Monday 8 August 2016 7:00 pm

How going public changes the role of the chief executive forever

Bernard Liautaud, managing partner of Balderton Capital and the first ever European entrepreneur to take a company public on Nasdaq, lifts the lid on the life of a chief executive of a public company in an open letter to Mike Tuchen, the chief executive of software company Talend, which listed on Nasdaq at the end of last month.


Hi Mike,

Congratulations on a great stock market debut and for all you have done for Talend so far. As I’m sure you know by now, your job as a chief executive has changed forever. As you prepare for this new chapter, I thought I would share a few things I’ve learned.

That wonderful (awful) thing called the stock price

It is mesmerising to see your share price on the ticker for the first time, and it is tempting to monitor it constantly. But the novelty wears off, especially when people start to use the constantly fluctuating number as a yardstick for your own performance. Your team needs to know that it is an indicator of company performance over the long term, not a day-to-day barometer.

Your share price can be blown around in the breeze by market fluctuations, economic outlook, political instability, currency movements, and even your rivals’ results. Make it clear to your team that you will stay focused on the business regardless of stock fluctuations. Perform well and the stock price will eventually reflect your success.

Public means public

Every quarter you will release earnings to Wall Street. Everything that was once a private conversation will become a detailed press release and a two-hour phone call with well-prepared analysts. The transcript of this call will be available to anyone who wants it, and even your tone of voice will be analysed.

Private investors are used to results that are “not quite on budget”. Public investors, in contrast, have little tolerance for even a small earnings-per-share miss. Poor results, or even good results with a lowered guidance, will send the stock tumbling. It is often said that it takes six good quarters to recover fully from a bad one.

Forecasting is one of the hardest things to master. You have to issue guidance but also watch the “consensus”. If your guidance is too low, the analysts’ consensus will be higher. Fail to reach the consensus in the next quarter and you may be punished, even if you have beaten your forecast.

Your shareholders and board members will no longer be one and the same

Many private chief executives grow close to their investors, who often become mentors. However, over the next few years most of us will make way for independent board members.

Take the time to choose an experienced board with different expertise and backgrounds, who will challenge and support you equally. Perhaps most importantly, pick people who have the time to be engaged. There is little point in having a brilliantly qualified board that you never speak to.

You must also take care of your public shareholders. They have entrusted you with close to $100m. Building strong relationships with them, and communicating openly and regularly, will help to gain their trust. The grilling questions of research analysts and shareholder technical teams can offer great insight on what really matters to your business, and therefore to your shareholders.

Your first class management team

As the chief executive, you will manage less and lead more. Part of your role has been, and continues to be, fulfilling that age-old piece of advice: surround yourself with people better than you. A strong management team is now more important than ever.

Creating and leading a highly functional team is the most rewarding experience a chief executive can have. Building complete trust, working in full cooperation, and being all aligned behind clear and coherent objectives feels like magic. Don’t take that precious equilibrium for granted, as it is your biggest asset.

Company culture does not have to change

When you employ 500 people, employees fondly recall a time when there were only 100, when everyone knew each other and when decisions could be made in minutes. When you have 2,000 employees, people will reminisce about how good and cosy things were when you were “only” 500.

The IPO usually signals a new period of growth, and a strong chief executive can ensure that the company remains nimble, by keeping everyone informed and empowered. But this will require effort, focus, and time on your part. Communicate even more, ensure the organisation’s structure doesn’t hinder staff, and build company traditions and habits that unite your team.

Enjoy it

Becoming a public chief executive comes, of course, with great responsibilities, but it is the most thrilling adventure a person can have. You have set the company on a terrific path. You have given it financial power and access to markets. You have given it a visibility that it never enjoyed before. You have given it the opportunity to acquire businesses if you so wished.

Enjoy every moment. Congratulations for making your company part of this exclusive club, and good luck for the many years ahead.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.