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Is Charisma a “must-have” Ingredient for Successful Leaders?

[This is part 1 of a 3 part series on the evolution of leadership theory—the history, most recent thinking on the topic, and what to look for when trying to identify it, including a look at charisma, executive presence and their contributing roles to successful leadership]

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As retained executive search consultants, we are constantly interviewing and assessing executive talent for our clients.  After interviewing these candidates, our clients often reference key characteristics they found (or didn’t) in an executive that are not found in their resumes—charisma, executive presence, or other purported leadership behaviors that are generally thought to be important to success.

But clients continue to ask questions about these traits that sit in the invisible spectrum.  Is charisma an essential ingredient to leadership? If so, for all sizes and types of companies?  Are there other types of leadership where charisma isn’t present and are they successful and in what types of circumstances? What about management versus leadership?  How do we define the differences, and when is a manager better suited than a leader?  And what’s up with “executive presence”? Is that just another term for leadership, or is it different? How? Are these differences important?

All great questions.   And—although we won’t be able to answer them all here in appropriate depth and breadth—we’re going to try to lift the curtain a bit.

With the book and now movie, “Moneyball,” the question of what to look for and what to measure in picking leaders for organizations should be rethought.  In “Moneyball,” the fulcrum of the book is based on a different way of measuring the potential and future performance of pro baseball players.  In the book, the Oakland A’s general manager turned upside down what had been considered the gold standard for sports talent assessment by baseball scouts in favor of a much less obvious and intuitive set of statistics.   Pro baseball would never be the same.

So, adapting this concept, it’s worth reviewing some popular (mis)perceptions of what makes a leader.

First principles—What does an organization need: Leaders or Managers?

Leaders/leadership by its own definition indicates the following situational characteristics—

Where one is now is not where one should be.  Rather

1) One should “follow” someone or something to another place, in theory a “better place”

2) This “better place” is both NOT self-evident (convincing is required), AND

3) It requires effort to get there, and is not frictionless, calorie-free, or zero-cost.

Managers, on the other hand, are most often those who create efficient operating systems once the “better place” has been reached.

Charisma as an essential ingredient to successful leadership—True or False?

The world “charisma” comes from the Greek word for “gift.”  Charisma is better thought of as a skill that enhances leadership effectiveness by dint of a superior ability to influence others to change their initial positions, perspectives, or opinions.

I was first offered a deeper insight into the concept of charisma in leadership by the teachings of Rakesh Khurana, a professor at Harvard Business School.  Dr. Khurana has done extensive research and writing on the topic, from articles in Harvard Business Review (“Curse of the Superstar CEO”, HBR 2002, http://hbr.org/2002/09/the-curse-of-the-superstar-ceo/ar/1) to complete books on the topic (Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs http://www.amazon.com/Searching-Corporate-Savior-Irrational-Charismatic/dp/0691074372).  More popular business authors like Jim Collins, author of Good to Great, wrote about “Level 5 Leadership” and addressed charisma in relation to this “top leadership level.”  Collins has been quoted as saying, “Being charismatic and wrong is a bad combination,” and “I’d go so far as to say that [The Level 5 leaders Collins chronicled in the good-to-great success case studies in his book] were uncharismatic for the most part.”  (http://www.amazon.com/Good-Great-Companies-Leap-Others/dp/0066620996/ref=pd_sxp_grid_pt_0_0)

Regardless of good or bad use of charisma, there is still a great deal of additional research and writing on the topic.  Clearly we associate the effects of charisma with enhanced motivation, inspiration and intellectual stimulation it engenders in the listener.  But can it be taught?  One branch of research surrounds this argument.   If you read the works of Professor Robert House at University of Pennsylvania’s Wharton School, he deconstructs “how” charisma works.  From House’s work, one could infer that charismatic behavior may be both “born in,” but also taught with enough study and practice (http://knowledge.wharton.upenn.edu/papers/674.pdf).

The Dangers of Charisma

What are the pitfalls of charisma in the corporate context?

• Charismatic executives tend to suppress individual thinking and leadership development in subordinate teams.  Leaders with charisma can create a culture of “followers,” rather than young, budding leaders and the next generation of a company’s executive team.  Narcissistic tendencies don’t allow others to flourish instead creating dominant monolithic thinking, “I don’t even argue with him anymore because I always lose.”

• This in turn leads to challenges for succession planning.  Often charismatic leaders leave a vacuum of next generation leaders, having created instead a strong set of followers.

• Life of the party isn’t always “engine of achievement.”  Charisma can be used to achieve personal goals as the primary objective, at the expense of organizational goals.  There is no question it is always best to have alignment of personal and organizational goals so that by achieving one, the other is also achieved.  However, this mandates that the charismatic leader be programmed to strive for a “win-win,” vs. a “win-lose.”   In fancy organizational behaviorist language, this ends up being the difference between those leaders who have “higher activity inhibition” and those who have lower levels.  If a leader has lower activity inhibition, they tend to seek win-lose outcomes with the “win” side being the individual over the organization.

What can the charismatic leader do to counteract negative repercussions?

The charismatic leader needs to ensure that they either surrounds themselves with others who have strong self-confidence and ideation, or that the charismatic leader makes a great deal of effort to cultivate an environment open to sharing other opinions, perspectives, and ideas rather than defaulting to “the charismatic boss.”

As referenced earlier, charisma is really more situationally valuable.  Typically, charisma is most valuable when change is the goal.  Innovation, revolution, new paradigm adoptions are the best projects for the charismatic toolbox.

Some popular examples of positively and negatively directed charisma include the following:

Good = Sir Ernest Shackleton, and the failed Antarctica expedition he saved | John F. Kennedy | Martin Luther King

Bad = Hitler |Jim Jones and the 909 deaths in the Jonestown massacre in 1978 where Jones as dogmatic cult leader got all his followers to commit mass suicide

A few additional interesting links to resources on charisma and leadership

http://money.cnn.com/magazines/fortune/fortune_archive/1996/01/15/207161/index.htm [lighter reading]

http://www.aom.pace.edu/amj/february2001/waldman.pdf [heavier reading]

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CEO Survey, Fall 2011 | Questions

How & What Growth-stage CEOs Are Ending 2011 & Planning for 2012

Below is the hyperlink to take the Q4 CEO peers speed-survey, exclusively for growth-stage CEOs. This survey focuses on “How & What Growth-stage CEOs are Ending 2011 & Planning for 2012″

This shouldn’t take more than 5 minutes of a busy CEO’s time–

We here at BSG Team Ventures periodically take the temperature of the markets we serve. The survey is no more than 15 questions, most simple multiple-choice.

These surveys are created and compiled by BSG Team Ventures as a courtesy to our executive ecosystem with the belief that knowledge is power. Aggregated peer-provided knowledge is “actionable power.”

To compare how you’re feeling a year later with the survey results from Q4 2010, titled “CEOs Plan for 2011”, go to http://www.bostonsearchgroup.com/blog/q4-2010-ceo-survey-of-growth-stage-companies/

We make an effort to survey only those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). [Note, if you don't fit the aforementioned description, please refrain from responding.]

Feel free to forward to the qualified CEOs in your sphere of influence. The more data generated, the more accurate the trend lines.

All responses are anonymous due to the web-based survey technology employed.

We will forward the survey results within the next two weeks to the email address on file. Please let us know if there is another email address you wish us to send the results to as well.

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VP Sales Americas Search for Leading Enterprise IT Security & Compliance Provider

The Company

Securing Business

The Company is one of the largest global providers of IT-security solutions and IT-Services with a focus on consulting, implementation and services.

The Company has offices in 8 countries – UK, Germany, USA, France, Switzerland, Austria, United Arab Emirates and Singapore with around 500 employees. The Company has more than 3,500 blue-chip customers and a range of government agencies.

Offerings include:

• Consulting in all aspects of IT-Security

• Continuous development of a holistic IT-Security Service Portfolio via our Managed Security Service Center and Call Center

• Close relationship with the key product vendors

• Holistic portfolio of IT-Security Solutions and Products

The Position

As a key member of the Americas executive team, the VP Sales will be the primary owner and driver of revenues for the Company, responsible for selling Managed and Professional Services (MAPS) solutions keying off of its core overlapping areas of service excellence:

o Data Protection

o Mobility

o Threats & Vulnerabilities

o Risk & Compliance (GRC)

o Cloud (securing the cloud)

The VP Sales will be part of the senior operating team for the Americas with principal responsibilities including:

• Exceed quarterly and annual revenue targets

• Develop & execute strategic sales and distribution plan: provide strategic and tactical thinking, as well as broad business insight. Take a leadership role in developing the sales strategy to support the growth of the business, while continuing to drive gross margins, quarterly bookings goals, and other KPIs

• Peer with the Professional Services team on client prospecting, engagement, and delivery

• Divisional revenue ownership

• Sales team-building

• Sales leadership and sales pipeline management

• Develop and managing detailed budgeting & forecasting

• Lead the management, maintenance & development of key partnerships in upstream indirect sales channels

• Foster teamwork and create a positive work environment for a geographically disparate sales force

• Lead and develop a dynamic and creative sales infrastructure that fits the needs of the business and the products the Company provides to its customers

• Drive internal discussion about strategies, ideas, new opportunities and the best methods for achieving success in a changing marketplace

• Consult with customers on their needs and provide feedback to other departments supporting sales efforts

• Forecast, track and report sales performance using internal tools and applications such as Salesforce.com

• Conduct internal pipeline meetings and reviews with the executive team

• Manage overall budget associated with sales plan

• Lead team in structuring strategic and integrated partnerships with key customers

• Personally assist in closing large deals and managing strategic accounts

• Travel as needed to ensure that sales and client needs are met and exceeded

Ideal Candidate Profile

The diagram below illustrates a comprehensive intersection of competencies critical in the VP Sales position:

Team

Reporting to the President of the Americas, the VP Sales currently manages and leads a sales team of 11.

Compensation

Compensation is competitive with the position’s requirements. In a performance-based environment, this will include base salary and incentive bonus structure based on both individual and company milestones.

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Sales Leadership Searches for Fast Growing Medical Clinical Software Provider

The Company

Our client provides education solutions software for risk management and patient safety.   It has strategic partnerships with Risk Management Foundation of the Harvard Medical Institutions; and Hospital Corporation of America. Our Clients customers deploying its e-learning content represent a who’s-who of nationally recognized hospital systems and medical malpractice insurers.

The Position

The Vice President of Sales for the eLearning product suite will report to the CEO, and be responsible for all revenue generating activities within the group.

Essential Responsibilities

  • Individual sales responsibility (player-coach role)
  • Divisional revenue ownership
  • Sales team-building
  • Sales leadership and sales pipeline management
  • Developing and managing detailed budgeting & forecasting
  • Developing sales and distribution plan
  • Developing partnerships in upstream indirect sales channels
  • Ideal Candidate Profile

    The diagram below illustrates the intersection of competencies critical in the VP Sales position:

    Staff & Team

    The company currently employs 35 full time staff and a large pool of contractors involved in product development.  As the company evolves their focus to place greater emphasis on the larger accounts, this team will evolve.  Historically the sales team has reported to the CEO, with the addition last year of a Director of Sales.  In the future, the VP of Sales will report to the CEO and the full sales team will report to the VP.  The VP Sales will have a team of both inside and outside sales, currently comprised of 6.

    Financial Backing

    The company is a privately held, profitable company with significant growth over the preceding two years.  As part of their growth strategy, the company took private equity capital in 2009.  Future growth will be funded by a combination of cash flow generated from retained earnings, prior external equity capital, and potential additional equity capital as deemed attractive by current company stakeholders and leadership.

    Compensation

    Compensation is competitive with the position’s requirements.  In a performance-based environment, this will include base salary and incentive bonus structure based on both individual, department, and corporate qualitative and quantitative MBOs.

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    BSG Team Ventures Completes Cleantech Energy Search in 90 Days for EVP Sales for Telkonet

    BSG Team Ventures is pleased to have assisted in the recent search for Telkonet’s new Executive Vice President, Sales & Marketing.

    Subscribing to the renewable energy industry mantra, “Efficiency is the first fuel,” Telkonet provides energy efficiency systems for residency intensive buildings.

    BSG Team Ventures completed the search in 90 calendar days.  Key success attributes for the executive sought included deep experience and credibility with the ESCo (energy services company) industry, power purchase agreements, and energy performance contract creation within the commercial sector, including hotels, government, and education.

    Telkonet, Inc. (www.telkonet.com) develops, manufactures, and sells energy efficiency and smart grid networking technology products and platforms in the United States and Canada. Its powerline communications technology (PLC) utilizes a building’s internal electrical wiring as a data communications network, turning power outlets into data ports while leaving the electrical functionality unaffected. The company offers Telkonet SmartEnergy products, including thermostats, sensors, controllers, and wireless networking products, as well as Networked Telkonet SmartEnergy platforms that incorporate Recovery Time technology for the monitoring of climate conditions and automatically adjust a room’s temperature accounting for the presence or absence of an occupant. It also provides smart grid networking technology products comprising Telkonet iWire System and Telkonet Series 5 PLC products, which include gateways, extenders, couplers, and ibridges to transform a site’s existing internal electrical infrastructure into an Internet protocol. In addition, the company offers high-speed wireless Internet access solutions and technology to the hospitality industry. It serves the hospitality, education, healthcare, and government/military markets.

    For the full Telkonet corporate press release, see  http://www.marketwire.com/press-release/Telkonet-Appoints-Gerrit-Reinders-New-Executive-Vice-President-for-Sales-Marketing-OTCQB-TKOI-1405366.htm .

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    5 Hiring Tips for Recruiting Executive Talent in 2011

    Planning for executive staff additions or replacements seems to be higher on CEOs’ New Year’s resolutions again in 2011. Just a year ago, in December 2009 and January 2010, CEOs broke out of their executive hiring deep-freeze and search activity showed unprecedented momentum.  CEOs had been holding their breath for all of 2009, witnessing Wall Street carnage, plummeting consumer spending, and massive macro-economic uncertainty.  Just as consumers in the 2010 Christmas season finally decided to spend more,  boards of directors and CEOs are counting on better economic conditions in 2011 and executive hiring is again back on the corporate shopping list (see recent growth-stage CEO survey, Q4 2010, http://www.bostonsearchgroup.com/blog/q4-2010-ceo-survey-of-growth-stage-companies/)

    So, what to be aware of when looking at executive talent acquisition this year?

    Here are 5 tips:

    1)     Candidate shelf-life is shorter than you think

    Just as the warning on automobiles counsels that “objects in mirror are closer than they appear,” a similar mantra exists for talented executives.  Recession is a great retention tool, and has allowed many CEOs to keep their executives with little fear of their departure.  However, today’s market for executive talent is heating up.  We’ve read the articles about companies poaching Google talent, but this is not exclusively in Silicon Valley, or with the big tech behemoths.  Talented executives may be willing to consider a move, but they are savvier than ever, will look to try to identify several opportunities to evaluate in parallel, and pick the best perceived fit in a narrow time window.  Companies who in 2008 and 2009 had the luxury of interviewing twice as many candidates as normal due to temporary supply/demand imbalances no longer have that extra time on their side to interview more, or take longer to make decisions.  Candidate shelf-life is finite.  And the market window is shorter than we might think for any given talented executive.

    2) Q1 2011 bonus payouts make candidate resignations difficult

    Candidates may have a hard time giving notice in Q1 due to pending 2010 bonus payouts.   There are often 2 options—

    a)     The finalist candidate will accept the new company’s offer, but won’t give their notice until after bonus checks have been cut (sometimes coming as late as February or early March)

    b)     Finalist candidates will ask that their new companies include in the offer a signing bonus that helps to “keep them whole” on any bonuses they are walking away from.  This can quickly get expensive for the new employer, with numbers ranging from $50,000 or $100,000, to $.5M or more, depending upon the position, the compensation package, etc.

    3) Relo has always been hard, but today’s real estate values make it much harder

    Many executives are upside down in their residential real estate.  Again, this creates a two option decision for the new employer—

    a)     Increase the boilerplate relocation package to include relief on any equity deficit the executive faces in selling in a down market.

    b)     Be more flexible on where the executive can live.  Yes, there is no question that a best practice is to have the executive live within an easy drive of corporate HQ.  However, with ubiquitous email access in trains, planes, and automobiles, there is an every growing body of evidence that “local” isn’t the only choice for executive domicile.

    4)  Equity is often no longer the great equalizer

    When the public markets allowed IPOs more readily, and there was generally more liquidity for fast growth and mature companies alike, the tradition of 10-20% base salary increases  in moving from one company to another became subordinated to “how much stock/equity can I get?”  That popular refrain has been replaced by a much more pragmatic and balanced approach to executive compensation, where cash is again king.  Except in rare circumstances, executives want to have some of their incentive on a cash basis, balanced off with an equity upside. (for example of CEO Equity Compensation Calculator, see http://www.bostonsearchgroup.com/blog/ceo-equity-compensation-calculator/)

    5) Executives know now more than ever what their peers earn

    Whether it be due to frequently published executive compensation surveys, unprecedented numbers of databases providing comparables earnings info, or newly imposed Sarbanes-Oxley disclosure rules on public company executive compensation, executives are much more sophisticated about what their worth on the open market may be.  They also share much more readily with their peer group.  Employers in 2011 should be cognizant of this when crafting a package, and care should be taken to engage the executive in what they feel their worth is, and the data/information they are using to establish that value. (for example, see http://www.bostonsearchgroup.com/blog/venturebacked-executive-compensation-study-vp-levels-west-east/)

    6)     [bonus tip] International is more important than ever in ‘11

    Yes, China and India may both represent great offshoring opportunity and new revenue markets, however talent from these markets are an equally or more important asset.  Just sending US citizens abroad as ex-pats doesn’t cut it anymore.  Hiring foreign nationals with experiences in certain international target markets is key to breakout performance.  An Indian national with several years experience selling/managing in Asia is a wonderful combination of skills and experience critical in driving companies through the next level of global growth (for more, see http://www.bostonsearchgroup.com/blog/collision-course-between-executive-leadership-succession-and-global-demographic-trends-in-coming-decade/)

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    Q4 2010 CEO Survey of Growth-stage Companies | CEOs plan for 2011

    Each quarter we survey growth stage CEOs who are running innovation driven companies.  This quarter,  we had more than 60 CEOs responding.  CEOs were running companies in broadly defined technology (software, hardware, semiconductor, telecom), Internet (e-commerce, media, social, entertainment), medical devices, biotech, and cleantech / renewable energy sectors.

    A note on methodology.  We send these surveys only to those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies).    All responses were anonymous due to the web-based survey technology employed. The majority of respondents were in the United States, with the highest concentration on the East and West coasts (New York, Boston, and San Francisco/Silicon Valley areas).

    For prior survey results from Q2 2010, titled “Impact of Economy and Renewed Growth”, go to http://www.bostonsearchgroup.com/blog/ceo-survey-results-q2-2010-%e2%80%93-impact-of-economy-renewed-growth/ .

    ECONOMIC CLIMATE

    The first set of questions was around the economic conditions in which each CEO felt s/he was operating.    One question we continue to ask and re-ask over the last six quarters or so targets the turbulence in the macro- economic climate.  It is interesting to compare CEO responses to the same question, “Do you anticipate a double dip in the near term future?”

    * In Q3 2009, more than half  (54%) of CEOs polled were expecting a double dip, and planning accordingly

    * In our Q2 2010 survey,  again 50% felt a second economic correction was likely, the biggest percentage of those CEOs believing it would be in either Q3 2010 or sometime in 2011.  The other half  of CEOs felt the specter of recession was behind them

    * Currently in Q4 CEOs were consistent with prior quarters with a bit more than 50% indicating they didn’t feel a double dip was likely, and the other half of the CEOs saying either a 50/50 probability or greater (16% feeling more likely than not)

    So less than 1 in 5 CEOs feel another economic dip is likely.  No CEOs selected the ” greater than 75%” probability.

    It’s interesting to do a meta graph of the changing CEO sentiment on this question.  Surprisingly, the graph would be sloping downward, but not as much as many would hope.  The high point was certainly back in Q3 2009, but even throughout 2010, as many CEOs were fearful of a negative correction as those who felt it was behind us.  No doubt this “lack of confidence” index doesn’t inspire the CEO with a swashbuckling, damn-the-torpedoes-full-speed-ahead attitude toward growing their companies.  Rather, it makes CEOs think in short-term windows, perhaps 3 months at a time, with little appetite to make medium or long-term bets.

    Those CEOs who felt another downturn was likey referenced several factors that might tip the scales negative–  gridlock in Congress due to midterm elections and likelihood that Democrats lose congressional majority, a belief that a bad Q4 holiday retail shopping was likely, and the persistent overhang of ongoing commercial and residential loan defaults.

    As for when another economic dip might occur if it were to occur, the vast majority of CEOs pointed to Q1, 2011, with Q4 of this year and Q2 2011 tying for second at 18% each.

    STRATEGY

    Almost 50% of CEOs polled said that they had either made a shift in strategy in 2010, or were planning to in the near future.  Granted, growth-stage companies are prone to shifting strategy until they land upon the best formula for significant and sustainable growth.  However ~50% is a big number, and clearly a chunk of those companies have been driven to rethink their strategies because of the challenging economic climate, the concern over the future, and the possibility that 2010 might represent “the new normal” where with no economic “rising tide” no help generated to float all company boats as in periods of economic expansion in the past (1997-2000, 2005-2008, etc).

    CASH FLOW

    The majority of CEO survey respondents (49%) indicated that they were still planning on burning cash over the next 2 quarters.  24% indicated they would be profitable.  CEO comments regarding this question indicated an overwhelming drive toward cash flow break even.  That was the big push and focus for their companies in 2010, and if they hadn’t achieved it yet, they were gunning to by end of the first quarter of 2011.  CEOs also commented that they were trying to run their companies at break even, with any extra EBIT being reinvested back into the company for additional growth.

    COST REDUCTION PLANS

    When asked what were the top 3 areas CEOs were targeting for cost reduction, the following table summarizes their responses, representing a combination of spend reduction and staff reduction in non-core areas.  There was a preference by CEOs to favor non-staff cuts over cutting headcount if at all possible, but many acknowledged that in order to make meaningful cuts, staff had  to be considered in the equation.

    CEO responses when asked about increasesin spend were logical.  The top three in order were sales, marketing, and R&D.  Many of the comments about this question noted the fact that outside of directly growing revenues, additional spend was hard to build in when many CEOs are driving toward a minimum cash-neutral mandate and economic uncertainties are driving CEOs to think conservatively rather than expansively.

    [Click on "more" below for remaining 8 slides and narrative from Q4 2010 CEO survey]

    More…

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    How long do executive searches take? How many get completed? How many candidates interviewed?

    Survey of 50 of the Fortune 500 companies reveals how long executive searches take, the average number of candidates interviewed,  how many of them actually get completed, and what percentage of those candidates are female or minority.

    As executive search consultants, we often get asked a series of questions by our client companies surrounding the executive search process.  Many of these questions are driven at gathering market intelligence around our executive recruiting.   The aim?  To create some third-party benchmarks to help companies understand whether a search has gone about average, better than average, or (gulp) “below the mean.”  Keep in mind, these could be internally run searches done in the “DIY” fashion.  Or searches executed by in-house recruiting departments or human resources staff.

    Historically, there has been precious little data generated by third-party sources with enough statistical heft to garner much credibility.

    One of the sources that at least aims to collect good data is created by David Lord, who heads the Executive Search Information Services organization.  David is a veteran observer and analyst of the executive recruiting industry, and has run a roundtable of senior talent executives from Fortune 500 companies for the last 20 years or so.  For further information, see www.davidlord.com.  Some of the data that ESIS collects is via an annual survey of those senior human resources executives who participate in these roundtables.

    For our clients, we often reference ESIS data when made available.  At our request, below is a data table we created from some of the information ESIS kindly provided that shows some longitudinal data over the last 4  years, 2006, 2008, and 2009.

    Trends worthy of note?

    Search completion times have come down by almost a month from near 5 months down to 3.5 months.  Good news for all, the company, the candidates, and the search firm.   It will be interesting to see if this flattens out, or jumps back up for 2010 due to tightening talent pool on the supply side as the economy began to pick back up this year.

    Number of candidates interviewed per hire dropped from 6.5 to ~5.  This could be an indication of a company’s increasing confidence in what they’re looking for, or an indication of sense of urgency around key hiring to help companies as they struggled through a very tough 2009.

    Female and minority hiring at the executive level has improved, but not as much as many would have thought. Women executives were hired 29% of the time in 2009 versus 23% in 2006.  Compared to the workforce percentages of women to men, this is still inversely proportioned.  Minorities have seen a nominal increase of 1% more hired over  the last 5 years, which–when considering rounding errors– is effectively no increase at all.

    Search completion rates have remained flat, with 4 out 5 searches engaged getting completed. Over the last 5 years,  search completion rates have hovered around 80%.  This is reported by corporations only, so subject to different numbers search firms might proffer.

    Retained executive search statistics, 2006-2009

    For deeper data, please contact ESIS.

    Additional footnotes worthy of note:

    1) For some reason, executive search firms specializing in the financial services sectors and related areas often calculate their “days to complete” numbers counting only business days, excluding weekends and bank holidays.  This can often make comparing normative data a bit more troublesome

    2) Days to completion numbers are calculated using the date of accepted offer of employment, not candidate start date/first day of work.  This is done because resignation periods vary widely and would undermine data integrity.

    team
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    CEO Survey, Fall 2010

    TOPIC: How & What Growth-stage CEOs Are Planning for 2011

    Below is the hyperlink to take the Q4 CEO peers speed-survey, exclusively for growth-stage CEOs.  This survey focuses on “How & What Growth-stage CEOs are Planning for 2011″

    This shouldn’t take more than 5 minutes of a busy CEO’s time–

    We here at BSG Team Ventures periodically take the temperature of the markets we serve. The survey is no more than 15 questions, most simple multiple-choice.

    These surveys are created and compiled by BSG Team Ventures as a courtesy to our executive ecosystem with the belief that knowledge is power.  Aggregated peer-provided knowledge is “actionable power.”

    For the survey results from Q2 2010, titled “Impact of Economy & Renewed Growth Planning”, go to http://www.bostonsearchgroup.com/blog/ceo-survey-results-q2-2010-%E2%80%93-impact-of-economy-renewed-growth/

    We make an effort to survey only those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). [Note, if you don't fit the aforementioned description, please refrain from responding.]

    Feel free to forward to the qualified CEOs in your sphere of influence. The more data generated, the more accurate the trend lines.

    All responses are anonymous due to the web-based survey technology employed.

    We will forward the survey results within the next two weeks to the email address on file. Please let us know if there is another email address you wish us to send the results to as well.

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    CEOs dish on How to Combat “Happy Ears” in Sales Pipeline Management

    OK, admit it.  As CEO of a growth stage technology company, when it comes to your sales team, they all have “happy ears.”  Joyce Durst, former CEO of Infraworks, an enterprise security software company in Austin, TX, used the phrase in describing the eternal sales optimism she and her VP Sales have to counterbalance every week during their Monday morning sales pipeline meetings with their sales team.  You know, this is the optimism that insists that the prospect call that just took place the week before is not only a “sure thing,” but is also a particularly big sized deal, and will surely close before the end of the quarter, with room to spare.   Unfortunately, “happy ears” are the occupational hazard of a good sales person.  These are the ones that as often as not has to take a partially completed beta product, dress it up, sell it into a market where no other solution like it has ever existed, persuade someone that the solution is a “must have,” and then also persuade the other buying influencers within the customer that doing business with an underfunded start-up with perhaps less than 12 months of cash in the bank is a capital idea.

    Working with growth-stage CEOs as executive recruiters, we’re often helping to hire sales VPs that will be able to build and manage a company’s sales pipeline.  Certainly hiring the right VP Sales is an important first step in sales pipeline management.  However, once you’ve gotten the right person in the seat, we asked a dozen or so early-stage technology CEOs what other tools, processes, and mistakes they’ve used or made that have led to their “best practices” for effective sales pipeline management.

    TOOLS (technology)

    Regardless of which tools were the favorites of each CEO, there was agreement that data hygiene was critical

    Chuck Dornbush, CEO of Athenium Software, put it succinctly, saying, “Make sure the data is well organized, and frequently reviewed.”  Another location-based services CEO added, “no matter what CRM tool you use, as CEO you need to make sure every sales person is using it, and using it the same way.” Vinit Nijhawan, former CEO of Taral Networks, emphasized that sales people hate to use a system at all; you’re lucky to get them to enter the data once, and you’ll never get them to double enter for forecasting purposes.  So you need to use the same system for lead tracking and reporting/forecasting.”

    PROCESS BEST PRACTICES

    Meetings 1x-week—sales people defend their new pipeline additions

    One of the above CEOs stated simply– “Know the basics, and do the basics.”  In more detail, he and several others sketched the basics out.   Have a weekly sales meeting.  For sales people to have a prospect “make the pipeline report,” they need to defend their putting the prospect into the pipeline, akin to a team interrogation.

    7 categories involved in qualifying additions to the pipeline

    Many of the CEOs talked about the minimum information requirements for a prospect to be added to the pipeline report.  Although some CEOs had four steps, and others had up to 40, the core must-haves most often included the following 7:

    1. Budget—– Is there an earmarked budget set-aside for this category of expenditure?

    2. Need –Is there a compelling need driving the prospect to make this purchase?

    3. Time urgency—–Is there something that creates a sense of time-bound decisioning, or is this an important-but-non-urgent agenda item?

    4. Internal champion—–Is there an individual inside the prospect who’s willing to go the extra mile and spend the political capital required to “fight the good fight” internally within their own organization?

    5. Decision making power–—Who holds the real “power” to make the decision?  Can a clear decision-making organization path be mapped?

    6. Clear ROI—–How is the prospective customer going to measure “success” for this product or solution?

    7. Trust– Both in the relationship between the individual sales person and the individual representing the prospective customer company, and the prospect’s relationship with you as a company with whom to do business… do they trust your products, your company, and your sales people?

    Tim Butler, former CEO at SiteScape and now CEO of growing RFID company Tego, said that as a reminder for his sales force, they have adopted a pneumonic, BUTANE–—budget, urgency, timing, authority, need & event.

    Stages of the sales pipeline

    Joyce Durst has her sales team and VP Sales apply a ranking/scoring system for each sales prospect.  If the customer is 50 points or less, they remain on the prospects list only, and don’t move onto pipeline report; if more than that, 50-70, they’re pipelined for NEXT quarter; if 70-90, they’re qualified as “committed;” If 90-100, the prospect is considered “ready to close.”

    Athenium CEO Chuck Dornbush finds that it’s critical to “set entry/exit rules litmus tests for each stage.”  One CEO established the rule that “you couldn’t allow a prospect into the pipeline until at least their forth stage–qualified, demonstrated, formal price quote, and funds allocated. “

    Other critical ingredients

    Categorize every lead as “hot, warm, cold”

    In addition to assigning probabilities as a percentage, try using some sort of ranking system.  Tim Butler uses another version– possible, likely, & probable

    Add non-sales peers to pipeline meetings…

    One of the CEOs stated  that it was very valuable to bring non-sales functions into sales pipeline meetings.  He added that personal accountability generated by sales people committing to forecasts in front of non-sales peers in a weekly/monthly meeting environment can do a lot to reduce the “fudge factor.”

    Get the customer prospect to serve as proxy VP Sales for you…

    Former Pantero CEO Pano Anthos who now is CEO of Hangout added a trick of the pipeline trade he’s found very useful– —“The customer needs to sign OFF on moving from one step to another.  Have the CUSTOMER via email play a proxy VP Sales role for you.”  Do this by having your sales person ask for a confirmation by email that the prospect has indeed passed from one stage of the sales pipeline to the next, whether confirming the ROI value proposition, or the budget allocation, or any of the other stages listed earlier.

    If no date for next prospect action step, off it goes…

    “Every prospect has to have an action item by date, or qualify it as ‘dead,’” another CEO offered up.

    Kill the bad deals early…

    Many CEOs listed this as critical to effective sales pipeline management.  Slow prospects should be turned over to the inside sales team.  Prospects that are particularly non-committal should get put in direct mail “tickler” mode.   “Stop spending the time on them, trying to actively manage them to close,” Marc Tremblay states, and adds that, “if feasible, you want to focus your sales team more on hunting than farming if you can.  You can get tied into prospects who may take two years to close… “  They may close, but “I always get my man” isn’t the most efficient proverb for sales.

    Expect the unexpected…

    When ending the quarter and/or the year there will be sales people who will say, “we’ll absolutely close these deals….” Even when all indications say they’re done, assume that some percentage will fall out, no matter HOW good they look.  Jim Lawton,  a veteran VP Marketing at a number of venture-backed growth-stage software companies who has seen a lot of sales pipeline management approaches states the reasons can include someone at the prospect company “getting sick, leaving the position, dog ate my homework… expect just about anything.”

    “3x coverage” to mitigate the unexpected …

    Continuing, Jim Lawton added, “If I’m trying to hit 3 million in quarterly sales, I want to have 9 million in the pipe.  Living on luck is tough, and you might hit a quarter or two with a thin pipe where you muscle the prospects and get a blue bird or two, but you’ll never make this repeatable.”

    Consider having TWO sales pipelines

    No, this isn’t two separate sets of books, nor is this a tool meant to be used deceitfully.  However, one of the CEOs offered up the fact that—–early on at least–there was a pipeline they kept internal, and one the executive team shared with investors that better illustrated the potential traction of their products.  The internal pipeline was more conservative.  As they grew the business, there was a natural convergence of the two into one.  Controversial, yes.  However, in order to manage burn-rates, and make sure you live to fight another day, it’s a survival tactic that no doubt many CEOs use, whether they admit to it or not.

    Other Considerations

    When to begin trying to do sales forecasting

    Once you’re at what’s often referred to by venture capitalists as the “scaling stage,” most CEOs list their pipeline out and begin assigning probabilities.  However, Vinit Nijhawan cautioned that, “You rarely ever hit the forecast you set up.  After you get your 3 or 4 customers, you feel there is a market for your product, but actually what you’ve done is gotten the really early adopters.  And CEOs then start to scale too early, hiring resources, and making decisions that are difficult to undo.  Instead, you need to be in that strategic marketing role in sales longer than most start-ups might think.  Don’t even OFFER sales pipeline reports.  It’s not an issue with the start-up’s products, it’s the market.  Quarter-over-quarter projections are almost impossible.”  So where is the line, and where do you know that you have a product that the market is ready for?  “THAT is the art in sales pipeline management,” says Anthos.  “It’s definitely not a science.”

    Strategic consideration in building the sales pipeline–—proper reference customer sequencing

    Another wrinkle in building an early-stage sales pipeline CEOs mentioned was the proper ordering of reference customers.  There is a step before managing the pipeline process or implementing some tool to help in pipeline forecasting.  This is determining what is the optimal sequencing of customers you go to in order to create proof points and references to scale customer acquisition most efficiently and effectively. Do you sell big customers first, then the small customers, or smaller customers and build up to bigger ones?  CEOs concurred, —“It depends on capital resources available.”

    MISTAKES & LEARNINGS

    3 reasons deals don’t happen… [click "more" link for rest of article] More…
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