IPO Offerings: Are you Ready for the Naked Truth

By Judith E. Glaser | vistage.com
Published November 27, 2011

The decision to go public with an IPO is pivotal to the growth of a company, for a number of important reasons.

It’s when you tear down the walls and invite outsiders inside your company. It’s when you agree to allow everything you do to be examined, scrutinized, and challenged. So, if you’re not ready to be naked in front of others — think twice.

A few years ago a client with whom I was on a multi-year retainer decided to go for an IPO. The client was a well-known, name-brand designer — and the organization, while only in business for a just over a decade, was now seeing profits heading north towards seven figures. With the aspiration and likely potential of huge growth — and a timely positioning to be one of the top three design houses in the world — the leadership team and board made the fateful decisions: It was time to go public.

And that’s when the work began.

It’s one thing to be able to stand in front of a crowd of employees who know what you do inside and out and talk about what’s next for the brand. It’s another thing entirely to create the documentation, the presentations, the road shows and the rationale to convince people who don’t know you why they should invest in you.

From Dreams to Reality

First, we needed to move from natural insider enthusiasm for a new brand extension to putting things down on paper for a financial team to examine. That team of financial truth-seekers was there to pull apart and challenge all our data before the investors had a chance to do so.

For weeks, I worked with my client’s CEO. We talked and talked over the matter, working to flesh out her vision and unfold her aspirations for the company’s future growth.

What we discovered: As a CEO, you know that what is and what will be seem closely connected when you talk about strategy — but tend to get further away when you need to actually execute it. So, there’s a real need to balance the dream with the reality and be true to what can make the vision live for others who choose to invest. Since this was a design company, everything had to be articulated perfectly and then scrutinized by the CFO, who would go on to build the financial story behind the dream.

Dressing Up for the Road Show

It’s not enough to simply lay out and substantiate the vision. After that, you need to go on the road and talk about it, explain it, demonstrate it, and sell it. You need to convince people that your dream is worthy of their investment dollars.

Actually, some say that 70 percent of investors look at an organization’s management as the deciding factor for IPOs. “Can I trust the leadership team to pull it off?” they may ask. “Are they a cohesive team? Can they execute the vision — really? Will they execute it well?” Answering these questions convincingly is no small feat, especially since you may be giving three to five presentations a day once you’re on the road (going city to city, working the crowds and, of course, doing it perfectly each time).

It’s a rough experience. My client half-joked that you either need to be high on belief to carry you through it day after day — or you need to take to the bottle. Fortunately, she was able to succeed by getting high on the experience (and then collapsing from fatigue at night between cities).

Also fortunately, being in the fashion industry, a part of her presentation was a “demonstration” of the new and exciting things to come when people invested in the brand. “Seeing is believing,” after all, and as a design professional, she definitely had an advantage that not all companies will share. Not all IPOs can tell their story so graphically and visually. And that’s all the more reason why rigorously researched data is so critical to success.

Employee Engagement

Not all IPOs involve stock options for employees. However, if and when they do, it’s a powerful experience for employees to go through with the management team.

I was the one to go to bat for giving everyone a piece of the action. It made so much sense, because my platform is about creating work environments where people feel like owners and act like owners. So, giving employees a share of the business — even a small share — is a crucial way of signifying appreciation for their hard work and giving them the motivation to stay the course. And that’s all necessary to help ensure that the company’s vision becomes reality.

Reality Sets In

In the case of this company’s IPO, the stock price was incredibly high. People were drunk on success over the first 24 hours, and when the smoke and mirrors of the initial IPO finally settled, the stock slipped back from $27 per share to $21.

Then reality set in … and the management team and employees began to realize that “when someone else owns you,” you need to really work hard.

The mirrors are always there, of course, and sometimes they’re foggy; you need to make sure they get cleaned. Being on the other side of the IPO, there was a rigor and a discipline expected by everyone. You could no longer simply say, “We can do this.” Now you needed to say, “We can do this, and this is how we’re going to do it.” The link between aspiration and execution is more closely watched, and people had to deliver when they said they would.

And everyone became mindful that performance sometimes didn’t have a practice stage — it was the reality.

Going for an IPO isn’t easy, and it requires the difficult and honest answering of a lot of tough questions. But nothing worthwhile is easy, right? So don’t be discouraged by this story; instead, let it motivate you to power your way through the process. Preparation is key: If you believe in your team and have the right numbers — and understand the tough reality you’re about to face — you’re already halfway there.

This topic and more are included in the Vistage Connect™ CEO peer advisory sessions. Learn more.

Leadership Journey

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Innovative Yangzi Delta Region

Featuring Judith E. Glaser | Innovative Yangzi Delta Region, Volume 2

Published by the Education & Training Department, Yangzi Delta Regional Institute of Tsinghua University, Zhejiang.

The target audience was alumni of the department all around China.

Article Translation:

"Our company name is Benchmark Communications, Inc..
We have found that identifying benchmarks — metrics for success — and working to ensure that organizations have created internal conditions that allow them to move in a positive direction relative to those benchmarks is the key to seeing an ROI in training investments.  

Every company has benchmarks for success. Every person has benchmarks for success. Often we don't even know that we have them, or that our mind is constantly judging everything we do relative to these benchmarks, but these are the guideposts that motivate and propel individuals, teams and organizations forward. Benchmarks are how we measure our ability to achieve our goals. Benchmarks frame our identity as individuals, teams and organizations.

A leader may desire, for example, to move his or her organization into new product lines to be more competitive in the marketplace. He sees this strategic move as a way to create this year’s success story in his industry — that by getting an exciting new product out quickly he will achieve industry dominance over his competitors.  The leader will drive his organization forward toward that goal of “being #1 in the marketplace.”

However, our research indicates that even when this goal is very clear, leaders are not always skilled at identifying and articulating benchmarks – which includes how they will measure success as they progress toward their goal.  As a result they create obstacles as they move from vision to execution. Execution requires collaborative effort among lots of people; it requires coordination of those efforts; it requires decision-making at many levels; and it means sharing resources when they are limited. 

When leaders get frustrated by slow progress in achieving the goals they have in mind, or when they experience a high level of conflict that arises while people are negotiating for resources, they start to shift the signals they send from confident and supportive to disappointed and judgmental. Sometimes the leader doesn't even realize this shift is taking place; she just knows that she is frustrated, and believes she needs to push harder to get people to see what's important.

We have studied this pattern of communication for 30 years, and it occurs in all organizations, with all leaders. Stress from the job of leadership steps in and causes leaders to resort to communication that is less effective– less influential and motivational and more judgmental — yet they don't realize it. They think they are pushing people to see and support the company’s goals in ways that they believe provide successful outcomes, while instead they are pushing people into stress, fear, and defensive behaviors.

Conversational Intelligence™

We work with our clients to help them understand the conversational dynamics that take place whenever people are under pressure to be successful, and we give them new frameworks for building trust, relationship, understanding, and shared benchmarks for success. We teach them how to stay in a place of truth-seeking and truth-telling with each other.  We help them focus on being empathetic and compassionate about the process of change.  We show them how to motivate, not dictate.

By creating an environment where leaders and their employees can openly, honestly share what we call their “personal movies for success” with each other, the workplace shifts from an “I-centric” workplace to a "WE-centric” workplace. The result is a cultural transformation to a workplace vibrant with engagement, learning, and the drive to achieve mutual success. 

The Impostor Syndrome

The level of transparency and trust needed to build this type of culture is higher than most leaders realize, and their first major hurdle is fear that people will learn that they don't have all the answers. We call this “the impostor syndrome.” We all have this fear, along with many others.  Paradoxically, once we put these identity threats on the table rather than hiding them, leaders feel a sense of relief and expansiveness that becomes a catalyst for change and openness in others. Everyone gets the feeling that they can finally share what is really on their minds, which leads to creative problem-solving and ingenuity.

Benchmark Communications has studied neurological research from scientists around the world, which has given us insight into how the brain works when human beings are at our best. When we are performing at our peak, we are using mirror neurons in the brain to create meaningful, empathetic connections with others, to share the movies of the future that are a natural function of our brains and hearts, and to support each other in the journey to success. This state of mind builds the highest level of success in organizations – helps organizations achieve the biggest ROI – and allows these businesses to identify, create, and surpass the benchmarks I describe above.

Trust the Heart of the Matter

My new book on Trust is about getting to the heart of a process that we have defined as moving from I-centric leadership to WE-centric leadership. It's all about how to create a platform for trust that is strong enough to weather the uncertainties of a volatile business environment. 

I-centric leaders make themselves and “their movie” the center of their universe, while WE-centric leaders make the organization's purpose the center of the universe—for themselves and for their workers. WE-centric leaders create conversations that enable people to feel “we're all in this together,” which promotes an atmosphere of openness and creativity.

I-centric leaders live in a world of constant drive to achieve their goals and are not good at giving feedback or working with others to achieve mutual goals, while WE-centric leaders become expert at having the sometimes-difficult conversations when people don't agree.  WE-centric leaders see conflict as a way to create a bigger platform for mutual success, and they are brilliant at working the gaps that often occur between “how I see the world and how you see the world.” They are expert communicators.

I-centric leaders are caught in the past. They are entrenched in their own view, and focus on persuading others to move toward that view, while WE-centric leaders adapt to changing conditions by creating a vision for their organization that is bigger and broader than they alone can hold.

We've learned from our research that the ability to adapt to a fluid economic environment separates those organizations that are successful from those that are not. Successful leaders and organizations create goals and benchmarks for reaching those goals.  Then the emphasis shifts to interpersonal dynamics.  WE-centric leaders build trust between employees, using specific strategies to overcome our brain’s hardwired tendency to see differences as threats and move beyond them to synchronize our mental movies of the future, so we can all move toward that successful future together. 

Published in 2011: Volume 2 of the journal named as "Innovative Yangzi Delta Region"- published by Education & Training Department, Yangzi Delta Regional Institute of Tsinghua University, Zhejiang. Target audience is alumni of our Dept.  all around China.

Gregory Goose Video

The Leadership Secret of Gregory Goose was commissioned by Benchmark Communications, Inc. as an animated adaptation of the book Ultimate Power: The Transformation Journey of Gregory Goose. This video is being used as part of a business leadership training workshop run by Benchmark CEO, Judith Glaser, and is currently distributed by Learning Communications. Animation was done in-house by Seth Kendall, and audio was scored by award-winning composer, John Avarese.