Chief Transformation Officers create 24% more value - could your business benefit?

In an era of constant change, many businesses struggle to execute large-scale transformations. Whether it’s commercial transformation, operational improvement, digital adoption, or organisational changes, these are highly complex, cross-functional programmes - and are critical to driving value creation. 

Enter the Chief Transformation Officer (CTO). A role initially seen more in PE-backed businesses, we’ve seen huge growth in the number and type of companies looking to hire this role.

In this article we summarise what we’ve heard from Operating Partners at Large Cap PE Funds and Chief Executives/ Chief Strategy Officers at Fortune 500 businesses, as well as recent analysis from Bain & Company. We explain:

• When you should (and shouldn’t) hire a CTO
• What role do CTOs play in the business
• What differentiates great CTOs from good CTOs
• Some examples of where CTOs have had a huge difference
• Some final reflections if you are considering hiring a CTO

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When you should (and shouldn’t) hire a CTO?

Not every company needs a CTO. When we speak with CEOs and Operating Partners, we ask two key questions to understand whether the role is necessary:

• Does the existing leadership have the bandwidth and expertise to drive the transformation?
• How cross-cutting is the transformation; does it require multiple functions to make fundamental change?

To answer the first question on leadership, we work through a tailored list to assess how prepared current Executives are for driving transformation. The areas we typically spend the most time discussing are: 

• Have they experienced similar transformations historically?
• Have they worked in an organisation that exhibits many of the qualities of where they want to go?
• How long have the executives been in place?
• How deep is the expertise for the Functional leaders requiring most change?
• Has the Executive team got a track record of successfully driving fast change?

In terms of the complexity of the transformation in question, this is often a faster part of the conversation. We talk through the main drivers of the required transformation, and assess how much the current working processes for each function will change.
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If you’d like to learn more about how you would bring this type of talent to your team or company, please do let us know.

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This conversation typically takes place when transformation is high on the agenda. This usually coincides with particular stages in a business’ growth; 

• Post-Merger Integration – To streamline operations and align teams following an acquisition.
• Crisis recovery – If an organisation faces declining performance and needs a structured turnaround.
• Major commercial/ business model shift – If you’re making fundamental shifts to your proposition.
• Technology overhaul – If a company is undergoing a significant digital transformation (AI/ new technology adoption)
• Rapid scaling challenges – When a business has received a large injection of growth capital, or is already experiencing rapid growth

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What role does the CTO play in a business?

From the outset, the CTO acts as the strategic orchestrator of change within a business. 

They work most closely with the CEO and COO, ensuring Executive alignment on the focus and progress of the transformation. They are also:

• Responsible for managing communications with Investor/ Shareholders on the transformation - for PE-backed companies, they can often work very closely with the Portfolio Operations team - acting as a bridge between them and the Executives.
• Working with Functional leadership to ensure the transformation is on track and driving the expected levels of impact

Bain & Company analysed the typical focus of the CTO role, and how it changes throughout a transformation programme:

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Whilst the CTO plays the part of Architect from inception, as a transformation takes shape different aspects of their role are brought to the fore:

• Integrator: connecting the value expected from the transformation program to its delivery, is also critical from the beginning
• Operator: CTOs plan and guide initiatives that bridge multiple functions and business units
• Coach: to the CEO and top executive team
• Controller: manages risks, ensuring a “red is good” mindset that values honest reporting and early warnings

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What differentiates great CTOs from good CTOs

Having hired 100s of CTOs over the past decade, we have a deep understanding of what makes a good, or better great, CTO. Whilst each role is tailored to the company and specifics of the transformation in questions, there are two hygiene factors fundamental to this profile.

 It’s a very specific skillset, and requires a true “T-shaped” profile:

• Strategic breadth: able to see how the transformation fits into the bigger vision for the business, and effectively communicate with PE investors/ shareholders
• Functional/ industry depth: over the life of the transformation, a great CTO will spend more time in operator, integrator and coach roles. To do this well you need unrivalled knowledge of how the business operates

In practice, we’ve found the balance of 5-7 years in top-tier consulting (i.e., Engagement Manager or Junior Partner at McKinsey, BCG, or Bain) followed by 10+ years experience in similar PE-backed businesses, driving similar transformations is a good archetype (albeit not the only one!) for an excellent CTO.

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Recent CTO hires on Movemeon

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Final thoughts: Should you hire a CTO?

A CTO can be one of the highest-ROI profiles you can hire. 

If your organisation is undergoing significant change, ask yourself the following questions:

• Does the existing leadership have the bandwidth and expertise to drive the transformation?
• How cross-cutting is the transformation; does it require multiple functions to make fundamental change?

Often the immediate response to “no”, is to look at bringing in a consultancy. Whilst often a great first step - it’s not a long-term sustainable one.

Given the exposure we’ve had to assess different situations on whether a CTO would be helpful, we can provide an independent assessment of what might work best in your circumstances. It’s also important to note that the scope of the role can flex with the size of company: we see the “CTO” role varying from 12-months to 5+ years, and seniority ranges of 10 years to 30 years. All of these options will have very different budgets.
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If you'd like to find out more about how Movemeon can support your hiring, please get in touch.