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Fancy the top job? Get ready to be grilled


Globe and Mail, Report on Business "Corner Office"
September 11, 2006
by Wallace Immen

Edmund Martin knew that his bid to become a chief executive officer would be a long process -- but it dragged on twice as long as even he expected.

In fact, almost eight months passed from when Mr. Martin submitted his resume for the top position at Newfoundland and Labrador Hydro-Electric Corp. to when he was offered the job of president and CEO last August.

In that time, he was subjected to multiple grueling rounds of interviews with the utility's search committee. The interviewers probed every aspect of his qualifications, grilled him about how he deals with challenges, and wanted a good sense of how he deals with and nurtures staff. And he knows he wasn't the only candidate going through such rigorous examination.

"It was very intense, and very, very thorough," Mr. Martin recalls. "Obviously, they had a long list of qualifications and a lot of constituents to please."

Welcome to the new reality for finding the right fit for the top spot in the corner office. An ever-growing shopping list of requirements is causing companies to cast a wider net and probe more deeply than ever before when it comes to searching out CEOs, executive recruiters say. Here are some of the trends for finding that fit:

The shopping list is growing

Once the equivalent of rubber stamps for succession plans, corporate boards of directors are now facing pressure from shareholders, regulators and clients to do the most rigorous search possible. They are obligated to make sure that even if there is a logical, qualified successor, no other potential candidates exist who could do the job better, explains Jeff Rosin, Toronto-based managing director for Canada for executive search firm Korn/Ferry International.

This is requiring them to write very detailed blueprints of what they want in a CEO to ensure they pick someone who not only has the experience and leadership skills but also a management style that won't clash with the existing organization, Mr. Rosin says.

Most search committees are looking for someone who has run a business beforehand, ideally as a president or head of a large unit and has made a reputation, he says. And they expect to hear the candidate's specific goals for immediate action, as well as goals for the next three and five years.

No lifers need apply

It used to be that companies prized candidates who had a decade or more of dedicated service with a single employer. Now, they want someone who shows range, says John Tanton, Vancouver-based managing partner of executive recruiter Ray & Berndtson. In fact, working with the same organization for 20 years or more can be a disadvantage for today's CEO candidate, because the board may think the person has become too set in his or her ways. Instead, a plus to highlight is a track record across several firms that have seen change, and experiences in more than one industry, Mr. Tanton says.

Looking for diversity

Despite Canada's growing diversity, the majority of CEOs in this country remain Caucasian, middle-aged males. And companies are striving to break the stereotype.

"More organizations have recognized there is an advantage to having people sitting around the table who don't all think the same way," says Catherine van Alstine, a partner with Ray & Berndtson in Vancouver. "They say, 'We want the best person, but we want to make sure that we approach the great women out there and entice them into looking at our organization.' And as their interests become global, they want someone who reflects the growing diversity of the Canadian population."

As well, it no longer applies that you have to be Canadian to run a Canadian firm, Ms. van Alstine adds. She estimates 80 per cent of senior level searches are looking for candidates beyond Canada, up from about 10 per cent a decade ago.

Exploding ageism

Search committees are also considering CEO candidates who are younger than in the past. Twenty-five years ago, just 5 per cent of CEOs were under the age of 50. By 2000, that proportion had increased to 15 per cent. Today, it's becoming common for boards to specify candidates in their 40s, Mr. Tanton says.

"The increasing role of technology is behind the fact that boards are asking for younger candidates who are tech savvy," he explains. "They want people who understand and can interact with the ever-changing technology that they are facing."

But along with this youth movement, boards are also more open to considering candidates who are near or even past the traditional retirement age of 65, he adds. They, however, will not generally be for long-term positions, and the requirements are generally for deep experience in an industry to oversee a specific project or a restructuring of the company.

Search committees are spending much more time probing personalities, Mr. Tanton says. In place of traditional management qualities, such as toughness or loyalty, search committees are placing heavier emphasis on "soft skills," like self-awareness, empathy, a sense of purpose, teambuilding and communications skills, he explains.

Until a few years ago, when boards did reference checks, they were primarily interested in how a person managed "up and out" -- in other words, how their performance was perceived by the board of directors, media and the business community, Ms. van Alstine says.

These days, they're looking for how people lead "from the bottom up," she says -- getting the opinions of people who have worked under them about their mentoring skills and whether they take an interest in all levels of the organization. And search committees will probe candidates more strongly about how they have behaved in unfamiliar situations, to see how well they think on their feet.

"That's because change happens fast in the corporate world, and leaders are expected to make quick decisions based on a limited information and be consistently right," Mr. Tanton says. "They have to be right consistently, or they'll lose their jobs."

Detail takes time

All of these extra interviews, background checking and other attention to details means the search drags on longer than it used to.

"The process has gotten much longer, I'd estimate at the very senior level it's increased 25 to 30 per cent over the last few years," because of the extra detail involved in the search, Ms. van Alstine says.

That means a process that may have taken three or four months now can take from six months to a year to get the right person at the highest level. Even then, the "landing process" -- negotiating compensation and getting the person clear of commitments at a previous employer -- can take up to another four months, she adds.

Perform or else

The importance of being right from the start is another reality candidates for CEO have to face. Today, there is no honeymoon, because shareholders became sensitized in the boom years of the late 1990s to expect immediate performance, Mr. Tanton says.

A study this year of the world's 2,500 largest publicly traded companies by Booz Allen Hamilton concluded the only measure of a CEO that matters to shareholders is results -- and the quicker, the better. It found 15.3 per cent of these firms replaced their CEOs in 2005, compared with 9 per cent in 1997.

The amount of slack allowed a new CEO depends on the organization, Mr. Rosin notes. "If it is a troubled organization with financial concerns, they will be looking for someone who can make a significant change immediately," in months rather than years, he says. If the organization is stable and looking for growth, there may be more of a grace period, but you'll need to be able to show significant progress toward goals within the first year.

That may be one reason CEO turnover is at record levels, averaging six departures each business day through this June, according to John Challenger, CEO of Chicago-based outplacement firm Challenger Gray & Christmas Inc. In the United States, there were 728 CEO changes through the end of June -- 6.9 per cent higher than the same months in 2005 and the highest since Challenger Gray began tracking turnover in 1999.

More power to you

On the other hand, the forces of supply and demand are putting CEO candidates in a good position to negotiate for the kind of authority they need to succeed, Ms. van Alstine says.

The quest for talent has turned more global as the number of qualified Canadians dwindles because the population is aging and veteran leaders are retiring, she says.

"Ten years ago, a recruiter would be able to present a list of eight to 10 good candidates to a CEO search committee for consideration. Now, the search has to be more wide-ranging to find three to five who meet the specifications."

The good news it that winning candidates can ask for more compensation and get it. A 2005 Wall Street Journal survey revealed that the average compensation for CEOs of the 350 largest U.S. public companies increased more than 7 per cent over the previous year, and the Canadian marketplace appears to be reflecting this trend, Ms. van Alstine notes.

"They'll be able to demand what they want, and organizations will have to do what it takes not just to get good CEOs, but to keep them happy."

© Copyright 2006 Globe and Mail



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