Search Firm Selection Archives

When It’s Time to Replace a CEO

During a moment in recruiting history when most executive search professionals are suffering, our practice in for-profit education has been thriving. Part of the reason is what I call ” board fatigue”–PE or VC partners and other board members who’ve grown impatient with the CEO of a portfolio company. In some cases their dissatisfaction is known to the CEO; in others, for various reasons (such as accreditation issues in the postsecondary education market), the board has chosen to conceal its desire for change, even from the sitting CEO.

The call to me typically begins, “We’re thinking of replacing a CEO. But we need this to be done in confidence. Can you do it and still be effective?” The answer, of course, is, “Yes, but first give me one good reason why you don’t sit down with your CEO and discuss why the change is needed.”

Answers vary, but the most common is, “We don’t want to lose momentum or cause uncertainly within the company,” i.e., “We’re afraid that news the CEO is being replaced might affect morale and revenues.”

This may be true, of course, but before embarking on a sub rosa search for a replacement, consider these issues–

•    Are you sure the situation cannot be resolved without the CEO being deposed? Have you tried everything to turn him/her around? Is the problem focused on a few concerns–work ethic, slow decision making, failure to address a single overriding market challenge, etc.–or is it overall leadership?

•    Are there intermediate steps you might take to at least put the CEO on notice? “Probation”? Come to Jesus? Sabbatical? Revisiting compensation?

•    Could the problem be resolved by bringing in the right support, e.g., a COO or new CFO?

•   Could the CEO be moved into a different to position, allowing you to bring someone in above him/her? Would your CEO accept demotion to President and COO, for example? Could the CEO be moved into a Chairman role?

•    How can you present the decision to replace in such a way that the CEO sees the wisdom in your decision? Obviously the CEO has a financial stake in the company’s success. Might it be that he or she will be relieved? See this as a win-win?

•    How valuable could the CEO be in the process to find the replacement? Do you want him/her to play an active role, and would s/he be effective in this role, if properly motivated?

•    What are the risks if word gets back that a search is being conducted for a new CEO?

•    What are the risks that a disgruntled CEO could sabotage the search process? Agree to participate in interviewing, then blow candidates out of the water?

•    What effect will conducting the search in confidence have on the overall quantity and quality of candidates? On your ability to secure the best among these?

•    How and when do you expect to inform the CEO what’s going on?

•    What role will the departed CEO have in the transition process once the new CEO is named?

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Executive Recruiters Boston Search Group and IdealWave Solutions Merge to Form BSG Team Ventures

Bringing Unparalleled Mobility and Social Media Expertise IdealWave Deepens Firm’s Commitment to Building Trusted Advisor Relationships with Clients

Boston – August 1, 2009 - BSG Team Ventures, formerly Boston Search Group, an international retained executive firm serving emerging and high-growth companies, today announced a merger with IdealWave Solutions, a nationally recognized executive recruitment leader in the mobility and convergence sector.  IdealWave couples deep expertise in the enterprise mobility and social media industries with a unique team-based approach that yields quick results with highly personalized service. The combined company, BSG Team Ventures, will be headquartered in Boston, with offices in Silicon Valley, New York and London.

As many other retained search firms are shrinking or closing down, BSG Team Ventures is taking advantage of the opportunity to grow stronger.  The merged entity will be uniquely positioned to identify and recruit top Board Director, C-level and VP-level talent for both emerging and established companies across its now seven practice specialties – mobility and convergence, cleantech, technology and media, medical devices, biotech, education, and not-for-profit.  While the executive search industry has been slow to harness advanced technology to optimize domain expertise, market involvement, and the candidate development process, BSG Team Ventures has turned to innovative social networking technologies to cultivate a large and growing community of mobile industry executives working for some of the most high-profile companies in the world.

“Combining forces to create BSG Team Ventures marks the beginning of an exciting adventure and a natural evolution for our business. With BSG we have found a partner whose commitment to innovation, client service, and results mirrors our own,” said Mathew Corbett, founder and managing director, IdealWave Solutions.  “I look forward to drawing on our combined 17 years experience in retained search and mobile industry expertise to grow the firm, provide increased capabilities to our clients, and expand into new markets.”

INmobile.org: Engaging the Global Mobile Community

The brainchild of Corbett, a longtime social media evangelist, INmobile.org is one of the largest industry-specific social networks on the Web, comprising more than 2,500 mobile industry executives who gather in one place to learn, share ideas, and network with peers.  Combining online networking with offline executive receptions at top mobile industry conferences, INmobile.org is both a key facilitator in helping BSG Team Ventures’ clients stay abreast of market and technology trends, and an invaluable tool in keeping BSG Team Ventures fully engaged with top leaders and decision makers globally.

The mobile industry is especially well poised for continued growth.  “Even more exciting than the internet phenomenon is this mobile phone phenomenon,” according to Dr. Eric Schmidt, CEO of Google, in a speech given to the Economic Club in 2008.

“Our merger with IdealWave comes at a pivotal time for our firm as we look to expand to new markets and set the highest bar for innovation in the executive search process,” said Clark Waterfall, founder and managing director, BSG Team Ventures.  “With decades of combined executive search and strategic organizational development experience, we’re confident that together with IdealWave we can continue to achieve the highest levels of client satisfaction in the industry.  We couldn’t be more thrilled with the addition of Matthew Corbett and Mark Newhall as partners to the firm.”

About BSG Team Ventures

BSG Team Ventures is an international leader in retained executive search and human capital consulting for emerging and high-growth companies. Its mission is to build deep, trusted-advisor relationships with its clients, and to do so with a keen appreciation for the unique requirements of entrepreneurial ventures.  Via its presence in Boston, New York, Silicon Valley and London, BSG Team Ventures has completed hundreds of leadership searches on behalf of its clients in its practice specialties that include technology, media, cleantech, biotech, medical devices, education and non-profit.

About IdealWave

IdealWave is the leading executive search partner for companies involved in or effected by mobility and convergence. Established in 2001 and headquartered in MA, IdealWave has worked with many of the most exciting companies innovating within mobility and convergence. The company was launched by Matthew Corbett and Mark Newhall.  For more information please visit www.idealwave.com.

Contacts:

BSG Team Ventures

Clark Waterfall: Managing Director cwaterfall@bsgtv.com

Matthew Corbett: Managing Director mcorbett@bsgtv.com

Address: 224 Clarendon Street, 4^th floor, Boston, MA 02116

www.bsgtv.com

Below is the final tally on top metrics for measuring executive success in the C-level and VP level team CEOs bring on board to help them executive on their businesses.  Thanks to the CEO input of more than 60 poll responses to this latest venture-backed company CEO survey.

The question we framed was phrased as follows:

“In evaluating the success of an executive hire after 12 months, what would be the top 3 criteria that you would use?”

The first choice from the poll results is somewhat self-evident– that the executive has exceeded performance expectations (goals, milestones, objectives, etc.) for the specific role from the CEO’s perspective.

However, the second most popular metric was “established internal and external reputation as functional expert.”   Essentially, this means that the executive has built his or her own political/social capital with internal peers and external influencers, customers, vendors, or other external relationships key to the success of the company.

The third most important metric was “culture fit.”   This was selected over the other 4 remaining metrics offered by a more than 2 -to-1 margin.

The question that pops up is how a CEO might best measure the  #2 and #3 metrics.  For both of these metrics perhaps a 360-degree review at the end of 12 months would be beneficial.  There are tools offered by the likes of the Hay Group and others that do an online version of this contextual employee review that can be quite useful to determine an objective read (see http://www.haygroup.com/tl/Questionnaires_Workbooks/Emotional_Competency_Inventory.aspx ).

Perhaps it would also be interesting if an executive search firm who brought a candidate to an organization also made this part of their fee structure.  And facilitated the process/offered the tools to make it happen.  Food for thought.  The goal of the executive recruiter would be to serve as that often mythical “trusted adviser” of executive talent, facilitating as much objectivity around executive team-building and talent assessment as possible.

Worthy of note is the fact that “integrity” ranked near the bottom of the list of success criteria.  No doubt CEOs assume perhaps that this is a given in any candidate.

How are retained executive search firms assessed?  And how should they be measured?

This is a funny question. And one that can be asked at two inflection points in the search process–

• BEFORE picking a search firm

•    And AFTER a search has been executed/completed

Focusing on the “before” part for now, for most companies the 3 most popular decision factors used to help pick a winner in the “shoot-out” or “bake-off” process today are typically:

• “Relevant Rolodex” or domain expertise. Has a search firm done a similar search in a similar sector recently?

•    Familiarity. Has a search firm worked with a client before?  The implicit assumption is “devil you know is better than the one you don’t.”
•    Price.  Depending upon economic conditions, search firms are as often as not considered “about the same,” and only price is the perceived differentiator.

However, I think there should be a shift in search firm selection criteria.

Let me digress for a moment and talk about the traditional value proposition of retained executive search.  Historically, there have been 4 pieces of value that the search firm delivers on:

1)    Finding or “hunting” the candidate.  In the industry, we refer to it as “candidate identification.”
2)    Selling the client opportunity to the “hunted” candidate
3)    Assessing the candidate for hard skills and soft skills “fit” for the search
4)    Closing the final candidate once s/he has been selected by the client company-the end game, including compensation negotiation etc.

Now, back to how search firms are selected.  The above criteria emphasize and value things like candidate identification.   At one point, this was a very important selection criterion to make sure the right search firm was picked for a search.  At one point in the history of executive search, headhunters would spend decades amassing a proprietary Rolodex, mapping the industry and what talent was harbored where.  This was hard-to-come-by information, usually only amassed via “gumshoe” work, calling and talking to the industry on a constant basis.  However, in the last 10 years, and 5 in particular, there has been a huge shift at the executive levels.  There has evolved a set of technology tools that has allowed unprecedented transparency into who is where at any given point, tech tools like ZoomInfo and LinkedIn to name just a few.  So, with access to these tools and the modicum level of investigative interest and time, finding as a value proposition for executive search selection has become commoditized.  The “black book” that recruiters worked hard to build and protect has effectively been published on the Internet for each and every executive level in virtually every industry.

So if “finding” is no longer the lynchpin for search firm selection, what does that leave? There are still the other three values a search firm brings-ability to sell the opportunity, assess the candidate, and ultimately procure the candidate of choice the company selects via the final interview processes and endgame negotiating.

It would be really interesting to see a search firm selection process be shifted to an evaluation of two of these three areas, plus an addition of three new metrics:

• #1: How does a search firm “sell” the search to prospective candidates? What is the search firm’s “pitch,” how well does the executive recruiter present the opportunity, its nuances, and a compelling story. Good talent is usually not looking to move. And good talent is usually fairly happy where they are, and valued where they are. So, a good headhunter needs to present an even more compelling reason to persuade an executive to look at a new opportunity. A prospective client could ask the search firm for the marketing documents the executive recruiter has written and used from past searches and evaluate them as to their compelling nature. A client could even ask for samples of emails or voicemail “pitches” that have been used in the past, and what tools a search firm uses that uniquely differentiate a company’s executive need.
• #2: How does a search firm “assess” candidates? We feel that assessment is the new “black book” value proposition of executive search. Prospective client companies could ask search firms for how they assess candidates? What tools do they use, what key success factors does the search firm interview for in all executives, and what unique success characteristics would they interview for specific to a given position and company profile. What assessment information is passed along to the company? What does a candidate interview summary “write up” look like? And how much assessment is really delivered in the write-up, versus a simple repackaging of resume and background information? Also, how are references done, and samples of references completed to get a sense for what the search firm is looking for in its referencing process. A really interesting article written about how search firms work, and in particular, how search firms assess candidates, can be found in the PhD research of Monica Hamori, PhD candidate at Wharton. It’s a very interesting read — http://www.allbusiness.com/specialty-businesses/332669-1.html. Unfortunately, Ms. Hamori’s conclusion is that candidate assessment is done very differently from search firm to search firm. Most notably, she identified that candidate assessment is done differently from partner to partner inside large search firms, with no assessment standards or processes.

As for the three new search firm selection criteria, I’d suggest clients add these three to the two above:
•    #3: Pre-search “discovery” process.  What does the search firm do to uncover all there is to know about the company, the culture, the position, the internal and exogenous factors, and most importantly, the chemistry success equation with the hiring authority within the company to whom the position with report.

• #4: Post-search onboarding and “stick rate.” What does the search firm do to ensure success of the candidate in their new role? And what is a search firm’s “stick rate,” or success rate in placing executives in new companies who then stayed for some period of time rather than bouncing off, suffering organ rejection from the host organism company who hired them? This could even include a redistribution of the executive search fee structure. Wouldn’t it be far better alignment between client company and search firm if both were incented to nurture a new executive’s success in the role? Perhaps a deferment of part of the fee for service if onboarding coaching were employed, with a delayed “final payment” at the end of a year of service, on actual bonus paid “above targeted compensation,” rewarding the search firm for above expected performance achieved by that executive.
• #5: References. Client companies should do a better job referencing the search firm. So much can be learned from how a search firm performs references. Who they check references with, how references are performed, what questions are asked, are references aggregated or attributed to specific reference givers, or? How many references are performed? Are any references performed with those who were not provided by the candidate? Are background and credentials checks performed on the finalist candidate(s)?
  Somehow, if these 5 selection criteria were used to evaluate potential search firms, my hunch is, as often as not, a different firm would be selected. And a better ultimate executive candidate for the retained search in question.