CEO Peer Groups: Your New Competitive Advantage?
Owners, presidents, CEOs, COOs, and other senior executives who participate in peer-learning groups frequently credit them with playing an important—even critical—role in achieving business goals. But they’re not for everyone.
Ever since its most recent low point in 2008, the U.S. economy has been expanding along a path of successive highs and the concept of CEO peer groups has been expanding right along with it. In the Chicago area alone, several thousand owners, CEOs, presidents, COOs, and other senior executives participate in a few hundred such groups, which vary in size, cost, and specific purpose. Nearly all groups, however, operate on several key principles: sharing experiences, embracing confidentiality, and a willingness to share ideas and experiences so every member of the group continues to learn.
Do they work? As might be expected, participants say they do. And that makes sense because they’re paying to be members and investing time, perhaps their most valuable resource. Would they continue to invest if the groups didn’t pay off?
The available statistics bear out the concept’s effectiveness. On average, the companies of members in these groups experience faster gross revenue growth of 5 percent versus an industry average of 1.6 percent—or a difference of 200 percent. The companies also see, on average, profitability increases of twice as much—22.6 percent versus 10.3 percent.*
Key Point: While growth in size (revenue, number of employees, profit) can occur for companies in peer-learning groups, a strong desire to grow your company is not a prerequisite for membership. These groups also help owners, CEOs, presidents, COOs, and senior executives maintain their companies at any level of revenue or number of employees by helping them to weather business problems, which are ever present, and to increase profitability.
So why don’t all CEOs join a peer group? Well, as with just about anything, peer groups aren’t right for everyone. Key member requirements include openness and commitment to:
- Improving, especially through continuous learning
- Investing time and energy as a priority
- Sharing experiences—both successes and failures
- Listening critically, compassionately, and without expressing judgment
- Following a group’s processes and practices, some of which might seem counterintuitive.
In more than 25 years in business, through our own experiences and those of our clients, we’ve come to recognize the great value that these groups offer.
When we talk to peer-group members, they say they join because they:
- Know from experience that it is lonely at the top. No one else at their company has their perspective.
- Struggle to find people internally to help them thoroughly think through difficult decisions.
- Understand that no one really holds them accountable—and that it’s not a good thing.
- Face personal or family issues they need help with but don’t feel comfortable sharing at work or even with trusted advisors. Comment : It’s important to understand that these types of peer-learning groups are in no way designed for personal counseling or “group therapy.” They can offer valuable perspectives from business and leadership points of view.
Key Insight: One experienced CEO peer-group facilitator estimates that as many as half of the issues that impact companies led by members of his groups either are, or can be traced to, personal or family challenges.
- Like to have a sounding board for bold, strategic moves they’re considering.
- See value in sharing experiences, opportunities, and challenges with others who are unbiased.
- Are especially concerned to gain more ideas for expense reduction and revenue enhancement.
In addition, of course, different companies vary in their knowledge and experience with new technology, business models, mergers and acquisition activities, regulations, expense reduction, revenue enhancement, and other business practices and influences. Peer-learning groups can be a great resource to guide you through such situations.
In the bigger picture, are CEO peer groups even needed? Data on US business formations and failures suggest that they are, at least as an innovative and proven support tool. In 2016, some 433,000 new businesses were formed; yet 400,000 went out of business.** In other words, our economy loses nearly as many new businesses as it gains. New businesses in that year added up to 8 percent of all operating businesses, which is significantly less than the 11 percent average seen from 1980 to 2010. For established companies, even more telling figures are that only about a third of new businesses make it to their tenth year and only 25 percent of family businesses make it to the second generation.
We see so much value in these types of groups that we decided to partner with the Chief Executive Network to launch one CEO peer group for manufacturers (which don’t compete with each other) early in 2020 and, later, another for non-competing distributors. Because they are professionally facilitated and follow a proven process, these peer-learning groups are highly efficient with your most valuable resources—your time and your energy.
You yourself might be interested or know owners, CEOs, presidents, COOs, or senior executives through your networks who already understand and appreciate what these groups are all about or who are simply curious. Please encourage them to contact me or share their names with us as you think it makes sense. We’ll take it from there by meeting with them and, together, determining whether they might be a good fit for our group—that is, whether there can be a fair exchange of value. The model is for the groups—manufacturing first, in this case—to meet four to six times each year, at times benefiting from expert outside speakers, and for members to receive one-on-one coaching sessions. Also part of membership is free attendance and participation in two major manufacturing conferences hosted by the Chief Executive Network each year.
If you’re looking for a proven and highly productive way to make your business as strong as it can be, please consider peer learning as a valuable resource. Just get in touch with me, Phil Krone at pkrone@productivestrategies.com or 847-446-0008 Ext. 1. We can discuss your particular business situation to see whether peer learning might offer useful support.
* The Chief Executive Group, Guide to CEO Peer Networks, 2016. CEG is our partner in offering peer-learning group experiences.
** The U.S. Census Longitudinal Business Database, a research dataset of all U.S. businesses with paid employees listed in the Census Bureau’s business register, as reported in The Wall Street Journal , November 4, 2019.
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