The 5 step playbook assessment on business leadership effectiveness

In this episode, Sam and Taavo from CEO Advantage return to dive into the 5X CEO Assessment—a diagnostic tool developed from two years of research into top-performing private equity-backed CEOs who delivered 5x+ MOIC.

The conversation explores how the 5X model—comprised of Strategic Clarity, Scalable Talent, Relentless Focus, Disciplined Execution, and Energized Culture—is used not just as a conceptual framework, but as a practical tool to evaluate and upgrade leadership team performance.

🔑 Key Discussion Points

▶ 5X Model Overview

• Built from studying CEOs with 5x+ returns
• Five components: Strategic Clarity, Scalable Talent, Relentless Focus, Disciplined Execution, Energized Culture

▶ How the Assessment Works

• Each component includes 10–12 statements to rate by importance and performance
• Includes open-ended responses for actionable feedback
• Results are color-coded (Red-Yellow-Green) for fast clarity and prioritization
• Used with leadership teams and optionally with boards or PE partners

▶ Strategic Clarity

• Aligning the CEO, leadership, and board on the value creation plan
• Communicating strategy throughout the organization—down to the receptionist
• The role of repetition in embedding strategy (11x rule)

▶ Energized Culture

• Holding people accountable for behavior, not just results
• Measuring employee engagement and culture with data (e.g. eNPS)
• Example: CEOs who stack-rank team collaboration to highlight friction and teamwork

▶ Scalable Talent

• Focus on A-players in critical value-driving roles, not just execs
• Using 9-box performance vs. potential models, shared with boards
• CEOs with strong HR leaders outperform—talent as a strategic function

▶ Relentless Focus

• Simplifying execution to “do now, do next, don’t do”
• Avoiding shiny object syndrome and internal distraction
• Ensuring alignment on key initiatives and managing PE firm inputs

▶ Disciplined Execution

• Tracking both leading and lagging KPIs tied to the value creation plan
• Establishing a management cadence and operating system
• Example: AI-driven measurement of customer conversations to boost growth
• Tying metrics directly into compensation and incentive systems

▶ How PE Firms Use the Tool

• As part of diligence or onboarding of new CEOs
• To drive annual CEO performance reviews
• To create a shared language between CEOs and sponsors on team performance

📘 Resources Mentioned

• Book: The 5X CEO – Available on Amazon and Audible
• The Private Equity Playbook series by Adam Coffey
• Move by Sandy Ogg (Talent to Value)
• Works by Patrick Lencioni on leadership and clarity

🌐 Learn more about the 5X model and CEO Advantage at www.AdvantageCEO.com

Raw Selection partners with Private Equity firms and their portfolio companies to secure exceptional executive talent. We focus on de-risking executive recruitment through meticulous search and selection processes, ensuring top-tier performance and long-term success.

🔗 Connect with Alex Rawlings on LinkedIn: https://www.linkedin.com/in/alexrawlings/

🌐 Visit Raw Selection: www.raw-selection.com

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for proven strategies, templates, and best practices to make smarter hires. 

Transcript

00:00
Welcome back to the Raw Selection Private Equity Podcast. Back again is Sam and Tava from CEO Advantage for a playbook series  deep dive  into the assessment of an effective leadership team  based on studies  of high performing chief executives.  Let's dive in.  You guys could give us a refresher please on the the 5x assessment.  Fantastic.

00:27
So last time we were here, we talked about our book, The 5X CEO, and that was based on two years of research of highly successful private equity-backed CEOs who were able to deliver a five times multiple uninvested capital or better, and further validated by uh research discussions with various private equity firm CEOs, managing directors, partners, operating partners, et cetera.

00:54
What we've done is we've taken the 5X model, which has five components, and we've broken it down into a 5X assessment. And the 5X assessment is really a tool to assess how effectively a CEO and leadership team are executing against the model. And so as a reminder, the five components of the model are around strategic clarity, scalable talent, relentless focus, disciplined execution, and energized culture. And so...

01:22
The assessment breaks each of those components down into 10 to 12 statements that we then use to go deeper  and really evaluate how well that team is performing against the various criteria. So  it might be easiest, Alex, if we sort of dive in and share a little bit about each of the components and how the assessment works and a couple of examples, if that's useful.

01:46
Yeah, one question before that, are you using this on existing teams or are you just to clarify to the audience or using this on incoming teams? It can be either.  it's  really what we have found  is there's two big opportunities. One is where you have a team that's in place, that's looking at continuing to assess their performance and improve.

02:08
It's a great opportunity to bring it in and let that team self-evaluate. And then can also have the board members and private equity sponsors participate in the assessment as well. That's optional. um It's also a great tool  from a diligence or just starting out. We've had PE firms talk with us about, as we bring on a new investment, great opportunity to do a pulse check and set a baseline for how the team is performing, and then use that as a mechanism to help drive

02:36
the overall strategy of where the team is gonna be focused. So what, you just one thing I would add, which is just in the application of the assessment itself, ah from a private equity perspective, as Sam mentioned, there are kind of two options with the assessment. One is just the senior leadership team taking the assessment, and there's also an option to include the board as well. And so  when you are, so from a private equity perspective, you could think of the assessment,

03:04
in terms of an early detection system into the portfolio, in terms of performance. So what are the potential early indicators around potential performance down the road? Also, what we've seen with our assessment is private equity firms are using it for their annual performance review. But we found not every private equity firm does a CEO performance review. And so they leverage this tool as a mechanism to create just a great dialogue around performance.

03:34
from a leadership, from a CEO and leadership team perspective,  in absence of a board, maybe not taking the assessment.  What we see are, know, CEOs who uh have a leadership team take the assessment and they integrate it into an offsite. And as you know, in an offsite, that's the time for a leadership team to step, you know, out of the business and work on the business. And so important, you're not just working on the business, but you're also working on the team as well. And so I think part of the value of the assessment kind of covers

04:03
both of those areas  and it can ignite a great discussion, but also action planning around  what they need to do to  really  improve how they're prosecuting the investment thesis. in other words, what the assessment really does is it uncovers the key friction areas  that's getting in the way of driving the value creation plan. Perfect.

04:30
Just, I'd like to start with the end in mind.  I'm  going to come literally,  this book, which was familiar to the model of what you've kind of created on the good to great. we can,  I'm  deep into that at the moment for the third, fourth or fifth time. don't remember how long many times I've read it, but I think I learned after the first time, obviously not.  What are we looking at from an end in mind? If we just think about like the kind of success factors here, um what's the...

04:55
What does success look like from this assessment? Or what are we looking for to gain from this assessment? Might be a better question. So I think there's a couple of opportunities with the assessment. First,  the assessment asks these different statements around the components of the model. And it's asking the  user for the level of importance.  So how important is this statement? So for example, one of the statements is  the leadership team.

05:21
and board are fully aligned on the value creation plan. So how important is that? Because there's different context for a business. And then to what level does  the assessment taker agree  that that statement is true? And so you're looking at that on a scale, and then the assessment conducts some calculations. And so what it'll flag for the CEO and or the board is

05:47
First of all, where are we aligned or misaligned on what's most important for us to be executing against? And then it also highlights where are we failing to execute against that? Where do we have opportunity to continue to improve and do better in these different areas? And so what I like about it is, to Tavo's point, PE firms aren't necessarily the greatest at providing specific feedback to their CEOs.

06:16
They'll say, I want them to be more aggressive, right? Or I want them to be more decisive and move faster. And when you're trying to translate that into something for a CEO and the leadership team to really take action on, the assessment provides much more specificity of, OK, there's an issue with strategic clarity, but what is it? Is it that we lack alignment with the board and the leadership team and the CEO? Or is it that the strategy is stuck at the top and it's not

06:46
permeating the organization for middle level managers and employees to understand what the priorities are and how they should be executing. Tavo, you want to add anything to that? Yeah, I'll just provide just a very specific example. So we're working with the CEO um who's replacing another CEO.  And we want to kind of get a baseline of what's going on inside the of the organization and with the team. So its team took the assessment  and um

07:14
In terms of the score, uh we color-code the assessments, so they were red around discipline and execution.  And what you found out, there was the complete absence of a management system within the organization. So they understood the  strategic pillars and  also the initiatives that were going to drive that. But what was completely absent was the granular detail around the project plans, around those

07:43
around those initiatives. And so that was incredibly insightful for the private equity firm. The CEO of course shared the results of the assessment with the firm. That enabled them to get aligned in terms of  what to prioritize within the business in order to make sure they're going to be successful with the initiatives that  they're investing in. Perfect. Well, let's dive into the assessment itself and happy to go into whichever areas you want to, you guys are happy to share. So over to you.

08:13
So  the assessment again  is  using statements around the five components of the 5X model to evaluate how effectively the CEO and the leadership team are executing against each of those. So within  each of the five components, there's 10 or 12 statements that  the assessor can indicate how important is this statement to the business and how well are we executing against that.

08:41
The assessment then runs calculations and provides some red, yellow, green coding  to enable the user to look at a final report. So it provides an executive summary and then a detailed report helping the  CEO and the leadership team to understand,  where are we in alignment in terms of what's most important or not? Where do we have gaps? And then how well are we executing against each component of the model?  And where might we see opportunities to improve?

09:10
There's also an open response element to each component of the model where the assessment asks the participant to indicate what's one action we could take to be more successful in this area. So strategic clarity, scalable talent, et cetera.  And that's a really useful tool as well because you're helping the team to understand each component of the model and then asking them for that one value add.

09:36
And when you start to synthesize all of those responses, which the report also does from the assessment,  that can be very meaningful for the CEO. And several of our CEOs who've gone through the assessment process have said they actually like to start there and read the open response and look at the summary, even before they go into the scores to understand where their team and or board members are and where they see the biggest opportunities for improvement. And so why don't we go ahead and just start with just strategic clarity.

10:04
let me give you just a couple of examples of statements within an assessment. know, one of the statements is the leadership team and board are completely aligned on the value creation plan. Obviously super critical. If you're not aligned, you're not going to be able to get from A to B. And second is, know, employees at all levels clearly understand the company's strategic plan. And so when you look at strategic clarity, it really is kind of the CEO's horse multiplier.

10:34
Because when you think about it,  the CEO and the leadership team, the board, employees need to understand what winning looks like. And if everybody understands what winning looks like, then you get to show up every single day to understand how you're going to contribute to winning.  And so you can have a team of like all-star talent, but if you don't understand where you're going, you know, that's a problem, right? So when there's ambiguity, confusion and conflict will fill the void.

11:03
Right? So this leads to poor execution and results. And so I'm going to let Sam provide just a couple of examples around uh what looks like around creating strategic clarity.  So  something that we talk about in the book and we, Tavo and I execute with our clients a lot uh is  even if you're  a couple of years into the investment, bringing the private equity sponsor, deal team, and the CEO and the management team together in a room

11:32
to review the investment thesis  and the expectations around where the value is coming from  and how that may have evolved over time.  Just the act, and it doesn't have to be complicated. It can be a one-hour session with Q &A.  But just the act of bringing the deal team and the management team together to review that, to have conversations, to ask questions, to bring clarity there can really

12:00
crystallize and  synthesize for that team what it's going to take for them to execute on the strategy and be able to move forward. And it's a little surprising, but it is not unusual for the private equity deal team to not share that investment thesis with the leadership team, which seems crazy when you think about it. You're expecting this team to execute on it. It would be really helpful if they understand the assumptions that you had coming in and where you're really seeing that value come from. And then the other piece is then

12:30
as Tava was sharing, translating that, you know, okay, so how do we take the investment thesis, translate that into our value creation plan, and articulate a strategy across the business that makes sense to all employees? And so there's a great example. What we see for CEOs is using some form of a strategy on a page. So in very simple language that is easy for all employees to understand and execute against, they're helping everybody understand

12:58
You know, what's the vision for the business? So what's the winning that Tabo talked about? What are the strategies that are going to get us there? And what are the different initiatives that we're prioritizing against each of those strategies and the goals and metrics associated? And so I think last time we talked about the CEO who has a strategy on a page, and he's penetrated the organization so well that his receptionist knows that she's associated with this initiative around organizational energy.

13:26
and how she connects to it. And he's been able to do that with every employee across the business. And I just want to double on, like Sam's not exaggerating when she said this particular CEO,  the receptionist understands literally the value creation initiative that they're tied to. How did that, if you know, how did that particular CEO, is he or she communicating that out on a daily basis, the old adage of saying the same?

13:56
thing a million times, but a million different ways. Is that the, I'm getting plenty of knobs here, but is that the general consensus of it? That is exactly it. So he has this one page strategy that he uses and he uses it in every kind of staff meeting, board meeting, employee town hall. So everyone is very familiar with the verbiage, the goals, the metrics,  and they talk about how well they're executing against it.

14:24
But yes, Alex, to your point, it's that consistent communication and repetition around it that is so important  because they do say adults need to hear things 11 times before they learn it.  so part of what we chat about with clients is just when you think you've beaten that drum to death,  keep going. That means you're really only just starting to penetrate the organization and help them understand what you're talking about and where you want to go.

14:51
That gives us an indication of what good looks like on a strategic clarity perspective from the organisational awareness and people from the receptionist through to the chief exec are aware of their impact, what they're trying to do as a business.  What in particular makes, does this bring out also what good strategic clarity  is if we look at the,  in fact let me reword that, if this is around the  vision and the mission, does that also measure that or is it purely around

15:21
the understanding from a business perspective of how well that is. So it does, it asks about em whether or not the mission and vision has been articulated  and then how well is it actually understood. And so both are important, right? Have you taken the time with your team to actually develop those and put them into the context of the business? And it's, this is a great example, right? Cause  a lot of CEOs have these conversations or have a mission and vision statement that sits on a wall somewhere.

15:50
But then it's never discussed again, and it doesn't actually correlate to what they do. The best CEOs, the  5X CEOs, connect the mission, the vision, the values into everything that is happening in the business. So they're recruiting against the values. They're evaluating employee performance against the values. ah They're talking about the vision as part of their one-page strategy. So it's not just a one-time conversation.

16:19
part of the day-to-day fabric of the business and everybody understands it and understands how it impacts their priorities and their decision-making. And part of creating clarity, what we found with the Buyback CEOs is they do it through simplicity. So let me just give you a really simple example, which is they don't have 10 values. They may have two or three values that are core to their success. So one of the CEOs in our study,

16:48
Um, they really had kind of two core values in the organization, which was if you're going to work at our company, you have to have, you have to be, if the two things,  one is you have to be competent and number two, you have to be kind.  And  you will work for our company if you're kind and if you're competent.  And, um, as you know,  right, the CEO is the ultimate standard center inside an organization  and your culture is what you tolerate.

17:17
And in this case,  um, the CEO, you know, was confronted with a test, which they, hired an executive.  And, uh, I think they've been in the organization maybe only two weeks and a situation happened where he was berating a team inside the organization. The CEO caught wind of it, confronted the executive  and the executive basically admitted it and said, basically they deserve it because of A, B and C.  and.

17:46
The CEO said to the executive, today's your last day. I told you upfront,  these are non-negotiable. We're going to be competent, we're going to be kind,  and that's not representative of who we are. And that one act, if you think about the signal that's sent to the organization, was so powerful. So I think that's actually a great segue into energized culture. So in the assessment,  one of the statements

18:14
that exists there is exactly what Tabo just touched on, which is that all employees are held accountable for both results and behavior. And so because that's so important, and so we're measuring the feedback from that.  And then another example is looking at uh organizational health and engagement are assessed on a regular basis. So there's a data-driven culture,  a data-driven culture around culture.  And so using things like employee net promoter score,

18:43
Having that baseline and then measuring how that  hopefully improves or declines based on where the business is heading is really important. And so the energized culture section of the assessment tries to break down those different pieces. Tavo mentioned the CEO is the ultimate standard setter for behavior. So it breaks down some of those really important statements around culture to make it, again, more specific and more tangible.

19:10
and to help the CEO and the leadership team assess how effectively they're executing against those. So I'll pass to Thavo to share a couple of examples of how we've seen that play out. Yeah, so I think one thing you see with these 5X CEOs, they don't just talk about things. Again, it's not just about simplification, but they'll also kind of create a process around it. And so  how many CEOs have you heard say, look, it's really important that we collaborate well, that everyone's a team player on this executive team, right?

19:39
In many ways,  it's pretty simple, right? Which is, oh when you think about a high performance culture, it's not  the scoreboard matters, of course,  but so does the way you play the game. And so oh one of the CEOs in our study, uh kind of took this to the next level. And what he did  is he had his executive team stack rank one another  on how well they were being team players.

20:08
Like so every single executive stack at a stack rank and send that to the CEO. So in other words, uh, by force ranking his executive team on like, being a team player, he turned collaboration into a measurably measurable behavior. Right. And so, uh, so twice a year you'd have the CEO executive team kind of go through this process. And he'd also have, by the way, again, what the scales. he had executives do this with, with their teams as well.

20:38
So what it does, it spotlighted leaders  who lifted the team, it surfaced hidden friction as well.  And he would highlight um the person who would always be, or the  few people who would always be at the top. then so he'd do that publicly, privately, the ones that are at the bottom, he'd talk to them. But he would recognize those who were seen as ah kind of top team players on the team. And in his words, ah

21:06
the tool gave him a window into what was actually happening with his team, things that he didn't see. That's very interesting. think a lot of it sits. okay, so we've got strategic clarity, we've got energized culture. What's one of the other ones? Let's go to scalable talent next. I think, again, the culture starts to connect to that. So one of things that we're assessing  in the 5X team assessment is whether or not there are A players in the most critical roles.

21:34
And the concept there is, again, we talked last time about critical role. So it's not necessarily your CEO and your executive team. Some of them will be the critical value creation, know, enablers or drivers, but it's also about lower in the organization, who's really having that  significant impact on value creation, again, either by creating it or enabling it. And do you have a player talent in those roles? So, because realistically, you can't have a player talent everywhere.

22:04
But how do you try to make sure that your most important roles have strong talent, that they're rewarded well, that you're providing opportunities for development for them, focused on their retention, and really giving that some strong focus to make sure that you've got the talent that can help you execute against your value creation plan.  I think the other piece, too, is around a talent review that can be shared with the board at least annually.

22:32
And so I'll pass to Tavo to talk a little bit more about that, because we've done a lot of work with different CEOs on this one and there's lots of opportunity. Yeah. So I think, you know, for scalable talent,  as Sam was sharing, right, it's about making sure you've got the right people in the roles that disproportionately drive enterprise value.  And so important um that there are great processes around that. And we saw that within our research. so

22:58
rising it to a board level talent review is so important. We recommend that either quarterly or semi-annually.  Again, that helps to drive accountability around talent. So you're not just over indexing on the financial metrics, but you're looking at the key talent that's going to be, you know, that's going to be  standing up the new capabilities as you're trying to kind of grow the business. so

23:21
And it's a great opportunity when you do have that talent level discussion, because the board is often interacting with the executive team. So they can be eyes and ears for the CEO as well. If they have some question marks on the talent, you know, inviting them as part of that  partnership is so important. And I think another, another element of this too, is,  is just a simple nine box. And one of the, one of the CEOs in our study with nine box.

23:50
her team quarterly. She also had her executive team do the follow the same process again at scales. the executive team would nine box their talent as well. And so from her perspective was  if she'd look at it and it was an accountability mechanism for her, but also, you know, if, someone wasn't getting better  or something didn't change, it was an action to either take on coaching or potentially move them.

24:17
ah out of the organization or into a different role. And so if you think about it, the business is so dynamic,  when you think about talent, your processes also have to be dynamic. And so these simple tools really enable,  shine a spotlight on what's important. And we should probably just explain quickly a nine box in case any of the listeners aren't familiar with it.  So a nine box is literally a simple grid. So you have three columns.

24:47
that are looking at performance. So the left column is needs improvement, middle is meets expectations, right is exceeds expectations. And so you're looking at your talent and saying, okay, what does their performance look like? And then separate from that, your three rows are looking at potential, high, medium, low. And low potential is not necessarily a bad thing. You can have great talent that is  far exceeding their expectations.

25:15
but has low potential. The example I like to use is the salesperson, right? You can have somebody who crushes it every year and has absolutely no desire to move beyond their sales role into a management role. So that would be considered low potential.  And so you're looking across those  three columns and three rows, which create nine boxes to see where does your talent sit and really being honest around that. And then another tool that we recommend is having a calibration discussion.

25:44
across the leadership team on where I might place my reports. Would Tavo agree? And how does he see and interact with them? And trying to get to consensus on where do people really sit inside that nine box is a phenomenal exercise as well as a leadership team to build that knowledge and understanding of who is your top talent, who are your high performers, who do we need to be retaining and rewarding, where do we have issues that we need to address, how are we going to address those, et cetera.

26:14
And we actually have a client that  has actually substituted potential on the nine box with person.  They feel so strongly in making sure ah the individuals in their organization are culture fit that they assess each person  on not only performance, but also on how strong they are in terms of contributing to  the culture. So just another way to look at it. Sorry to interrupt.

26:42
Just a quick mention of our longstanding partnership with Grata. As you all probably know, the private equity scene is constantly evolving and deal flow is moving now to proprietary and data-driven processes. Grata provides you with the data and information of over 7 million private companies. So if you're looking to improve your proprietary deal flow and improve the data access, then reach out to Grata today. Now back to the podcast.

27:11
It's asking me one of my questions because I think, I mean, people is very perspective and this is coming from a guy who runs obviously an executive cert firm, but I think it's difficult to know  sometimes what good looks like. And I find a lot of executives, I like the nine bucks and this is going to my kind of deep dive into this was going to be how.  Um, and I think basically what you're doing is you're asking that chief exec to look at and review the team, to go into detail, to put it all into perspective and.

27:40
The Fivex CEOs, as you guys referenced, the best CEOs have more people. It's not going to be everybody, but they have more people towards the upper right quadrant of their work or in the high performance, but  don't want to grow, don't want to accept, et cetera, but executing their role well. And that's how you'll learn looking at, right? And then the business is then assessing that on a scalable talent level. This business is going to grow. Will the  employees grow with it and what's the potential of...

28:10
potential. I would assume that's quite a difficult one. There's quite a lot of thinking and there's a few arguments that will go into perspective of relationships and who likes who. So I'm assuming that's quite a difficult one for lot of chief execs in the most part to work through. And I was going to say, Alex, I think the other thing that we found in our research is the 5X CEOs had very strong HR leaders, right? Because to exactly your point, this is difficult. And so

28:39
a CEO who thinks of HR as a strategic resource, not just as someone who's administering payroll and benefits in a 401k, right? But truly as a business partner who's helping to look at that business strategy and helping the CEO and the rest of the leadership team think about how are we going to resource against that strategy? How do we make sure we get top talent in our most critical roles? Do we really understand what our most critical roles are? How do we think about development and succession?

29:08
All of that, if you have a strong HR leader,  can make a massive difference in being able to drive value creation in that capacity. Okay. Well, I could talk about talent all day, but I think that definitely covers from a scalable and assessment perspective. Which one's next?  Why don't we go to relentless focus? ah And just a couple of examples from our assessment there.  They're always really telling in terms of, uh

29:38
the level of organizational focus.  The first is around the leadership team maintains a laser focus on the few critical priorities aligned with the value creation drivers.  And then another statement that we ask in terms of how well a team is  performing is around this. This one is called, uh, disruptive distractions to execution are proactively managed and addressed. so I'll, I'll first just talk about kind of relentless focus. I'm going to tell a story to start, which is.

30:08
Uh, one of the most successful CEOs in our study, we were uh interviewing her and they're all, they're all over, they were all over zoom and recorded.  And one of the questions we would always ask was around, uh, what had the biggest impact on accelerating kind of value creation that had the biggest impact in terms of the results that you achieved.  And I'll never forget it because she, she looked at us and she said, guys, I don't know how to say this, but it's really simple.  Um,

30:38
And we're looking at her like, okay, what is it?  And she said, look, every organization I go  into, it was always the same thing.  The leadership team,  they're just trying to do too much all at once. And so I would just simplify it and I would literally take the team through an exercise almost day one around  an exercise that she would focus the team on. What are we going to do today?

31:06
What are going to put off till tomorrow?  And what aren't we going to do? And her role was so important in terms of kind of being the referee around that  and really getting clear  on the initiatives that were going to have the biggest impact on the plan.  so it was, it sounds simple, but you did a great job of executing on it and I'll let Sam build on that.  So I agree.

31:34
She was amazing in terms of how she looked at it. She had another tool that she would use ah to  help her team understand the growth priorities and really focusing on what was core and strategic to the business. ah And so we talked through that in the book, but it was really around that focus  of what's most important and what are we not going to do. And so having a conscious discussion about the reality that

32:03
The best CEOs and their leadership teams focus on the best opportunities, which means saying no to good opportunities. And that can really be a struggle to walk away from something that you see and recognize as a good opportunity in favor of  the best opportunities and the biggest priorities for the business. I think the other thing that we saw, and she also talked about this, in engaging with the board. So this connects back to strategic clarity.

32:31
By having that one page strategy and building that alignment with the board on where the business is heading, that can help a CEO and leadership team sustain relentless focus in the future. Because if your board or your PE Deal partners  are starting to percolate new ideas and new opportunities that don't connect back to what is winning, it gives you a mechanism to engage with them and have that conversation and say,  these were the priorities that we identified as most important.

33:01
So does this new opportunity bump those,  or does it go on the do later list? Or do we consciously say, hey, it is a good opportunity, but it's not the best opportunity, so we're going to leave it  and move on? And so managing that interaction with the PE firm is really important. And part of what we also heard was, at the more junior levels in the PE firm, making sure that the senior team and the CEO understand

33:30
what's being asked because sometimes unintentionally, the more junior team members can be asking for a lot of information and a lot of data that may create a lot of churn for mid-level managers and the leadership team in terms of accessing that information and helping to provide what they want and not necessarily creating a lot of value on the backside of that. And so being conscious of those requests.

33:52
That was something that we saw from a PE firm perspective is really understanding what your team is asking for and making sure that it connects to  the hard priorities of the business. Tobi, you want to anything? Yeah, two things.  One is our advice to ah private equity companies that we work with is always align internally before reaching out externally.  And so because you want to manage, you want to make sure that the leadership team is experiencing constant inbound. ah

34:22
And that they're very clear in terms of the reports that they need and also around the requests that they have. And then just the second thing I would say was, cause we see it quite a bit is kind of the shiny,  the shiny object syndrome.  Um, it happens with the deal team. It happens with the CEO and leadership team.  Um, and quite frequently with entrepreneurs, as you can imagine. So entrepreneurs that sell their companies to private equity, we see a lot of that in particular. And so.

34:51
Uh, you know, just managing against that. And I think this, that simple tool that we talked about around, um, do now do next, you know, don't do is so important. Yeah. It's that, but I stole the phrase off Alex Hormozzi, who's a private equity investor, the woman in the red dress, which he got from, um, the matrix, uh, when he's got the gun pointed at Neo's head and he said, you looking or whatever? Sorry. He's talking to me. said, were you listening to me or were you looking at the

35:18
woman in red dress and then agent Smith's got a gun pointed his head when he turns back around to look at the woman again. Yeah, it's something I've suffered with for some time and I've really only got over in the last 12 months of just, there is nothing else. We focus on what moves the needle going back to the metrics. I literally did this conversation this morning with the team and we're trying to educate a team around it. What do we need to do to improve to hit the 30%, minimum 50 % growth target? We.

35:46
How do we chain that? What do we do? Loads of ideas came forward and we just kept going back to the metrics and go, well, the metrics don't tell us that that's the case. The metrics tell us this. We could go running off and trying to do that, but this is what it is. Can we do this with AI? Can we do that with AI? That's not where the metrics tell us where the problem is. It's usually comes back to you guys need to do more in selling usually, but, um, you know that is. yeah, that's it. Really important. One more thing that I is really important, right? So part of the CEO roles does to define reality. That's one of the most important roles of a CEO.

36:15
And so what you see  is an unrealistic view of the capacity and capability of an organization to execute. Right? So if you're, so if you're, if you're still, know,  if you're still trying to build up talent in the organization  and you have to also understand how much capacity you have to execute on what initiatives.  And it's very easy to.

36:42
overestimate what you think you can really do. so having, defining reality around what you can, what you can really do is so important. So we've hit four. Number five, I think one of probably the most important thing is the actual doing the execution. So walk us through that please. Absolutely.  And Alex, your comments about the metrics, right, connects perfectly to discipline execution. So the assessment asks a number of questions around that.

37:09
But one of them is the leadership team tracks the most relevant key performance indicators, right? KPIs that align to the value creation priorities. So again,  everything in the model connects, right? So this connects back to strategic clarity, back to relentless focus. So do you understand your vision? Do you understand a handful of value creation drivers that are gonna move the business to where you wanna be? And then how do you translate the metrics around those key value creation drivers and create KPIs

37:39
that are meaningful for your team and focus not just on lagging indicators, so revenue growth, EBITDA, uh but also have leading indicators. So the leading indicators are the factors that the CEO, the leadership team, their teams can really influence and control and impact. And so having those leading indicators as part of the metrics that the business is watching is so important because it gives them that opportunity to adjust.

38:07
course before it's too late. And so the best CEOs have a simple dashboard. There tends to be an inclination to pile on with 50 different metrics. And so the 5x CEOs have a simple dashboard with a handful of metrics that are most important to the business, with a nice balance of leading and lagging indicators. And then obviously as you go through the organization, every department has their own indicators that are important.

38:36
But having a good balance there  is really critical to making sure that there's execution. And then on top of that is, do you have a management  operating system that your team is using to orchestrate the business? Is there a rhythm and a cadence to the business? Do you have good balance between working on the business and working in the business and thinking strategically and  also looking at tactics?  And so there's some great examples that we had coming out of the research.

39:06
around the cadence and structure that the best CEOs would put around that to make sure that they had that visibility across the organization to monitor the execution and adapt as needed. The hidden gem behind the management system is just having robust operating mechanisms, right, inside the organization. That kind of generates the speed, the lift  to drive initiatives forward.  And just to comment, and I think, again, uh

39:34
Simplicity is your friend, right? So I think as Sam mentioned, not having  a bloated dashboard of all these metrics is an expression I love, which is those who can't tie a knot tie a lot. And so ah there's some vagueness in terms of what really moves the needle uh to  kind of get to where you need to go with the investment. so I think one exercise that's so important with the senior leadership team is just to say that

40:03
is just to ask one another just around what are the most important things that we need to measure? there's gonna be some things that you can't measure today, but if we could figure out how to measure that, that would have the biggest impact on our success. so I'll give you, again, in the spirit of simplicity, I'll give you just one example um from a client and knowing how important organic growth is to any business. One of our clients determined that

40:33
the key to their organic growth was the number of conversations their engineers had with customer engineers. And so it was not just about volume, but it was also the quality of that dialogue as well. And so ah that was  like the number one metric that he would look at was, and  focus the organization on was driving kind of the volume and quality of those conversations, because he knew that had the biggest impact.

41:02
on the business.  so, and then he's taken it to the next level, right? Around, know, part of what's so critical around the role is driving alignment and especially alignment of incentives. And so in this case, what the CEO has done is leverage AI to look at all those customer reports around that dialogue.  And in terms of quality,  they've trained AI to rate it on a scale of one to 10, you know,

41:31
10 being the best, one being the worst. And then, then there'd be a bonus associated with those individuals who have the highest quality ratings,  uh, in terms of those meetings with the customers. The execution piece, you are identifying and assessing whether or not they have the metrics. And then you go into detail to look at, is it a lot around how they execute, how that's concentration of execution? Is there anything you can give us more around

41:59
We have the metrics, we have the understanding. What about how you're assessing the I suppose the doing  of the understanding of everything?  That's the idea of the operating mechanisms  is  if I can kind of reconnect us from the top. So from a strategic clarity standpoint, you understand your vision, you understand your value creation drivers that are going to move the business forward. And then you're breaking down...

42:25
that into different initiatives that need to be executed against over the course of one year, two years, three years, et cetera. And so for each initiative, you should have an action plan understanding who's doing what by when, right, at the simplest level. There's a lot more you can put around that, but keeping it simple. So who can do what by when?  And then do you have the operating mechanisms to  have checkpoints and make sure that that execution is actually happening? Are you holding each other accountable?

42:54
oh Is there a level of what we call supportive accountability and collaborative accountability? Because you want to drive a solution focus in the organization, not a blame focus when something goes wrong. And so by having the right operating mechanisms and being able to track progress against various milestones and commitments where people are bumping into issues, you want them to surface that quickly and reward and recognize when people bring issues to the table so that

43:24
the team can engage to help address them, support them,  find the solutions. Because in a private equity world where speed is of the essence, the last thing you want to do is have a culture that doesn't support surfacing issues early, because then they just become bigger and can have a larger impact. And so you want to have those operating mechanisms and have that level of accountability where you're surfacing issues early, the team is engaging to help solve them.

43:53
and you're moving as fast as possible through that. And so that's where that structure connects. And then something that Taba mentioned that we haven't talked about is compensation alignment. So in addition to having these metrics, how are you incenting your people to perform against that and making sure that your incentives align with your value creation plan and your priorities so that you're driving execution against that and you're getting the behavior that you really want?

44:21
So really important to tie those compensation metrics back into your priorities. want you guys to share with us with regards to your book. So first question is, can you tell us a bit more about the book and obviously where people can get that from in essence, obviously around this framework? And then secondly, if there's any other materials that you guys would recommend the executives go out about to try and obviously upscale, upgrade with regards to this. So the 5X CEO, the best way to describe it, it's about...

44:49
high-performing CEOs teaching other CEOs how to be high-performing. And so we studied uh more than 50 CEOs who achieved an average MOIC of 6.2  and really tried to understand,  we shifted away from behaviors and more towards tactics.  And so think what you'll find from the book really around what are the most important tactics around getting to a successful outcome.  And so that the whole book

45:19
is kind of chock full of examples and also case studies around what does excellence look like in every part of the  5X model,  which is obviously around strategy, talent, focus, execution, and culture. In terms of recommendations  beyond our book, so our book is available on Amazon, the 5X CEO, and it's also an audio book on Audible.  We also like to recommend Adam Coffee's series of books, the Private Equity Playbook.

45:48
Exit Strategy and Empire Builder, if I'm remembering correctly. He's a former private equity-backed CEO with great experience and I think does a really great job of making it very simple to understand how he looks at that process. We're also big fans of Sandy Og and his book, Move, and the concept of talent to value. So in terms of thinking about your critical roles and who's value creating or value enabling.

46:17
Sandy does a great job of really breaking that down into something that's simple. ah And then we're huge fans of Patrick Lencioni and  all of his writings, ah because he does a great job as well of helping to make this very easy to follow  from a reader standpoint. Tabo, anything? What am I missing? I'm sure there's a bunch of other... captured our  top three. Love it. If anybody wishes to reach out to you post this podcast, guys, how best do they get in touch?

46:47
They can come to the AdvantageCEO.com website.  Well, thank you very much for joining us for round two of the Private XE podcast. Thank you, Alex. And thank you very much for all our listeners for yet again tuning into the Private XE podcast. Till the next time, keep smashing it.