During my career, I joined a few different CEO groups. Each group had its own criteria for membership, and a unique operating model. The basic premise was the same for all of them: ‘The CEO job is a lonely position and you need a peer group to help you grow and keep the wheels on.’ CEOs sit between the board of directors and the executive leadership team. They work for the board, and manage the executive team. In both roles, the CEO has to practice a degree of isolation and be a bit circumspect about showing vulnerability, or uncertainty, or frustration, or a range of emotions that are not aligned with demonstrating leadership. This is where a small peer group of fellow CEOs can be extremely valuable.
As I searched for the best fit peer group, the experiences I had with each group led me to refine my needs and criteria for the next group. During my journey, I was leading different companies, each with its own dynamic, and I was gaining experience in the CEO seat that I like to think was making me a better CEO. That meant that not as many challenges surprised me, and I was developing my own toolbox of best practices. As a result, my needs for a peer group were evolving. I went from being a sponge or a novice looking for any guidance and insights, to being particular about who was in my group, and focusing on how we could actually help each other.
My favorite description of a good CEO group is that it is the board you wish you had. Although I like the analogy, a peer group differs from a board in two important ways: they should not have any financial interest in your company, and they have no role in your compensation or your tenure as the CEO. Those two requirements are the key attributes that open up the relationship to be (relatively) unguarded and authentic. Meetings are a safe space where the peers in your group have only your success as their objective.
After a few trial and error memberships, here are my suggestions for the ideal characteristics of a CEO peer group:
Similar Industries. In my first experience, I was leading a venture-backed start-up software company that was losing money every day. My ‘peer’ group included two profitable family businesses with no external investors (or boards of directors). A CEO running a turf farm, and one running a gravel business, a biotech-manufacturer that sold human tissue products, and a couple of others I cannot recall. Needless to say, we had nothing in common other than zip code, and our CEO title. At this point in my career, I was a sponge for any CEO wisdom, but this collection of businesses really was not very helpful. Similar industries can mean broad categories such as: software companies, health-tech companies, tech-manufacturing, regulated industries, etc., but avoid businesses that are too close and could eventually overlap or compete. I was in a group with a CRM platform and an email marketing platform. They eventually became competitors, which made things quite awkward.
Similar Corporate Structure. If you lead a family owned business, then seek out other family owned businesses. However, if you are institutionally funded, then find peers with similar institutional funding. If you lead a public company, then you need to be in a group of public company CEOs. Private company and public company CEOs are not peers. Based upon my company’s structure, I wanted private company peers with a functioning board of directors that included representatives from the institutional investors. Many issues faced by CEOs revolve around interactions with their board, so a peer group with similar board dynamics is important.
Similar Stage. The challenges for early stage businesses are different from the challenges for later stage mature companies, so it is important to find a balance in your peer group. In the early stage, decisions and tradeoffs relate to launch, market acceptance, and survival. Mature companies deal more with growth and value creation. Find a group with the right balance.
Similar Size. Big companies face different challenges than small companies, so in this instance ‘size matters.’ Size is often a proxy for the stage of business, but it can also reflect the type of business. Some companies build significant revenue with very few employees, while other businesses with similar revenue may require vast teams of people. Human resource challenges are a frequent topic in CEO groups, so it is important to be clear about how similar your peer group members are with your staffing profile.
Similar Funding. Within broad ranges, the dollars invested may not make much difference, but a company sitting on hundreds of millions versus a company pinching every penny from a three million dollar round, will not have much in common. Businesses funded by grants or non-dilutive capital are different than businesses funded by venture or PE firms. It relates back to stage and maturity, but how many rounds of capital and the structure of the cap table can also be a point of comparison to determine if a CEO is your peer. Companies that have been through several rounds and have large preference stacks have fewer degrees of freedom than a company still operating on its A round with willing investors on the sidelines.
Similar Experience Level. This may be the most important criteria. When I was a first-time CEO, I did not know anything about the role, and as I mentioned above, I joined a CEO group to be a sponge and learn from others who were more experienced. It was a one-way flow. However, I learned that for a peer group to be effective, the members really need to be peers, and similar experience levels matters a lot. My last group had a process for interviewing and vetting new members, and we generally agreed that if a candidate led with “I just want to learn from you…” that was an instant ‘no.’ We wanted to hear that their focus was to share and help each other. They had to bring something to the group, not just be a sponge. This could mean a new member with a deep background might be a good fit even if their current business did not meet some of the other criteria. We valued experienced CEOs.
Personality Fit. If the peer group clicks, it can be together for a long time. In my last experience, people sold businesses and started or joined new ones without ever leaving the group. To make this work, you have to get along with the people in the group and enjoy learning and sharing with them. Get to know your group before you commit.
Structured Meetings. Every group I joined had a leader that ran the meetings. The formality a leader or moderator brings to the meeting is vitally important. Just throwing a bunch of CEOs in a room and hoping that they find purpose is not a reliable recipe. I found that a knowledgeable leader shaped and organized the discussion. The best meetings imposed structure on presentations, and required every CEO to bring something to every meeting. It could be a best practice to share with the group, or it could be a problem they needed help solving. The leader would draw out the contribution in advance of the meeting, and every meeting had an agenda. It takes effort to participate in a peer group, and structure forces every CEO to come to the meeting prepared to participate.
The right CEO peer group absolutely makes a difference and will improve the trajectory of a business. Even star athletes need a coach, and the same is true of CEOs. A peer group can be your coaching team, but the key element is to select the right CEO peer group.