiting program. But even just zooming out too, there’s a theme you touched on throughout the book about some of the kind of original elements of the private equity playbook of reducing costs, adding leverage, and growing and keeping things mostly consistent for a long period of time. And that’s kind of most of your growth and return. A lot of those elements don’t work or aren’t nearly as effective as they used to be today. And so, you need to- your kind of value creation playbook has evolved to be more growth oriented and talent leadership focused. And it sounds like the Alpine, kind of that 10 year period plus of recruiting and focusing on the leadership and talent piece kind of fits within that theme of that change over time in the private equity landscape. Can you talk a little bit about some of that dynamic and what you’ve seen over time evolve with the private equity playbook?

Dan Cremons: I think the big drivers of the changing requirements to be the evolving requirements to be successful in the private equity space is simply competition and efficiency in the space. I started in PE in 2007. There was a fraction of the number of PE firms that there are today. There are six to 12,000 firms in the PE space today, depending on how you define that market, a couple trillion dollars of dry powder. We’ve all seen a lot of the same stats and many of us have experienced on the front lines the fact that it’s just getting more and more competitive and the market’s getting more and more populous by the day. Make no mistake, this private equity is a red ocean market today. If you know sort of blue ocean, red ocean, blue ocean being uncontested, wide open market space, red being the opposite of that, private equity was much more sort of a, I don’t know, a purple ocean in the early days when I started in the space. It is definitively a red ocean today. Tons of capital, tons of players. And in a market that’s that competitive and that has gotten that efficient, the old school moves of buying companies, levering them up and then just relying on leverage and a little bit of cost cutting to deliver returns just doesn’t work. That’s not going to generate alpha. Almost by definition, if you’re doing the same things everybody else is doing, it’s very difficult to generate alpha or excess returns. And so, you’re right, I think the global message here for firms – and everybody understands this, you don’t need somebody like me sort of professing this – but you need to find a competitive edge increasingly in today’s market in order to generate long term sustainable alpha in the space. Alpine just so happened, for reasons I described earlier, Alpine just so happened to say that we think that people alpha or leadership alpha is the flavor of alpha that is going to win the day long term. There’s other ways, there’s other success formulas. I don’t claim that that’s the only way to be successful in private equity. There’s other models and other firms having success with different differentiators. But at some point, you have to sort of put your chips somewhere on the table and say, this is the source of competitive differentiation we really want to build our firm against. And for Alpine, that was talent. And I think for a lot of firms, a lot of firms are waking up and there’s some research and data out there that suggests this. A lot of firms are waking up or have woken up to the idea that investing in great leadership, ensuring that you have the right CEO in place, ensuring that that CEO is building a fit for purpose leadership team, these things are just sort of price of admission to being successful in PE these days. Again, as more and more firms start to build out human capital and talent capabilities, whether it’s the CEO in training program or not, but just build out talent capabilities and become more thoughtful and disciplined about getting the right leadership team in place, those things are increasingly becoming table stakes. So, you see a lot more firms sort of moving in the direction that Alpine and other sort of first movers in this space have been, and I think you’ll see that trend towards greater investment in talent and human capital capabilities only continue to grow in the PE space.

Alex Bridgeman: If you think of a scale of one to ten, one being not very sophisticated from a PE firm’s perspective value creation wise and recruiting wise, one being no sophistication, ten being very well thought out, value creation team, recruiting CEO talent bench, maybe CXO talent bench as well, what does a ten look like in terms of maybe a real world example or kind of what are some elements of what a ten would look like? And then if you’re a PE firm and you’re sitting at maybe a four or a five, how do you get to a ten?

Dan Cremons: I’m going to refer you to page 278 of your handy dandy copy of Winning Moves, where I did a lot of research on this, reflected on my own experience, put a lot of thinking into this very question. And on page 278, there’s my own view on, and I’ll just read this to you: Firms and companies that do this well, do this well meaning this being building the right talent capabilities. But firms and companies that do this well have built the capabilities that allow them to do the following, and this is going to be very intuitive. This is not- this is kind of common sensical at some level. All you have to do is track the employee life cycle. So first assess the team, which is all about developing a clear and fact-based view on what is important to success when it comes to the capabilities we need to see resident within the team running this business, and how do we assess whether that team has those capabilities. So assess the team, number one. Attract great people. This is all about creating an employer value, an employee value proposition, creating an employer brand, creating an employee experience or a CEO in residence experience or a CEO in training experience that is going to attract the best and make them want to tell their friends when they’ve joined. So that’s step two in the life cycle. Step three is selecting the right people. This really comes down to having an assessment process that allows you to separate the wheat from the chaff, allows you to separate the top operators or executives that you could bring into your portfolio from the rest and having some real discipline around executive selection, which I do quite a bit of work on. The fourth is onboard those people effectively. There’s a book, as a side note, there’s a book, Power of Moments written by Chip and Dan Heath, where they say that the moments that tend to matter in general in life are the very beginning of something and the very end of something. And this is kind of intuitive, but if you apply this to the employee experience, whether your employee is a frontline employee or a CEO or anywhere in between, how they enter a business will have disproportionate impact on their overall success in the role. There’s certain things you need to do to set a CEO up for success or a new person up for success broadly. And it can have disproportionate impact on their overall perception of the experience. So getting onboarding right, again, pretty intuitive and commonsensical, but it’s a very important part. Building the capabilities that onboard people and provide them a real launch pad into the new role, clearly important. Thing number five, develop and grow these people. Investing in your team’s learning and development, figuring out what are the skills that are most important to success in a given role, in a private equity environment more broadly, and then putting some real effort behind upskilling your leaders in those ways. A lot we could talk about there in terms of learnings from the CEO in training program. But developing and growing people, clearly very important. Then the last part of the employee cycle is retaining them, which if you’ve done a lot of the aforementioned, you’ve attracted really great people that are values aligned and bought into the mission, you’ve onboarded them effectively, you’ve invested in their growth and development, you position them within portfolio companies that are high potential where they can really succeed, then the retaining thing should take care of itself largely. But nonetheless, that’s an important part of building a human capital flywheel is if you do all the other five things and invest in leaders, build them up, and develop them, sure would be a bummer if they take their talents elsewhere. And so retaining employees in Alpine’s case has been, specifically CEOs in training, has become a very, very important part of the formula in a sense that it just provides, again, this deep bench of executive talent that can be deployed to these companies. So that’s a long answer to a short question, but I think those, if I’m a private equity firm trying to figure out where am I on the maturity curve, how do I improve my standing on that maturity curve, I’d go back to those six things, and one to ten yourself on those six things, and then ask yourself the question of what domino needs to fall first in order to, to the extent that you’re early on the maturity curve, what domino needs to fall first in order to begin to build into this bigger vision of being a talent first, people first firm. And those six things give you a pretty good road map to follow, albeit pretty broad, but a good road map to follow.

Alex Bridgeman: Yeah, it seems like a helpful benchmarking exercise at the very least. I don’t know if you listened to the Art of Investing episode with Mitch Rails recently, but he talked a lot about benchmarking, and when he became involved in the Washington Commanders, he would go to all the other football stadiums, NFL stadiums, and ask them what mistakes did you make in setting up your loading docks or your concessions or bathroom locations and all these different questions just to figure out if you’re going build a stadium, how do you do it phenomenally well? And it strikes me you could do something similar here and identify some of the nines and tens in the PE world who are doing this really well and try to go visit, hang out, do almost like a coach’s clinic of sorts. How would you- what are some of the folks in that kind of nine and ten range in your view in the PE world? Sounds like Alpine’s probably in there.

Dan Cremons: Depending on which part of that, the six part you’re talking about, I think different firms I’ve seen do different parts of that really well. For example, on human capital assessment, which is where I spend a lot of time, a lot of firms are getting quite good at this. There’s tools that have been around for a while and firms like ghSmarts and others around that have been around for a while that are helping firms become quite efficient and effective at this. So I think a lot of firms in that category are doing quite well. When it comes to developing and growing and developing employees, Alpine’s built some cool programs. There’s other firms, like Shore Capital I think got some recent press in Forbes for what they’re doing in this department. They have a very similar program called the CXO Program whereby they too are developing and building up the next gen of portfolio leaders. They recently had their first CXO promote into a CEO role, which I know is a big milestone for them. There’s other firms that are a little bit further behind in terms of- Vista for a long time has had different programming on executive development as well. There’re others I’m missing. But I think your point is the right one, which is that in order to figure out how to be the best, learn from the best. And you can use this six parter to deconstruct what you need to learn and from whom. But this is a very similar formula to what I did to write this book. I come into the idea, come into the topic of value creation with some amount of pattern recognition from my own career and some points of view on how do you develop a value creation plan, how do you drive a value creation plan. But I don’t- I’m smart enough to know I’m not that smart when it comes to all the different ways that firms can can do these things. And so, the first thing I did was went out there and interviewed dozens of value creation professionals, portfolio ops professionals, operating partners, and CEOs from successful private equity firms or PE-backed companies and asked them some fundamental questions about what are the keys to success in your point of view on how do you build a value creation plan? What are the keys to success post closing in actualizing or executing that value creation plan? What are the winning moves across the different levers that I reference in the book that are proving to be the juiciest in your portfolio companies? Just ask them these questions and then use the answers to build a point of view or refine or sharpen my point of view, which I then advance in the book as to what does great look like in these different areas. My approach to writing the book was very similar to what you’re describing as it comes to the human capital piece in particular.

Alex Bridgeman: Yeah. Can you go over that, those couple categories of winning moves you laid out, the revenue growth being probably the biggest one, strategic acquisitions, margin expansion, a couple others too? Would you kind of lay out the broad buckets and then we can kind of touch on them as we go?

Dan Cremons: Yeah, as context, I’ll just quickly say that before I even get into the deconstruction of value creation, the winning moves that you can use to make value creation happen, I think it’s very important just to stop for a second and level set on what do we mean by value creation. This has become the cliche of the decade in private equity. Everything’s value creation, value creation, value creation now, for good reason. We’re living in what I believe to be and have dubbed in the book the value creation era of private equity, which harkens back to our earlier conversation. But when I think about what is value creation, simply put, anything that creates equity value in a business. Or using more active language, value creation is the pursuit of things that create equity value in the business. So that then begs the question you’re posing and the book deconstructs which is, what are the things that deconstruct value or what are the things that drive value creation, equity value creation? It turns out there’s like five things that can create equity returns. One is growing your revenue. The second is expanding your margins. The third is doing strategic acquisitions. The fourth is paying down debt to the extent that the business is levered, which most private equity deals are. And the fifth is expanding your multiple on exit. That’s it. Five basic things that can create equity value in a business. So knowing that isn’t really good for much in and of itself, but it does give us five doors to then go step into and look behind when it comes to, okay, how do I make each one of those drivers drive? And that’s where the book goes next, is breaking down each of those five things into its component parts and pinning to each of those a series of proven actionable winning moves that investors and operators can make to make each one of those drivers drive.

Alex Bridgeman: And reading through, it struck me how much each category, each bucket interacts with the other and with revenue growth potentially being the most impactful of any of the buckets, at least today, and driving the availability of paying down debt or margin expansion as your company grows through revenue growth, that impacts kind of everything around you. Can you talk a little bit about what were the things that drove you to that conclusion? What kind of research or information or folks did you talk to that kind of led to that being the case you make in the book?

Dan Cremons: Yeah, I just think about it kind of intuitively to say, I think I refer in the book to revenue growth as the mother of all levers. And just think about it intuitively. If you grow your revenue, if you grow your revenue, then margin expansion in a lot of cases happens naturally to the extent that you have a business that is high gross margin and has a lot of operating leverage which just means that as you grow revenue, your sort of margins grow along with it. So as you grow revenue, margin expansions happens naturally in a lot of businesses. As you grow your revenue and margin expansion happens, you create more cash to pay down debt. So revenue growth begets or drives a debt pay down. Revenue growth also directly impacts multiple expansion. Buyers are willing to pay more for a higher growth business than a lower growth business. And revenue growth also, revenue growth in the book, in at least the way it’s constructed, revenue growth and strategic acquisitions are a little bit different or are treated differently. Both create overall revenue growth. One’s referred to as organic, the other is referred to as inorganic. But if you are doing, sensibly doing good, creative, synergistic, I hate the word, but synergistic strategic acquisitions, that can have a one plus one equals three effect on revenue in a sense that if you find, if you’re buying businesses that have other things to cross sell, other products or services to cross sell into your existing base, it’s a great way to accelerate revenue growth on your core business too. So, I just stepped through it sort of logically and said, I think that appears to be the linchpin of value creation is growing revenue. And so, it’s no mistake that in the book, I don’t know, 75% of the winning moves, of the 105 winning moves we talked about relate to revenue growth. And that was a very intentional decision because it matters that much.

Alex Bridgeman: So what within revenue growth were you most kind of excited about and engaged in and passionate about in learning as you went through this interview process and writing process? Within revenue growth, within that kind of broad bucket, what levers or moves were you like most personally excited by? What was most interesting to you?

Dan Cremons: There were two- so let me deconstruct revenue growth in the same way that I deconstructed value creation. Think of this as almost like Chinese nesting dolls, I think they call them, where you sort of break each of these things apart and within it lies another set of things you can break apart. So I gave you the five things that create equity value. Let’s focus on revenue growth for a second. There are six ways to grow revenue in a business. Keep the customers you’ve already got, call this customer retention. Grow the customers you already have; call this customer expansion. Get new customers in your current market; call this market penetration. Expand into new markets; call that market expansion. Create new products to sell to customers in your current market or new markets; call that product expansion. Number six, optimize your pricing. So those six things are the six levers you have to pull if you want to grow revenue. So to answer your question, the two of those six that just are of the most interest to me, which I’ll explain why, are customer retention and pricing. Let me focus on customer retention for a second. Customer retention is the least sexy and most often overlooked of the six revenue drivers. There’s some research in the book that basically says that B2B companies are much more likely to focus on winning moves that acquire new customers than they are winning moves that are focused on retaining the customers they already have. And that’s because, I think in a big way, that’s because acquiring new customers and slapping new logos on the website is just sexy. But we also know, anybody who’s ever built a financial model before knows that return models in private equity deals tend to be highly sensitive to improvements in or degradation of customer retention. And so this is the lever that often gets overlooked is the power of being able to improve retention by even a few percentage points can have a disproportionate impact on year five, say year five because that tends to be the private equity investment horizon, but year five EBITDA and exit enterprise value. So, there’s a lot of- I’ve led customer success organizations before. I have a lot of passion just for the overall topic of delighting your customers and the impact that can have on the revenue engine of a business. But that topic, that lever in particular is very near and dear to my heart and I think it is often overlooked as a major value driver in a business. Pricing is the other one. I’ll give you the quick flyover on pricing, and we can click into any of these areas if you like. But pricing is, you probably know this from your own ETA journey, but pricing is, again, one of the most overlooked, underappreciated levers. A lot of lower mid-market businesses, a lot of SMBs are not price optimized. And there’s a variety of reasons we go into in the book as to why the pricing lever hasn’t been pulled in a lot of companies. When I say the pricing lever hasn’t been pulled, pricing just hasn’t been approached especially thoughtfully. Pricing hasn’t been continuously optimized and refined over time in a lot of these businesses. That seems to happen in large part for fear-based reasons. We don’t want to upset the apple cart. We don’t want to lose our current customers by making any tweaks to pricing. But it turns out pricing is just a value exchange. It’s a metric by which value exchange is sort of determined. And as companies are growing their product and improving their product and creating more value for the end user of that product, it’s right to expect that you ought to be able to charge more money for that product. Or think about sort of the product or the pricing model differently such that you’re capturing more of the value that you’re creating for customers over time. But for a lot of SMBs, pricing’s just not really built into the way they think about their business. And so, I see in a lot of lower market, lower mid-market businesses, mid-market businesses for that matter, that there’s a big opportunity that can be created by going in, looking at pricing afresh, and retooling pricing such that companies are capturing more of the value that they’re creating for customers. That’s a very broad brush assertion that there’s pricing opportunity in a lot of these businesses. Obviously, it’s important to be delicate and to tread lightly given there is a risk to making significant pricing changes. But I find that’s just an area that, an opportunity a lot of companies haven’t fully paid attention to in the past. And any improvement or optimization in pricing that hits the top line tends to flow directly through the bottom, to the bottom line and drive immediate EBITDA impact when you’re able to do it effectively. So, a lot there, but I think pricing is another one that we’ve had a lot of success with, we had a lot of success with at Alpine, clients of mine have had a lot of success by going in and looking at that early in the whole period. And so I think that’s a big one too.

Alex Bridgeman: Within the revenue bucket, what moves have you found are most challenging to implement or maybe most challenging to first-time CEOs to implement as well?

Dan Cremons: I’ll stick with pricing because it’s fresh on my mind. This is the one that I think, I hit on this a moment ago, but first-time CEOs especially can be reluctant, I shouldn’t say are, but can be reluctant to pull the pricing lever because there is risk. And if we just delve for a second into the first-time CEO psychology, that explains not only why some are reluctant to pull the pricing lever, but why first-time CEOs are oftentimes a little bit slower to make tough decisions, et cetera. Again, this comes back largely to fear-based reasons of this is my shot. First-time CEO, this is my shot. This is my breakout opportunity. And I’ve given you a little narrative in the mind of a CEO. This is my shot, my breakout opportunity. The last thing I want to do is do anything that’s going to screw this up and cost me my job early days. So not every CEO has that talk track playing through their head, but I think it’s natural that a lot of first timers, that those thoughts run through their head. What that causes is it can cause some general fear aversion and aversion to making tough decisions quickly. There’s a mantra that’s often peddled in the ETA space which is do no harm as being one of the most important things to do in the early days post-closing. And I think that mantra comes by way of the fact that, again, the last thing a lot of these first timers want to do is screw anything up significantly the first, in the early innings of their CEO-ship that’s going to put their CEO journey at risk. I think that mantra or that advice is, there’s an unintended consequence there, which is it gets in the way of CEOs making necessary change early on that is in the best interest of the business long-term but can be very difficult to navigate through early on. So it’s a little bit of a departure, but I think the CEO psychology can explain the reluctance to pull a lot of these levers that maybe have a slightly higher beta risk reward profile than others. And pricing is one of those. It turns out, however, that if you do pricing studies thoughtfully, if you approach pricing decisions with the right execution playbook, I give some tips on this in the book, you can significantly de-risk any pricing changes that you think makes sense for the business by doing things like thoughtfully determining what should be your go-forward pricing, by doing things like communicating that clearly, effectively, empathetically, but directly to your customers, things like making sure that you’re hitching any pricing change to some sort of improvement in the product or the service, such that customers feel like they’re getting more out of it. So point being, there’s some ways that you can de-risk these changes. But I think pricing is an example of one of these winning moves or a basket of winning moves that can be tricky to pull off.

Alex Bridgeman: Yeah, certainly. Let’s dive into the first-time CEO psychology a little bit more, too. You mentioned some early traps for first-time CEOs. What have been some traps you’ve noticed, and what could you keep in mind or what could you work on as your first couple months in a business to get up to speed faster and become more effective quickly?

Dan Cremons: Yeah, I wrote something on this recently. I wrote something on this a long time ago and then I refreshed it recently. I put it up on LinkedIn, you can check out the longer form version there. But it’s called 10 First-Time CEO Traps and How to Avoid Them. I just pulled it up in front of me. Let me read off the 10 that we go into in the article, and then we can dive into any one of these that you find most interesting. Number one, pretending that you have it all figured out. Number two, being blind to your blind spots or being unaware of your blind spots. Number three, focusing too heavily on the short term. Number four, failing to focus on what’s most important. I should say identify and focus on what’s most important. Number five, sitting on important decisions too long. Number six, failing to puncture the CEO bubble. That one needs a little bit of explanation. The CEO bubble is this idea that CEOs, first time CEOs and experienced CEOs alike, oftentimes only hear what people want them to hear. And that creates this bubble that can give you sort of a distorted view of reality as to what’s actually going on in your business. And failing to puncture that CEO bubble and get to truth as to what’s going on in your business, of course, can be problematic. Number seven, over-relying on authority to lead. Number eight, forgetting that people are watching. Number nine, failing to ally with your board. Number ten, failing to align your team and organization. So these are ten of the biggest traps. And what I did to get here is just cycle back through my own experience and journey as a first-time CEO, the observations I’ve had from hiring, deploying a few dozen first-time CEOs into PE-backed companies and just thought through what are the things, what are the landmines that tend to be the most prevalent in the field of first-time CEO-ship? And those aren’t the only ten, but those are ten big ones I’ve seen come up a lot.

Alex Bridgeman: Can you dive into the everyone’s always watching one? That’s kind of interesting and thought-provoking.

Dan Cremons: Yeah, the idea with everyone is always watching is that as a CEO, you just really have to understand that you are always on stage and your microphone is always on. Whether you know it or not, people are watching your every move as a CEO. They’re taking even the most subtle sort of cues that you are giving in meetings, the seemingly innocuous things that you’re saying that you meant nothing by but can be perceived different ways, people take those and tend to sort of expand them and inflate them in their own minds. And I don’t mean to say that in a way that creates a feeling of a lot of pressure or stress for CEOs, but you just have to recognize that people are watching you and they’re taking cues from how you speak, what you prioritize, how you act and behave, the things that you are signaling are important. People are taking cues from those as to how they need to act, how they should behave, what they should view as important in order to be successful in your charge. So let me take this out of the ether and just give a real-life example. When I stepped in and started as the CEO of this company, we were pretty undisciplined about a number of parts of the business. For example, we were pursuing a lot of deals that just weren’t qualified deals. When we were doing projects and initiatives, they didn’t have a lot of planning and rigor behind them. And so, when I came in, I probably over-rotated on trying to bring planning and rigor to an organization that was just devoid of it. That slowed us down. That discipline was valuable in some areas, but it really held us back in other areas. And this team adopted this sort of measure twice, cut once, ready, aim, aim, fire sort of way of approaching their work because they saw that that’s what I was modeling. And I didn’t really recognize that even subtle cues I was giving in meetings, asking people third and fourth order questions behind their thinking when second order questions would have done just fine unconsciously sent a signal to the team that they really need to have their stuff buttoned up in order to pass, in order to ace my exam as the new CEO. And we were living in a war time in this business. It was a turnaround situation, somewhat of a war time where we needed to be knocking pins down quickly, making progress quickly, and that leadership style and failing to recognize that people were taking cues from my own just style. It became clear to me relatively early that I needed to change my own style and, just back to the core point, recognize that as a CEO, people are taking cues from how you behave, what you’re doing, what your style is, you need to be very conscious of the signals that that sends to them.

Alex Bridgeman: What did you do to change your style?

Dan Cremons: I think for all the things that I- for all the tendencies like perfectionism that I really struggle with, I think just self-awareness and ability to read the situation is something I’ve gotten a lot better at in my career. And so I have different mechanisms I use to just stay well attuned to what is going on in the situation and how do I need to adjust my style in order to sort of best lead within that situation. I talk a lot about adaptive leadership and the need to sort of expand your repertoire as a leader and meet the situation where it is. But I spend a lot of time with my direct reports and have done this as part of my playbook for other operating roles, try to spend a lot of time upfront with them, getting to know them, understanding their style, helping them understand my style, creating good psychological safety in the relationship such that over time I can ask them for feedback as to, what am I doing, what am I doing or not doing, as the case may be, that is getting in the way of your success, whether on an initiative, whether on a specific task that they’re leading, or sort of in the more global sense. And that allows me to make sure that I can see what my team is seeing in me, make sure I can see clearly the ways in which I’m leading and how those are impacting the organization. And again, back to the CEO bubble, that doesn’t mean I’m always going to get a 20/20 high fidelity, high resolution view of how the team is perceiving my leadership, the impact it’s having on them, and therefore how do I need to modulate my style. But just by stopping for a second and asking the team to give you feedback, hey, what am I doing that’s working for you? What am I doing that’s getting in your way? What advice would you have for me as to how to adjust my style to get more out of you? This doesn’t need to be a big thing. You don’t need to go commission a big 360 review or interview process to get this. But just five minutes at the end of your weekly one-on-ones asking those questions I find can be very illuminating and help me understand what impact am I having on the team? And is that my intended impact? Or is there something about the impact I’m having that in the needs of the situation that ought to call on me to adjust?

Alex Bridgeman: Another one you talked about was not being able to prioritize correctly or focus on the most important things. How do you try to focus and identify what are the most important things? What does that process look like for you and your own experience?

Dan Cremons: Yeah, I just want to say sort of at the beginning that this idea of the importance of focus, I know operators understand this. There’s a lot of discussion around focus being important. And yet – we saw this in our private equity days, I saw this in my private equity days – a lot of operators tend to struggle with this. A lot of first-time CEOs especially tend to struggle with this. And I think, again, there’s psychological reasons why that is. There is first timers want to prove themselves. They want to make their mark. So oftentimes, their eyes can be bigger than their stomachs. Their ability to have impact and make things happen is greater than the organizational capacity they actually have to make things happen. And when you head down this path, it’s the classic sort of I’d rather move the right things a mile, the short list of right things a mile than move a dozen different things an inch. So we all probably from our own careers have experienced firsthand the perils of becoming unfocused. But I guess what I’m saying is I just want to recognize that most people understand this, but far fewer people actually have mechanisms built into the way they operate that can drive focus. So that was really your question. And I don’t claim to be a ten out of ten good at this, but I do have a few things I’ve done that have forced me to, that have helped me to create focus. One is, and this is a really simple, just actionable thing that a mentor of mine taught me a while back. This guy was a great CEO, became an operating partner. And he said, on the drive into work every morning, I spend like three minutes or five minutes with the radio off and I ask myself the same question every morning, which is what are the things that I could do today that would create the most long-term equity value? And I think about that, I give myself space to ponder that. And then I come into work in the morning, and the first thing I do is I try to clear things off my schedule that don’t align with my answer to those questions, or to that question rather. And that’s not to say that, beneath that, there’s a question of, okay, well, how do you figure out what those three to five things are? But I think for starters, just asking yourself that question routinely every morning and coming in and saying no to things that don’t align with your answer to that question is a great place to start. The other thing, the other tool I use to figure out what are the most important things to be focusing on is the old Eisenhower boxes. Have you ever heard of or used the Eisenhower boxes?

Alex Bridgeman: Yeah, absolutely. And we were also talking about Dave Dodson’s Manager’s Handbook before recording. And he has a similar kind of Eisenhower/prioritization exercise every morning he recommends folks do of just write down like the two to three things that today would move the needle the most, which rhymes a lot with what you were talking about, too. So, yeah, there’s a couple of kind of similar tactics and strategies all floating around the same general concept here.

Dan Cremons: Yeah, and using that totally. And I mean, there’s two other mechanisms that are coming to mind that are part of my own operating system. One is every quarter as an organization, I did this at Alpine, I’ve done this in operating companies that I’ve been working in, I do this with my own business. Every quarter, I set priorities for the quarter, no more than eight; for an organization, no more than eight. And for a smaller team or for a solopreneur like me, I have on my sheet of paper, my weekly planner thing, I have four priorities for this quarter. And I spend a lot of time at the beginning of the quarter figuring out what are those four things, using tools like we’re talking about, the Eisenhower boxes and asking myself the question of what could I be doing that would create the most long-term value. But every morning, every week, I come in and make sure, I do the same exercise, make sure that I’m spending my day in a way that’s aligned with those things. And I also have a stop doing list. I set this at the beginning of the quarter and revisit it every week at the beginning of the week. But what are the things that are on my calendar, on my task list that don’t align back to those? And how can I either delegate them or say no to them outright in order to get the most important things done? There’s one other thing, while we’re riffing on this, there’s one other thing that, there’s this book called The One Thing written by Gary Keller, who’s like a real estate, a very successful real estate CEO. And The One Thing is about one thing; it’s about one question that I have found to be very clarifying when it comes to this idea of focus. The question is something to the effect of, what is the one thing that I could do which such that by doing it could make everything else easier or unnecessary? Something like that. What’s the one thing I could do such that by doing it, everything else will become easier or unnecessary? This is about finding sort of the linchpin, the one unlock. An example of this that always came to light when I asked myself this question as a PE guy was getting the right CEO in place. Getting the right CEO in place into an operating company is the one thing which when done will make everything else easier or unnecessary, everything else that I’m spending my time on, the fires that I’m fighting in the portfolio, the sleepless nights and stress that’s being created by not having the right CEO in place. Once you get the right person in place, a lot of that becomes, certainly becomes easier. Much of it becomes unnecessary. And I just think, I mean, I don’t know how long that book is. I don’t know that I’ve actually read the book, but I took that question away from it. And it’s always really stuck with me as a way to just pull yourself out of the weeds and rise above the fray and remind yourself what are the most important unlocks to be focusing your time on.

Alex Bridgeman: It’s funny you mentioned Gary Keller. I see the Keller Williams founder, he has a podcast called Think Like a CEO, which is similar in title to my own. And so in the back of my mind, I’ve tried to think about how do we get him on the podcast and have a crossover, which would be kind of fun.

Dan Cremons: Can I flip this back to you for a second? I mean, from our get to know you call a few weeks back, I know about you that you’re a guy that’s, you’re doing a lot of different things. You have the podcast, you have a successful career outside of the podcast, you have this ETA journey that you’ve been beginning to warm up. I’m not sure if that’s public knowledge or not. But you’re a person like many of us, high achievers, if I were to put you in that category, that you have a lot of things cooking, a lot of things you could be doing, a lot of things you could be using your talents and time on. So what for you works when it comes to how to create focus in your own work and life?

Alex Bridgeman: That’s been challenging. The podcast has been something I’ve run since undergrad. So, it’ll be six years as of this coming December in 2024 that I’ve been running a podcast as a side project. It was a full-time project for a little while, for call it August 2020 to about March 2022 when I joined HousingWire as Chief of Staff. And I think that Chief of Staff experience was absolutely transformative to kind of the rest of my career, I think. But it didn’t always overlap with the podcast in terms of like it’d be fun to chat with different CEOs on the podcast and I ask them questions that I hear about or think about a lot. Like we had the former CRO of ZoomInfo on the podcast, Tim Strickland, and a lot of my Chief of Staff role was in this data licensing sales role, I was leading licensing sales for our kind of address level housing data. And I asked him directly the questions that I was thinking about, about pricing or when do you focus on upsells, like what level, what number of customers do you have or level of revenue where you start to break out and have a more dedicated upsell process and stuff like that. So, I think that’s where the two overlapped and would have some complimentary-ness to them. But that part’s been challenging. I would like going forward to have that focus and whittle things down to the podcast and my search journey, and I think those two will have a very close overlap. The podcast is focused on interviewing CEOs each week. That’s probably going to be pretty helpful as I become a CEO on my own or talk to other CEOs and owners who may consider selling their business. I think those two will actually be pretty aligned. But long-term, I do want to have a more focused career instead of daily tasks and jobs that I’m doing. So that’s part of the goal going forward. I feel like my early 20s were very broad, lots of things going on, and I’ve kind of whittled it down to like two things. So I feel like that’s been good progress, but I hope they eventually merge together too.

Dan Cremons: Totally. I’m going to back you up on this one by saying, I don’t claim that my advice is always the right way to do things, but I believe as I’ve gotten a little older and have the benefit of hindsight from the early chapter of my own career, I believe there’s a lot of value early in your career to giving yourself permission to explore. Even if things don’t relate directly to what’s bringing home today’s bacon and putting food on the table, like I believe there’s a lot of benefit to exploring, over time, asking yourself some questions as to what’s giving me the most energy, what are the things that I tend to be the best at, what are the things where I can have the most impact and honing in over time. I’ll take you on a quick detour that I think might be useful. So I wrote a book during COVID, this is before Winning Moves, but I wrote a book called The Blue Flame. It’s a leadership book, and it’s basically about one conversation, which I call The Blue Flame Conversation, that has had a lot of impact on my own life and on people in my charge, people that I was leading on teams. And it’s basically a conversation that can help people to figure out what’s a role in which I can really shine and feel fulfilled and feel engaged. And one of the things I talk about in the book, one of the metaphors I use is in order to get to the point where you’re clear on what am I great at, what brings me a sense of meaning, what brings me a sense of energy, and in so doing, put yourself in a position where you can do more of those things, you need to have early life experiences where you can explore. And I liken it to the Katy Freeway that’s in Houston, where Katy Freeway is like, I don’t know, a 25 lane wide freeway in or around Houston. And early in your career or early in your life, I’d want to be traveling on a 28 lane highway and shifting into different lanes and seeing what feels like the speed that feels right to me, which one of those lanes feels the best to me and over time trying to find yourself not on a 25 lane highway but on an increasingly narrow highway, one that’s going to take you in the direction of what’s really going to align with your talents, make you feel the most energized and bring you a sense of meaning. But there is real- I speak from personal experience, there were parts of my early career where I felt kind of unfocused and I looked on that with a lot of self-judgment at the time, and in hindsight, it just was so clarifying having a wide breadth of experiences that helped me to figure out what is my jam? What is my jam? And I feel a lot clearer on that question sitting here right now because I’ve been able to try things and figure out what works and what doesn’t for me, what plays to my talents, what lights me up, and what brings me a sense of meaning.

Alex Bridgeman: What was a formative experience for you, something you tried that told you, no, that’s not actually that interesting to me or I don’t want to do that anymore?

Dan Cremons: Yeah, I mean, private equity investing. I spent the early part of my PE career in an investing role. And what I was going to say is I wasn’t very good at it. I don’t think it was an issue of not having the underlying skills that could be built to be an effective investor. I’m analytical, pretty thoughtful, not the highest horsepower analytical mind out there but relatively analytical, pretty thoughtful, have an ability to understand different variables and how they all come together to shape a point of view on an investment. So, I had some of that raw material, but I just found myself unfulfilled in investing roles. I was looking around the table at other people on our team who just loved the pursuit of the deal, loved the intellectual exercise of pulling all these different factors together to arrive on a go, no go decision. And I don’t know how to explain it other than to say, one to ten scale, my level of energy for that was probably a six or seven. I found it really interesting, very useful from a learning perspective. I’m very glad I had that experience. But again, high level, probably six to seven on the energy meter. By contrast, once we owned the business and we had to figure out how do we partner with teams and work through them to make results happen, what are different capabilities we can stand up that would support these operators. You probably hear it in my voice as I’m talking about it, but like those things just register a lot higher on my energy meter. So that was one that ended up shaping my career trajectory in a sense that we as a firm at one point, probably in the 2013-2014 time horizon, we made a strategic decision to go from a model where all of us were focused on all of the things. We were all sourcing deals, doing deals, sitting on the boards of acquired companies, to a model that was more specialized, where we could find the lane that fit us the best and really focus a substantial part of our time in that area. So, I put my hand up and said, hey, I want to go help stand up a lot of these portfolio support capabilities and work with these companies post-closing. And it turned out that was a really good- ended up becoming a much better fit for me.

Alex Bridgeman: Yeah, I found something similar. I, at one point, thought about doing more search fund investing and quickly kind of realized that I was not as excited to be kind of removed from business by that many layers. It just wasn’t as exciting to me. Like the world of being a search investor is very different from running an actual company as a searcher. And I, through my Chief of Staff experience too, realized I got a lot more energy from working with teams and actually solving problems within the company than trying to identify the right folks to back or investments to make. That was a very different skill set and set of activities that I wasn’t as excited by. So, kind of similar to you. In fact, early on starting the podcast, I thought the investing in companies was like the most exciting thing and operations was kind of boring. And I’ve almost completely flipped on that where running companies easily feels like the most exciting thing to be working on and has guided my journey and helped me refine and get into my smaller lane highway of what I’m actually excited to do.

Dan Cremons: What led you to that clarity that that’s what energized you the most?

Alex Bridgeman: I think within a company, you’re able to just have such a greater visibility into what’s going on and a sense for what is actually going to grow this company and you experience the action a lot more closely. Like in a licensing sales role, like adding a new sale or adding a new customer was super exciting and you can- it’s such a direct value creating activity selling and adding revenue, like I can’t think of a more direct way to add equity value to a company than selling a new customer or retaining an existing customer or adding an upsell; those all just felt so much fun and I wanted to do more of that and there’s things beyond just selling, there’s lots of improvements in product you’re making or better onboarding and HR and hiring process. There’s so many things within a company, lots of the winning moves you talk about, that I just found that really engaging and I think a good use of my talent and things I’m excited to do. I think one thing I’m good at is getting people excited to help me with things. And the downside of course being if I’m excited to do something that doesn’t matter, someone might get excited to help me do something that doesn’t matter and now I’m wasting their time. So that’s kind of something to modulate. But I think that skill can be useful. And once you know what’s important and what you need to focus on in the company to grow, I think that will be a helpful skill to have. So anyway, long answer of saying that just felt like a very exciting set of things to do. Whereas the search investing of identifying the right people to back, going to lots of conferences, and kind of pitching yourself as an investor and why someone should take your money versus someone else’s, that didn’t feel nearly as exciting to me.

Dan Cremons: Yeah, I can relate to a lot of what you’re saying at a personal level in terms of the things that bring me energy. But I think you’re doing something that I hope all people in their careers, in their lives do, which is develop a sense of self-awareness as to what do I value. Self-awareness gets tossed around a lot, but I believe this is one of the most important meta skills for a CEO, an executive, or just an effective human being to have, which is a foundational awareness of what do I value? What’s important to me? Where do I excel? Where do I not excel? What brings me energy? What brings me meaning? All these things together can allow you to see yourself more clearly, and then make career decisions and life decisions that are congruent with that. And I see you doing that, which is you’re learning about your, like I described I was doing, you’re learning about these different things as time goes on. And your own lived experience gives you a lot of intel as to what you’re doing well, what you’re not doing well, where you thrive, where you struggle, what you value, what brings you a sense of satisfaction while you’re doing it, you’re making some conscious choices to leave some things behind in order to travel down the right lane on that highway that’s going to honor those things and align with those things best. And maybe the search fund lane ends up becoming totally optimal, or maybe it just has helped you to sort of narrow the lanes on the highway, and there’s an adjacent lane that you’ll end up shifting into at some point in your career. But you’re doing the thing and I’m doing the thing in my own way that I hope all people do in their career, which is don’t just drift through your career taking the next available thing or grabbing the next rung on the ladder, but actually stop for a second and ask yourself these questions of what am I good at? What am I not? What brings me energy? All the things we’ve been talking about and then have the courage to go make decisions that align with that. YOLO, as the kids say. Life is short. Do it on your terms. And that was a big, I’m not sure about you, but that for me was a big leap to make. This for me was in 2021 when I started my own thing. It’s a big leap to make. It was very scary. Hey, I think I know what I should be doing. It’s not totally logical, the idea of leaving the friendly confines of a private equity job, not logical. I get this question often of like, wait, you’re not in private equity? Like, what are you doing, dude? But so it was scary at the time. It didn’t make a lot of sense, but I just knew intuitively that there was something else that was calling me that I thought would align better with these things. And it turns out following your intuition in those ways can lead you to some pretty cool places.

Alex Bridgeman: Yeah, I agree. And beyond the book, you have another one of those things that you’re working on, helping teams, helping companies evaluate management teams, which when you were talking about this, I felt like this could be an entire episode in itself of just how do you evaluate teams or different roles and any tools that you might use, anything that fell within that group. What’s a good starting point for talking about how you go about evaluating management teams, both from like a, should we buy this business or not, but also to, okay, we own this business now, are there roles that we need to upgrade at some point or change, how should we think about that? What are some good starting points for that conversation?

Dan Cremons: I’ll give you the flyover of how I approach this work and then we can dive into the tactics wherever you think would be most useful. Here’s where this conversation starts. First and foremost, what is the thesis for the deal? And when I say the thesis for the deal, I’m talking about specifically in situations where you’re evaluating management for a private equity-backed business. Step number one is what is the thesis for the deal? I don’t believe a CEO is a CEO is a CEO. I’ve met plenty of CEOs who, I’ve met lots of CEOs in my career, and each one of them would be good in some situations and probably less effective in other situations. And so I don’t believe, I don’t know that anybody does, but I don’t believe in a one-size-fits-all answer to finding the right CEO or the right executive. It depends in large part on what is the thesis. Step one is getting clear on that. And I’ll speak from the perspective of somebody who’s working with PE sponsors, helping guide them through this thought process. But I sit down and really understand and dig into the thesis, the investment rationale, what is the value creation agenda for the business, really want to get a window into the private equity mind on what does success look like in this deal and how are we going to attain it. Step one. Step two is then saying, okay, what capabilities do we need to see evidence of in the business or engineer into the business in order to make that thesis come true? And when I say capabilities, that’s kind of a loaded jargony word, but capabilities tend to be, in a lot of cases in the knowledge economy, tend to be things that are resident in the brains of human beings. In the old industrial sense, capabilities was, hey, we need to have X manufacturing lines and what have you. But in service based businesses, technology businesses, capabilities tend to be, in a lot of cases, things that are resident within the brains of people. So that’s really step number two. What capabilities do we need to have in the business? Step three is going about and examining the business, which I do a lot of this work pre-closing and some work immediately post-closing, but going in and through a series of structured interviews and other tools, surveys and diagnostic tools, getting a sense for what capabilities actually exist in the business today. Where does the business have the capabilities that are needed to power success in the future, where are the gaps? And there’s a lot we can talk about as to how you assess that. That was really the thrust of your question, but you assess that at an organizational level, and then there’s a specific sort of executive level way of understanding, hey, in a given functional area in the business, CEO, the CFO, the CRO, based on the business, based on where it is in its lifecycle, its maturity, based on what’s called for in the deal thesis, the value creation plan, here are the top three to five most important things, capabilities, attributes, skills, that we need in each of those areas in order to give us confidence that we can make success happen in that part of the business, building out a little mini scorecard that sort of spells all that out. And then the exercise is, of course, going about understanding do the people in those areas have the requisite capabilities? If yes, go forth and prosper. If no, what’s the decision or what are the actions we need to take? Those actions can be, we need to shore them up, we need to develop them, we need to train them, we need to replace them with somebody who could bring in those capabilities more quickly or more confidently. And that becomes all the raw material for what I call the people plan, which is the plan by which private equity investors and their operating teams are going to ensure that they have the right who, the right people, in the right where, the right roles, focused on the right what, the right value creation initiatives or objectives. So there’s a lot there, but that gives you a flyover. Start with the thesis and work your way backwards to figure out what needs to be true about the organization, about the capabilities, about the people in the organization to make that thesis come true and then figure out if you’ve got that or not and where you don’t, what’s the plan of attack and the priority of those actions to get the business built in a way that’s going to be fit for purpose for delivering on that thesis.

Alex Bridgeman: What part of that end-to-end process do you personally enjoy the most? What’s the most fun for you?

Dan Cremons: The part I enjoy the most is, of course, it’s important and there’s elements of this that I quite enjoy, but it’s important to figure out what’s needed in the business to make success happen. I quite enjoy thinking through that and partnering with private equity sponsors on that. The part I enjoy the most, just the activity I enjoy the most, is sitting down with executives to understand who is this human being in front of me? What capabilities do they have? What is their native genius? What is their greatest contribution or area of impact to the business? Then thinking through how can we get this human being optimized for impact? This is drawing on some of the same ideas we were talking about earlier, but what is this person great at? What brings them a sense of energy? And what brings them a sense of meaning? To what degree does the role that they’re in today actually align with the answer to those three questions? If it doesn’t align with the answer to those three questions, that’s important to know because the private equity firm doesn’t want to set itself up for failure out of the chute, but it’s also necessary to understand those things to help that person figure out what is the best role for them. In some cases within the business, it’s oftentimes the case in newly acquired companies that if you can sort of readjust somebody’s job description to shave off some of the areas where they’re less effective and really optimize for the areas where they’re very strong or move them to another part of the business where we think their talents could be better used, that’s a great way to unlock somebody and unlock greater performance and organizational impact. In some cases, it also means moving them outside of the business. I’m a believer in the fact that people don’t want to be in a lot of cases and shouldn’t be in the universal sense in roles that aren’t tightly aligned with the answer to those questions. Getting to understand people at a really deep level in all those areas and then help my private equity partner or client and their CEO think through what’s the right way to get this business people optimized and get folks into the right role for them is very important work, I would argue, from a overall probability of private equity success standpoint and just very fulfilling work because it has the potential to unlock people and help transform businesses. So I really enjoy that. I think that’s a product of just my general interest in people. It’s very easy to do work and interesting to do work, I’m sure you can relate to this from the podcast, but very easy and interesting to do work that you just find to be aligned with what you care about and what you value, and just getting to know people and understanding them and helping them understand themselves is very, I think it’s super cool.

Alex Bridgeman: Yeah, I completely agree. One thing you talked about was if the person in the role is not maybe the perfect fit for the business, sometimes you can add to their skills, you can train them on certain things you need them to be better at, and other times, you need to replace them with someone who can get up to speed faster. What would tell you which direction to go? What are you looking for that tells you this person can be trained versus we need to find somebody else?

Dan Cremons: Yeah, first of all, what is the thing, that’s the first question I would ask myself, what is the thing that they need upskilling on or training on? Certain skills are going to be inherently more difficult or more time intensive or take a longer time to build than others. So, I think that’s the first question – like, what is the gap area and how steep is the learning curve and how prolonged or long is that learning curve for the person to learn that thing? That would be the first question I’d be asking myself. The second question is, what is the order of importance or urgency of the thing that needs to be done in the business where this person has the gap area? Let’s use an example here to make this more real. If you’re talking about a CRO, and that CRO has a lot of experience in direct sales, less experience in- Actually, let me pick a different example. This is a bad one. Let’s talk about a role in a revenue organization for a second. Salesforce administrator, make this up. If the needs of the role are you need somebody who understands how to configure, how to manage a salesforce instance within a sales org, the person in that role today doesn’t have that experience, the first question I’m asking myself is, again, how steep is that learning curve? I don’t really know how to gauge that for this particular role, but that’s the question you would naturally start with. The second question is how important is that to the business and what’s the sense of urgency on getting that part of the business tuned up. If it’s highly urgent, if everything else downstream in the sales process, sales execution depends on having a well-functioning instance of salesforce, you can probably convince yourself that, yeah, we need to get that right sooner than later. It’s the proverbial first domino that needs to fall to allow a lot of other sales execution things to happen. So that would raise, if that were the case, that would raise in importance getting the right person into that role more quickly. The third thing I’d be looking at is, within the capability of the person, is their growth mindset and learning aptitude. You give me somebody that doesn’t know how to execute salesforce or how to manage salesforce, but has just a lot, a high degree of learning aptitude, a real track record of taking things they don’t know how to do and bearing down on them and figuring it out quickly, probably an argument that I’d be willing to bet on somebody like that if I thought the learning curve wasn’t especially steep and we could afford to give this person a little bit of runway to go figure that out. So, I don’t know, I mean, this is the question you’re posing, when do you back versus when do you fire? And I don’t claim to have a perfectly algorithmic way of thinking about that. There’s these different factors that are highly situational that I’d be thinking about. But I think when in doubt, it’s important to understand the audience for this, too, and the context. In private equity, time is money. To the extent that you have a five-year targeted hold period, you’re faced with a decision of, do I back the incumbent manager who might have some skill gaps? The degree of learning curve notwithstanding, the order of urgency or importance notwithstanding, but you’ve got some real skill gaps. And time is money and we’ve got to get this value creation plan underway. Most private equity firms have a bias for making change as opposed to backing the incumbent leader. That’s just, I think, the reality of the matter in private equity-backed businesses. And we can debate the merits of that approach and the pros, cons, and how do you reason your way to that point of view, but that seems to be the bias that a lot of PE folks have.

Alex Bridgeman: Absolutely. What have I not asked you today that I should have? Or what have we not talked about that you’re dying to share more on?

Dan Cremons: The one thing that comes to mind is, I mean, you’re starting your own search journey. You will soon be a first time CEO, like I was and like many that I’ve worked with have been. A really interesting topic, which we delved into a little bit when we were talking about the traps that first-time CEOs tend to face, but a really interesting topic, I used to do a lot of coaching with first-time CEOs on, is like how do you win the first couple of weeks in the role? A lot of precedent is set as a first-time CEO as to how you show up in the first few weeks, and that’s when a lot of people’s perceptions of you as their new leader tend to get bedded in, and that’s not- I don’t say this to create stress for first-time CEOs out there, but there’s some importance to being really thoughtful about how do you win the locker room, how do you win the first couple of weeks in the role? There’s a lot we can talk about on that. And I know this is a topic a lot of search fund investors tend to coach up their CEOs on, but that’s a very rich topic area that I’m sure is something you’re thinking a lot about.

Alex Bridgeman: Yeah, it’s definitely very rich, lots to talk about there. What would be like one or two things that you’d urge folks to focus on?

Dan Cremons: Step one, listen and learn with an open mind. You’re coming in with preconceived notions as to what’s going on in the business, why they’re going on, what the right path to success is for the business, and you’re coming in with this because you’ve done due diligence. But suspend disbelief, go in there with an open mind, spend the first couple of weeks listening and learning. Emphasis on listening. That’s thing number one. Thing number two, and these are no particular order, but thing number two that jumps to mind is get a few quick wins early on, and quick wins can be- don’t necessarily have to be going and signing a transformative new customer. A quick win can be from your listen and learn campaign, you heard that a lot of people are pissed off that the ice maker in the break room doesn’t work. So like go spend $500 getting a new ice maker. And these little things, these little, quote unquote, quick wins can actually be big things in small midsize companies where little annoyances can loom large in the culture of the business. So identify and work with the team to bag some quick wins. It’ll build momentum and help you build your credibility. And then thing number three, again, no particular order, but thing number three is just be straight up with the team as to where you are. You’re a first time CEO, I was a first time CEO, you’re a first time CEO. This goes back to the thing in my article I was mentioning about trap number one is pretending you have it all figured out. So what’s the opposite of that that is a key to success for the first couple of weeks is be clear with your team that you don’t have it all figured out. I had this talk track I used to use where I would come in, I remember where I’ve been every time I’ve had this conversation with the team, with a new team that I was stepping into. But I would come in and say, hey, I get how this looks. I’m a new guy coming into the business. I have considerably less experience than you do in this industry and certainly in this business. In a lot of cases, I was the youngest guy in the room by quite a bit. And so, I would say, what that gives me is really two things. One is just a lot of humility for me, and two is just a lot of appreciation for you and the tribal knowledge you have, the deep understanding of our customers and our market that you have, the deep understanding of this business that you have. So I just want you to recognize that, that I see that. And I’m going to need a lot of your help to learn this business. I’m going to need a lot of your help to be successful in serving you in the role that I’ve been called to do. You should also know that I’m going to bring every bit, for all the things that I lack, experience in the business, experience in the industry, what you are going to get is 100 percent of my best stuff to help us succeed in accomplishing the mission. And so that just like sort of names something that a lot of people are probably thinking when the young CEO comes in, which is here’s this young buck that doesn’t know what he’s doing. Just like name it, eat the elephant in the room that everybody is observing and let the air out of that balloon and attest to the team that despite all the reasons, I wouldn’t say it like this, but all the reasons why you’re probably wholly unqualified to do the job, you’re going to give 100% of what you do have in service to the mission. And I just found that that kind of talk track, it just allows me psychologically as the new CEO who probably has a certain amount of imposter syndrome to move past that. It allows the team to recognize that I’m self-aware. And it creates real trust on the team that the CEO’s coming in and willing to say that, I think. I don’t know. That’s the perception I have from having had these conversations before. So those are three off the top of my mind that I think may not totally win the day early on in your tour of duty but I think can go a long way. And just giving yourself the right to fight another day as you make it past the first few weeks.

Alex Bridgeman: Yeah, that’s a fine place to close. Dan, thank you for coming on the podcast and sharing about winning moves and recruiting and identifying talent. We could talk for much longer, but we both have to run. But thank you for sharing a substantial portion of your day today with me on the podcast. It’s been a lot of fun.

Dan Cremons: Thanks for having me. Thanks for everything you’re doing with the podcast. I’ve learned a lot from the work that you’re doing, so thank you for that. And good luck. Good luck in the next chapter with your own CEO journey. It’ll be really cool to follow from afar.

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