Archives for January 2021

The view of earth from the International Space Station, 400 km up, is stunning.  You can’t help wondering if you can see all the band-aids.

Our poor, bruised planet and the people who live here have survived one of history’s more trying years. The worst pandemic in over 100 years has affected over 200 countries and cost two million lives.  Raging bushfires devoured Australia and the US West. The steady increase in natural disasters included a record-breaking Atlantic hurricane season, flash floods, earthquakes, typhoons and volcanic eruptions.  Few people will recall 2020 fondly.

But many, it would seem, face the future with hope.

Ever year at this time we invite our members to submit an assessment of how they see the coming year in their country or region.  Our members are in 37 countries around the world, nearly all of which have taken a beating in 2020.

National metrics have always included GDP (Gross Domestic Production) and now include deaths from Covid-19. The GDP number has been inevitably negative, for Covid positive.

But our people out there unanimously feel the corner is being turned as Covid numbers shrink and the GDP grows. Most spectacular of all is Asia.

Today we are launching our 2021 Outlooks, which will be published over the next few weeks.  We are starting with Asia because that’s where the good news can be found.

The star performer is China, which has been on an amazing growth trajectory for several years. In 2020, it was the only major economy to record positive GDP year over year — +1.9%.  IHS Markit forecasts growth of 7.5% this year. Only India can top that, coming in at 8%.

You can read a summary of regional expectations for Asia here, authored by Cornerstone CEO Simon Wan who is based in Shanghai. National Outlooks available today are for China, Taiwan and Hong Kong.

On Monday we will publish Thailand, Singapore and Japan.

Final article from Steve Manning, Head of Financial Services at Cornerstone Singapore, on finding PE company leaders.

The bar is set high. Dynamics at Private Equity firms is fast, aggressive, all conquering, and as the investor leader you’re thrust into that all too familiar position of tackling senior leadership management issues at a newly acquired portfolio firm. 

This four-part series recognizes the challenging factors surrounding a search for the ideal candidate. The focus is squarely on meeting unique demands of private equity performance, but will often square the circle for many senior executive traits.   

• Hiring Private Equity Leaders – Part I: Ideals and Compromise
• Hiring Private Equity Leaders – Part II: Core Soft Credential Constituents
• Hiring Private Equity Leaders – Part III: Then the Challenge

This fourth and final installment will balance needs with compromises; float tangential opportunities to expand horizons; and ward off the myopia clouding your view of that elusive, ‘pink giraffe,’ PE leadership candidate. 

1. Where to expand the search for tangential talent

Beyond relaxing specific credential requirements, success may hinge on the ability to think laterally, and seek out candidates with tangential experience.  A simple illustration perhaps is a CEO of a large injection moulding firm, who might be well suited to a brewing and bottling company.  Both are high volume, capital intense process industries. 

• Direct Industry Experience:

Running in a close second place to past portfolio company experience — which was addressed in part two — is the importance of direct industry sector knowledge and experience.  The new CxO will be tasked to define and craft strategy, make investment proposals, defend them (so they had better have depth in the related sector), and have a brain the size of an elephant.  Certain functional leadership positions and industry sectors can be less strident on this question.  The CFO candidate might get by with only a broad sector experience such as manufacturing, finance, or technology.

From experience, keeping an eye on a candidate’s knowledge of how a specific business model works is essential and non-negotiable.  On a macro basis, producing versus services for example are hard lines to cross.  It is imperative to probe candidates deeply on the fine subtleties of your business, such as how return on capital is impacted by elements deep down in the producing stage.  A search partner with industry knowledge is critical to this evaluation.

Sales and marketing positions appear to provide broader sector hunting grounds, but reality can be different, and there are still many constraints.  A typical conversation with your search firm might underline that the role requires a sales professional with strategic thought; an ability to distill your firm’s value proposition; knowledge of the customer base and be able to bring new key accounts to the table immediately; familiarity with your product; a finger on the competition; and has led a large regional team’.

Right away this locks the search into an ever narrowing set of industry credentials.

That said, a candidate with a good technical background will be able to learn a product or service potentially in less time than it takes to find a perfect insider who comes from a competitor.   Make an honest assessment of the complexity of your portfolio company business model and value proposition, size of business, size of organisation, sales process, before you lock into tight parameters for the role.   Don’t be guilty of over inflating the uniqueness of a business and discarding how quickly outsiders may be able to adapt.

• Think Tangentially:

The ideal candidate may not materialise from a traditional CEO profile, meaning the resume might look different from what you expected.  Compromises can include: not being business school all-stars, or even graduates; perhaps they started careers in a very different environment (a photojournalist, for example, will have travelled and understand different cultures well); or perhaps you have a failed technology entrepreneur in the mix.

Realise that hiring for a portfolio company firm is not just competing against others, but competing against all industry to attract excellent talent.

You will subconsciously know when a candidate is CEO material.  It is not the tick in the boxes of their experience competence list, or past successes, in so much as how right out of the box they radiate confidence, and a sense of charisma.  This does not mean they are extroverted, bull-nosed, or shy, they simply exude ‘presence’.

Whatever credential strong candidates hold, they are likely to be trench fighters, with soft skills and charisma to lead and dilute egos.  They may have faced numerous setbacks, and have stories of mistakes, although they probably have a fast-moving resume and quick ascension once they found their calling.  These are healthy ingredients for success in a portfolio company.

At a functional pinnacle, although tangential compromises are available, recognise that a senior executive candidate with the requisite years of experience will have broad traits baked in hard.  You will find it difficult to move a candidate between functional management roles. To put it simply, if the role is operational then hire an operations manager, financial then hire a finance head.

Tangentially other roles that have required strong leadership but might not have been a CEO in your specific sector can be trawled; a ship’s captain, a military leader, a dean of school.

What is becoming more prevalent today is ensuring that whoever a candidate is they are fully digitally conversant.  They don’t need to know how to code, they do need to know how coding can change their business, how to evaluate solutions, and to be well versed in what’s happening in information and technology. Facebook and LinkedIn proficiency does not qualify.  Move beyond lower age barriers to capture this ability.

2. Private Equity Series Summary and Move Ahead

The above discussion, taken with the messages in parts one and two, endeavour to underline that in many instances a search for candidates can be moved tangentially, and compromises made to the ideal.

Hiring from a close competitor or from another portfolio company will plug a gap with a competent leader, but simply recycling known candidates may also recycle the same lacklustre performance that made the candidate available.

On the other hand, the time line to find an ideal portfolio company candidate could be unacceptable.  It may be better to focus on someone less tied up in the constraints of an industry, and more motivated to apply new thought leadership to create – excuse the cliché – breakthrough performance.

Realise that hiring for a portfolio company firm is not just competing against others, but competing against all industry to attract excellent talent.  While detailing the motivators on offer, also be forthright about the challenges, stake holders, and expectations.  The right candidate is likely to be a risk taker, they won’t be successful if they’re not, so don’t hold back on laying out all the cards positively.

Building a relationship with an executive search partner who understands your portfolio business model; has uncanny assessment nouse; who knows where niche talent resides; and who can call upon a global network of partners with deep sectoral, geographical and technological areas of expertise, will make the difference.  But most crucial are those people who think tangentially and can help find a way forward through comprise

Importantly, don’t have your ‘ace’ candidate guessing motives, objectives, and exit plans.  And similarly, once on board, don’t set goals in a vacuum.  Fantasy land won’t help your new hire in the development, communication, transformation, and running of the business inside your portfolio company.

The more you can share on where you want to be, the more your new hire can align and drive towards the same goals.  The position is for a mature and professional leader who will drive towards your aspirations, and find that right fulcrum in the balance to meet achievable goals.

Evaluations take time to surface compatible candidates, and comprehensive assessment tools are invaluable to bring out not only significant personality traits, but indications of how the candidate might perform under pressure, and whether personal goals align with the role on hand.

Search and on-boarding the best possible CxO leader is critical to achieving the growth you’ve projected, and so is your ability to enable their success.  It’s likely your organisation has access to mature development and talent tools to support your new best friend.  Your search consultants also can further reinforce development, so engage them to follow up actively with leadership development.

Does the Executive Search procedure still relate to work taking place in conditions of high uncertainty? As more organizations adopt the Agile methodology, executive recruiters are finding they also must develop new approaches and processes to find and engage the elusive Agile candidate.

Companies with a workforce that can adapt quickly — to new company policies or direction based on the economic or competitive climate — are the ones most likely survive. That leads to the question: how do you build an Agile workforce? How can agile recruiting find those individuals best able to adapt to new situations and thrive in a changing environment?

With Agile, we’re no longer looking for the perfect candidate. The company needs to effect change as quickly as possible and we are looking for the most suitable candidate for the situation in the shortest period of time. When the need is for Agile recruiting solutions, the emphasis in search and assessment shifts from the availability of relevant professional experience (although this is certainly a very important criterion), to the candidate’s capabilities to address and manage change, capabilities which may not be confirmed by past experience.

Executive recruiting today increasingly faces the need to find key managers at the intersection of two or more industries. This has been especially evident in Life Science, confirmed by a study conducted by our group Cornerstone International Group – Key challenges in Life Science & Healthcare 2020

Until recently, such a combination of experience was not possible, for example, “a leader with a background in medicine and IT”.  And even when this unique combination of experience is available, it is not enough. It takes the right mindset to run an organization in today’s VUCA world.

What approaches in top recruiting will attract the best candidate? Let’s remember the basics of the Agile methodology:

• People and interaction are more important than processes and tools;
• Advancement is through successive projects with near-term goals
• Cooperation with the clients is more important than agreeing on the terms of the contract;
• Being ready for change is more important than following the original plan.

These approaches imply the capacity of the client to suddenly and unexpectedly put forward new requirements, often contradicting the original candidate profile. The strategic goals and objectives of the organization may remain the same, but the ways of achieving them may change.

If a search is carried out “in advance”, a clear and understandable job description alone will most likely not work.  It is necessary to rely on an understanding of the company’s strategy, its goals, capabilities, values ​​ and its development. The search process itself is being transformed and is now based on:

1. Work in short cycles;
2. Active use of feedback to adjust search and assess;
3. The search itself can become on-going after the vacancy is filled.  It now  reflects a shared way of thinking and life of the company, the formation of Agile project approaches, and the arguments for attracting other project managers.

If the candidate is not found quickly enough, the task will be transformed, the business will not wait for the “perfect” leader.

The emphasis in Executive Search is shifting. We are looking for combinations of values and personal characteristics of the candidate over the traditional work experience.  With the aid of increasingly sophisticated software, the ability of a consultant to assess the coincidences and differences of the value field comes to the fore.