Archives for July 2019

The international survey we recently released, “Where’s your business heading?,”  identified the three top strategy challenges for business leaders today.  The first two are heavily technology enabled – the accelerating pace of business and the challenge of vanishing boundaries.  The third is not native to the business environment but is rapidly becoming its most important issue.

Corporate Social Responsibility, or CSR, is a recent phenomenon, as in an extraordinary occurrence. It is only 50 or so years old and is already pronounced dead by contrarian thinkers, a sure sign that it is hugely influential. Known also in some circles as Responsible Business Conduct, it focuses on how business can pursue wealth creation in harmony with the environment and society.

It is no coincidence that CSR has become a major factor in recruitment as we transit younger, more educated and more self-aware generations of workers.  Today’s candidates are more socially selective throughout their job hunt.

They place heavy emphasis on an organization’s reputation and commitment to the community and want to ensure their future employer engages in CSR practices that align with their own beliefs.

CSR, in effect, is the Why of business.  If you are not familiar with the Why movement, Google Simon Sinek’s “Start with Why”, or a companion book “Find your Why”.  Here’s a quick introduction.

Sinek’s uses a simple model he calls the Golden Circle, shown above.

It describes how every organization operates on three levels.  Everyone knows WHAT they do.  Many of them know HOW they do it.  Very few know WHY they do it.  Sinek does not mean “making money” which he considers a result. He is looking for a cause, a belief, the reason why you get up in the morning.

Sinek believes that when a customer’s personal beliefs align with your values, he/she is not only more likely to do business with you but become a regular.  This is why he feels that, while everyone else is marketing from the outside of the circle in, exceptional people such as a Steve Jobs or a Martin Luther King worked from the inside circle out.

The challenge of the traditional elevator pitch is to explain, within 10 floors, what your company does, how it does it and how good it is. In the elevator pitch of today, the components become what, how and why you feel a purpose, a belief that what you do is worthwhile.

The person speaking wants you to know that what he or she does is a benefit to society, is respectful of the planet and sustainable. In other words, the true goal of Corporate Social Responsibility.

CSR, and finding the Why in what you do, are important new influences. It is not long ago that CEOs proclaimed their mission was to earn money for the shareholders; Milton Friedman believed that a business focused on CSR “revealed a suicidal impulse”.

But, without changing the profit-based model, over 13,500 companies have signed the UN Global Compact, a promise to uphold social responsibility in human rights, labour standards and environmental protection.

That’s a worthwhile “Why”.

Read what leaders say about Corporate Social Responsibility in our survey “Where’s Your Business Heading?”

Or you can go here to watch Simon Sinek give a TED talk on Finding the Why.

Leaders challenged by disappearing boundaries

We released a global report last month with the title “Where’s Your Business Heading?”  Our respondents were business leaders in 20 countries but they sounded like old-time cattle ranchers — they want to be where there are no fences.

George Bradt, writing in Forbes about the report, came up with “boundarylessness” to describe this trend in business.  It’s not in Webster’s or the OED, but since there is no noun to describe this state, so be it.

When we talk of “cross-border”, or “global”, we are thinking of physical boundaries defining countries and markets.  Here, the consolidating-world trend is well advanced.  The current international trade disputes have exposed the global interdependence of business, especially with incredibly complex fields such as supply chains for giant industries.

So, where business is heading in many instances, the report tells us, is to move the decision-making closer to the customer.

And this is not only a physical adjustment.  Fences are falling inside the organization as well.  Traditional hierarchies are being re-drawn and management layers reduced.  Heinz Wester, the business guru with Cornerstone Stockholm who managed the survey and structured the report, cites two prime examples.

“Workers are being divided into smaller, flexible units that can be moved where needed,” says Wester.  “And that enables some streamlining. A middle manager who might have had 500 reports and a responsibility of $500M a couple of years ago might still be responsible for the P&L but have only a handful of direct reports.”

This contributes to the second trend – a faster flow of information to the decision makers.   Market knowledge no longer goes through a series of management layers: it flows uninterrupted – and unfiltered – to the C-level and even to the Board.

INFORMATION FLOW

The downside – and there always is one – is risk.  Risks rise with speed and more open strategies. Streamlining management can be fraught.  Are workers better trained today than 30 years ago?  Maybe.  Are they more self-motivated? Probably.  Nonetheless, millennials aside (who have yet to confirm an impact on business operation), it is hard to see why today’s employee would feel any more obligated to the corporate welfare than his or her parents.

And the risk rises as the need for speed continues. Customers appreciate a speed improvement factor of 2 but now want one of 5.  As geographic boundaries fall, it still leaves terms, conditions, legal requirements, sustainability and a host of other elements of risk to be managed in less time.

If you want to know more about what keeps our business leaders awake at night, read the full report of “Where is Your Business Heading?”.  It makes good reading.

This month, we release a significant new study of business trends based on interviews by our Partners in 20 countries. In this series of posts, we look at the impact of the study findings on the bedrock of business growth, hiring and managing top talent. First up, Speed: the accelerated pace of business.

 

Our latest study – Where is Your Business Heading? – identifies three current impacts on global trends.  The first is the new, ever-faster pace of business – the demands it creates and the procedures it modifies.  Do these include executive recruiting? Do we need to find new talent faster?  And the answer, inevitably, is yes and no.

Let’s start with yes.

Technology has almost completely re-written the hiring process. No more classified ads for workers or prestigious half-pages for executives. The Internet is a gigantic job-board and time-to-hire has been slashed from weeks/months to days/hours.

For most people, that is. LinkedIn lists 600 million ready to work and says one is hired every 10 seconds. Specialist recruiting firms match candidates with algorithms and flood the hiring company with “best qualified” resumes.

But that just gets you to first base. Someone still has to read the resumes, select, reference check and interview, negotiate and hire. The time here has also been reduced – but not as much — by early steps in AI and machine-managed profiling.

Clients encourage and seek out speedy service under the early-worm strategy that fears someone else will get the best people if you don’t move fast.

All of which thinking has merit but remain subject to the most important criteria of them all. The value of the hire to the company.

Every new employee brings value in different ways. The relevant assessment in recruiting requires turning around the telescope and looking in the other end. Value to the company will range widely from the plant worker to the decision maker and the best way to see it is to look for the cost of loss.

 

Cost of failure can be huge

If a machinist falls short, a replacement is swift and straightforward.  If an executive doesn’t fit the culture, the cost can be huge ($500k+), the disruption major and the risk of lost intelligence extremely serious.

Which brings us back to the other answer above, which was “no”. Reducing the time-to-hire is the least of your objectives the higher up the recruiting echelon you go.

To understand why, you just need to examine the service offer of the Retained Executive Search firm.  The companies already mentioned, the pile-‘em-high resume senders, are called Contingency Search firms. They compete with each other and are rewarded only if one of their resumes is accepted.  The retained firm is contracted exclusively to find the best candidate. Period.  (Go here to download our e-Book “Retained or Contingency”)

Time-to-hire has been shortened in the retained biz (some firms promise finalists within a month, compared to 2-3 months not long ago) but the time taken, however long, is still dictated by the in-depth assessment and qualification process.

Here’s how Cornerstone International Group President Larry Shoemaker explains it.

Retained search firms not only look more intently at available candidates, they actually create them. Superior knowledge – of markets, sectors, cultures and companies — is one of the foundations of the retained service model.  And, most important of all, is knowing who has not offered their services but who might be persuaded to.

Known as “passives”, these are high quality men and women who are currently employed.  Skilled recruiters, however, know the type of company and the type of offer that might pry them loose.

This intense focus on finding exactly the right person for each opening shows that retained search firms are acutely sensitive regarding the cost to the company of a failed hire. It is probably THE most important reason for their being hired in the first place. Against this backdrop, the need for speed is attractive, but strictly secondary.

NEXT:  The impact of a shrinking world on executive recruiting.

The growing number of companies that specify diversity in executive recruiting are not doing so because it’s the “right thing to do”.  It may indeed be a social benefit, but a company’s mission must be performance based or it goes out of business.

And, since creating a culture of inclusion and a welcoming environment for diversity usually means altering long-standing, strategic plans, the evidence and result must prove greater value than the systems in place.

Put another way, businesses are unlikely to change until there is a foundational reason to do so.

Modern diversity research, (particularly when diversity is intentionally surrounded with an inclusive culture) shows that women in leadership positions positively impact bottom-line revenue, profitability and client perceptions while increasing a brand’s total value.

Businesses with inclusive, diverse cultures achieve three important competitive advantages more easily:

• Better decision making – diverse backgrounds, educations and experiences broaden perspectives and improve the group’s critical thinking
• Innovation – diverse thinking processes facts more carefully while developing and considering a broader array of opportunities
• Broader appeal – diversity more quickly reaches key customer markets, including minority and underserved buyers, to increase sales

Beginning in 2010, the world’s top management consulting and data analytics research organizations explored the “Business Case” for diversity across many industries and markets.  Their results contain many similarities and draw essentially the same conclusions.

The Gallup organization, working primarily in retail and hospitality service industries, linked diverse work environments to increased employee engagement.  They identified “employee engagement” as a critical factor for driving business metrics upward through improving productivity, quality, employee commitment, retention and profitability.  Gallup proved diversity grew sales revenue and net profit.

Scientific American’s research concluded that organizations with inclusive cultures enjoyed:

• Greater innovation
• Greater creativity
• Improved bottom line profits with higher job satisfaction, lowered employee turn-over rates, easier recruiting, and a higher reputation for “good places to work.”

The “Women in the Workplace – 2018” report by McKinsey & Company compares annual results since 2015 and reports higher returns on equity, higher operating profit and higher stock prices year-over-year after organizations adopted and actively supported inclusive/diverse cultures.

Outside specific business and organizational culture research, demographic and economic shifts across the US population are propelling major changes in traditional business practices.

• Women represent slightly over one-half of the workforce population (50.8%). They are a growing percentage of all business’ customers, clients and partners.
• Women influence 85+% of all retail purchasing decisions
• Women impact the B2B market by representing 43% of Purchasing Managers
• Women create Women Owned Businesses

Companies with most women execs earned 34% higher returns

Mind Your Culture found that companies employing the highest percentage of women in executive positions earned a 34% higher return to shareholders than did companies who had few to no women in the same roles.  Companies with the most women in Director-level roles performed better than those with the fewest women and achieved 16% higher return on sales plus at least a 26% higher return on invested capital.

The data is sufficiently positive to encourage recruiters to take action.   Three years ago, Cornerstone’s Alejandra Aranda persuaded all eight of her competitors in Chile to sign a Code of Good Practice on Gender Diversity for the World Economic Forum.

Western markets tend to be where the diversity action is taking place.  According to the MCSI World Index, the majority of companies with at least 3 female directors are in developed markets.  In the US market, these companies achieved median returns on equity that were 11% higher and earnings per share of 45% more than companies with no women.

Elsewhere, a steep path gets steeper.   Globally, over one-fifth of the 2,694 MCSI Index companies still had all male boards in 2018.  MCSI (Morgan Stanley Capital International) projects it will be 2029 before a 30% female representation is attained among corporate directors universally.

These and similar reports also warn of increasingly slow rates of progress in business culture transitions – moving from aggressive, competitive and power-driven organizations to the more “constructive behaviors” type where high potential employees say they are more likely to choose to work and want to stay.

Embedded in many diverse business culture studies is a challenging, pre-existing condition – the elephant in the room.  This is the lack of qualified and accomplished women currently visible in top leadership posts, critical to building successful, inclusive cultures and greater businesses.

Successful, diverse business cultures must be inclusive at the highest levels of strategy and decision-making. 

A newly released global CXO Survey report by the Cornerstone International Group indicates that a developed sense of Corporate Social Responsibility (CSR) is of growing importance in the transformation of a business culture.  The new generation of talent is only willing to work where their social expectations are being met

This no doubt helps to account for a situation where gender diversity on Boards and in the “C-Suite” achieves the highest reported levels of business financial success, yet it is also among the slowest improving rates appearing in published results measurement.

How do you decide if such change right for your business? To know if, when or how a business should become more culturally inclusive, the top leadership team must carefully review present performance inside their unique organization and consider their resources, both financial and human.  They must evaluate the challenges and potential rewards, sometimes against other, possible easier and less dramatic paths of change.

Finally, when it comes to recruiting candidates who will contribute diversity and welcome inclusiveness, you must first have built the appropriate environment.  Failing this, you run the risk of winning the enthusiasm of brilliant, talented candidates only to see them cross the street when your culture falls short.

Creating the results we are referencing here demands that everyone on the executive team understands, believes and become passionate about cultural inclusion.   They must embrace synergy between leadership, customers and employees and take responsibility to become accountable for implementations at every level.

Julio Portalatin, a Board Member with DXC Technology, is on record as saying:

“Make it a priority because it helps the business, not because it’s morally the right thing to do. Have a clear sense of the business case for diverse ideas, thoughts, and opinions brought about by different representation. Hire recruiters who have a track record of attracting very qualified and competent directors, who are also diverse in many ways.” 

Members of Cornerstone International Group include recognized leaders in the development of the diverse and inclusive workplace.  If you want to know more about the rewards and pitfalls of pursuing diversity in executive recruiting, get in touch.  That’s what we’re here for.