Author Archives: Richard Slayton


Slow Economic Growth in the Midst of Uncertainty: Q2 In Review

Now that we are well into 2012, the macro economic situation is seemingly on par to that of 2011. Europe may well be the more worrisome news with more bailouts on the horizon, and no real end in sight to countries plagued by toxic debt and fiscal austerity.  With Greece recently bailed out, Italy and Spain are teetering on their own fiscal crises. The US economy is sputtering along at a growth rate of 1.5%, mainly due to a drawback in consumer spending.   In Asia, China’s economy grew at the slowest rate in three years, but still clocked in at a healthy 7.6%.   Company executives are watching global markets closely to react quickly in locations where they have operations.

The fragile global economy is experiencing headwinds. For this reason, we are seeing executives in a holding pattern to grow the company rosters, there is little new “headcount” being created. Building a bench of talent in many departments is being put on the back burner. “Caution” is a popular term being used and it’s understandable given the level of uncertainty for the economy over the coming months.

Ironically, there is still significant demand for top talent and in fact, we are seeing significant demand for ‘A Players’. The Technology, Financial, and Insurance sectors seem to be buoying the demand for top talent which mirrors the findings of the most recent AESC Quarterly Survey.

While companies are not aggressively expanding headcount, they are more willing to make replacements – wanting to install a superstar for the C-Suite or other senior executive position. In fact, many companies report shortages for well seasoned executives.  Multiple offers are now more common than not – something we haven’t experienced since 2008.

This has presented retained search with a high demand for targeted searches; it just might be a more complex road to finding a suitable ‘A’ candidates who are willing to make a move.  A recent AESC survey indicated that 57% of senior executives are willing to make a career move. In the same survey, many respondents indicated a negative outlook in terms of economic instability and career stagnation.

It may seem somewhat redundant, but like many previous quarters, the 2nd quarter of 2012 is full of optimism but paralyzed by uncertainty and caution. Companies want to hire ‘A Players’, executives are willing to move, but action is slow to happen.

Hiring Executives for the C-Suite: Source Internally or Externally?

Hiring decisions are wrought with uncertainties. Employing the wrong person can cause minor inconveniences at the entry level, but at the CXO level, a hiring mistake can cause detrimental economic effects that leave lasting effects throughout an organization. Engaging the most crucial members of your organization is a lengthy and strategic process. To ensure the best candidates are sought after for these crucial roles, recruiters should look outside the company in addition to within.

Hiring Executives From Within

The belief that insiders will always do better is a powerful and well-versed argument when debating whether to promote internally versus looking outside the organization for prospective candidates. Certainly an individual who has been bred and groomed within the organization has a solid grasp on process, corporate culture, and the company’s inner workings than would an outsider. Candidates promoted from within are expected to perpetuate strategic goals and objectives, and are married to the history of the organization by having had a hand in creating it. Additionally, if a contender is chosen from within the company, it eliminates outside recruiting fees and the cost associated with assimilating a new employee to the job.

Sourcing Externally

To some, turning to an executive retained search firm in hiring executives may at first seem counterintuitive, but at closer look makes strategic, economic, and long-term sense. The same benefits of hiring a candidate from the existing talent pool are also convincing reasons why not to hire from within. While trained diligently on corporate culture and process, the candidate’s mindset has been molded by executive-level decision makers to ensure position for promotion. Carrying on with the status quo may work for some organizations, but in most, a lack of change and innovation is a certain way to erode market share. When there is a strong need to motivate change, recruiting from outside the organization is the key to ensuring this objective is met. An outsider brings new perspective and is more likely to ignite change, going against the status quo. Executives hired from within the organization are less likely to take risks or move the company into uncharted waters.

Exemplary education, top credentials, and leadership charisma are the key traits for leaders to successfully manage incendiary change. The likelihood that a home grown employee who has taken decades to climb the internal corporate ladder is that candidate is slim. Corporate culture and procedure are things that can be learned, but becoming an exceptional leader is something that is created through a complex array of challenging career experiences. The most prolific CEO’s in history have always been those perceived as mavericks by their peers; those willing and able to subjugate their board of directors to inspire change.

While the safe choice may be to promote from within the existing talent pool, the argument that it will produce the most effective executive is weak. The risk of choosing an individual who may not be as strong as his or her predecessor increases, as some C-Level Executives tend to avoid surrounding themselves with robust top-tier executives to eliminate competition. While unlikely, this situation could create a weak group of managers who evolve into little more than C-level ‘yes men’.

Why Retained Search

Filling such a critical role in any organization is something that should not be taken lightly or handled by anyone less than an expert. Using a retained search firm for these highly visible, important positions is the ideal option. When utilizing a retained search firm, the deliverable is clear: the most effective candidate for the position. A retained search firm has one objective, and that is providing viable candidates backed with quantifiable data. Background checks, reference checks, academic record and income verifications, in addition to valuable market intelligence, are all provided by an unbiased third party. Additionally, a search firm can significantly shorten the time from candidate identification to hire and improve that employee’s stick rate.

All is Steady in Search for Top Talent, Q1 in Review

The economic tone for the US economy in the first quarter was largely positive and steady. This parallels what we saw in retained search demand and the recent quarterly report released by the Association of Executive Search Consultants (AESC). The industry as a whole saw modest growth with the number of executive searches growing by 2.5%.  Our firm has also seen sustained demand within the consumer/retail, insurance and industrial sectors.

Top Talent Need Only Apply

The interesting dynamic developing is that companies are remaining patient in their search for ‘A Players.’ Contrary to previous climbs out of recessions, companies “want it all” in their hires.  It’s not just the skills that are in demand, but the candidates’ leadership capabilities, soft skills and culture fit.  Companies are holding out for the ‘A Player’ and the top echelon of talent.

Is This the Year of Diversity?

Diversity and inclusion efforts are no secret, but dedicated roles around these efforts are making their way to the C-Suite. In our previous post, The Chief Diversity Officer and Why You Need One, we talk about the growing emphasis companies are placing on the diversity role to adapt to shifting consumer bases such as the growing Hispanic population.  Underneath the surface of diversity initiatives are some real business benefits: Lower Employee Turnover, Boosting Employee Morale, and Increasing Revenue. As with all C-Level searches, finding the right CDO can be the difference from a successful program and poorly designed one.

All Eyes on LinkedIn

Another theme sprouting up from the first quarter is the growing influence of social recruiting tools, like LinkedIn.  Corporate recruiting circles are leveraging social media tools mainly to identify suitable candidates and using the platform’s growing job board capabilities. For retained executive search firms, and the very senior level search work we conduct, the impact is significant, but it doesn’t  replace the art of consulting companies on position requirements, the need for intense confidentiality, and executive level screening processes.

Looking Ahead

The expectation is that the business climate will be paying close attention to a fragile economic situation in Europe and whether the American economy can push through sluggish growth unscathed. The next few months will likely be similar with steady demand from companies patiently pursuing top talent in the market.

2012 Will See Increased Executive Search Demand

We entered 2011 tentatively, unsure of the sustainability of the recovery.  With substantial effort, and continued “tailwinds,” last year was much better than most expected.

This year feels much different, less tentativeness and more optimism.  Our clients are now looking ahead to the entire year, not just quarter to quarter, and what they see is a depleted talent pipeline.  2012 promises to be a year of increased executive search demand.

The Numbers Confirm Our Outlook
We are experiencing the boost in activity first-hand from our clients and it is confirmed by the recent survey by the Association of Executive Search Consultants (AESC).  43% of industry professionals expect search activity to increase this year. In particular, activity here in the US will be stronger than in Europe, which has seen soft demand for executive talent due to the sour economic situation there.

Consumer and Manufacturing Industries Poised for Growth
We’ve seen our clients in the consumer and manufacturing sectors increasing their demand for top talent. For the most part, American consumers have stabilized themselves from bad debt and poor job prospects. Now, consumers are opening the pocket book again; this past holiday season, retail sales rose 4.1 percent according to the National Retail Federation. After a decent holiday retail season, manufacturing companies will benefit from increased consumer demand and resurgence in consumer sentiment to buy American made products.  The strength of these industries (and complementary industries) will create new opportunities with higher compensation and advancement opportunities.

Functional Area Demand
Not surprisingly, we see the greatest talent gap in C-level positions, which coincides with the survey data from the AESC report. The C-Suite is a constant need for enterprise companies for any number of reasons and across all industries. Executives who are primed for these types of roles will continue to see excellent opportunities come their way.

Other areas we expect to see increased demand this year include Finance, R & D/Engineering, and Human Resources.

What do you think is in store for 2012? Respond to us on twitter

The Key to Innovation is Culture, not Spending

Last week Booz & Co. released their 7th annual Global Innovation 1000 report titled “Why Culture is Key”. In it, Booz surveyed 600 innovation leaders at global companies, large and small. They conclude, as they have consistently over the past seven years, that ‘there is no statistically significant relationship between financial performance and innovation (R&D) spending.’

Among their conclusions:

The Top Innovators Are Not the Top Spenders
Apple, Google, and 3M were voted as the top innovators by their peers. Yet, none of them are in the top 10 in terms of R&D spending, and many outperform their competition in a number of areas, including financial performance and shareholder return.

Much R&D Spending is Wasted
Overall, R&D budgets were up last year, about 9% according the survey. Companies continue to throw dollars at new technology and incremental innovations on products. Rather, they should be need seekers who are obsessed with finding the articulated and unarticulated needs of their customers. This is where culture is born and where innovation can blossom. However, most companies still struggle to turn R&D expenses into profitable products and to make gains against their competitors who continue to out-innovate them.

An Organization’s R&D Talent and Culture of Innovation is as Important as the Dollars Spent
In reality, more of those dollars should be allocated to building the right team with the right leaders at the helm. Without the right talent, it’s harder to align the business strategy with innovation, and innovation with the company culture.

The C-Level and leaders of R&D need to assess how a new executive will embody the culture and how passionate they will be about the products and customers who are the ultimate beneficiaries of these innovations.

A few questions to ask the hiring team regarding prospective R&D candidates:

  • Is the innovation strategy effectively articulated? If not, is this the person who can do it?
  • How will this person align the information and cultural gap between R&D and the organization’s executives?
  • How will this person accelerate the execution of innovation success?

The study shows that business results are driven mainly by ‘strategic alignment (with overall business strategy)’ and ‘a culture that supports innovation’. In fact, 44% of the companies surveyed have both highly aligned cultures and highly aligned innovation strategies. As a result these companies reap more profits and enterprise value.

Aside from the numbers and the surveys, it’s logical to think that a highly aligned company culture is correlated to innovation success. Think about Apple and Google, it’s not just about having the best technology. In fact, much of their technology is not particularly complex. But the technology was built around identifying – and sometimes creating – customer needs.

We encourage you to view the report in its entirety here.

Hiring Accelerates As Year-End Approaches

With November rolling in, and snow now blanketing the Northeast, we all begin looking to the end of the year. In fact, Thanksgiving is only a little more than three weeks away. Usually at this time of year two things are constants: companies/functions run out of budget and attention shifts to planning activities for the next year. The result is that the release of search work slows, only to pick-up after the new year. This year, however, is different.

We see companies accelerating to the end of the year, a marked contrast to historical norms. We believe there are a few reasons for this:

  • Companies have large cash positions and with limited investment options, are electing to put their money in their people. When necessary, they are going to the outside to bring in the best talent.
  • Companies are gearing up for 2012 and recognize that recruiting takes time. Starting now ensures that the newly recruited executive has most of 2012 to impact the business.
  • It can be less expensive to recruit now. Companies usually make up for short-term and long-term bonuses that are “left on the table” and with most corporate bonus programs paying in February or March, the thought is that hiring an executive after they receive their bonus can save significant money.

While this may not fully explain the reasons for the acceleration, we believe that this year is different. Perhaps this is the “new normal.”

Negotiating Through Long-Term Incentives: The RSU “Problem”

A number of years ago the US tax law changed and required companies to expense stock options granted to their executives. The consequence of this, in addition to stock prices which were becoming more unpredictable, was that companies moved away from stock options as a long-term incentive. Today, most of our major clients use Restricted Shares (RSUs) or a combination of RSUs, Performance Shares (PSUs) and cash.

From a company perspective, this has improved the retention of executives – the executives see real value in RSUs and PSUs and so are not willing to leave unvested value “on the table” if they are recruited away. The company recruiting the talent is faced with a real financial problem – making up for unvested value – this value can be significant. For example, let’s say an executive with a base salary of $300,000 normally is granted at 50 percent of their base salary in long-term incentives which vests at three years. The vesting period is such that at any one time, $450,000 would be left behind if the executive departed the company.

Thus, the RSU “problem” has started to become a real issue in recruiting. Companies like the retention aspects that the RSUs provide, but don’t like the cost of making up for them when recruiting.

Our advice to executives:

The earnings you will receive from an accelerated career path should help offset some of the losses in money left behind, if the company recruiting does not fully make up for the loss.

Our advice to companies:

Have a philosophy behind the amount you are willing to make up. For example, some companies will only make the candidate whole on two year’s worth of unvested long-term. Others make-up fully the amount left behind, but use offsetting RSUs or a mix of cash and RSUs. We find that when a company is reasonable and has a rationale behind their make-up of LTI it is better accepted by the candidate.

The Dilemma Of The Extreme High Potential

The world seems to be going to extremes – business is no different.  For years company leaders kept a close eye on the younger talent in their organization identified as “high potential.”  This moniker is usually reserved for a small group of management talent which is viewed as having significant future potential.

Occasionally there is an up-and-comer who shows such great promise that they could be classified as an extreme high potential.  These are few and far between and often reach very senior level positions while still in their 30s.  These extreme high potentials often have similar characteristics:  top tier education (both undergraduate and graduate), extreme quickness at processing information, high interpersonal skills and a natural ability to assess business situations.   Some examples:

  • A CEO of a multi-billion dollar publicly-traded company – 34 years old
  • A Chief Customer Officer of a $10 billion consumer business – 33 years old
  • A Chief Human Resources Officer of a $25 billion publicly traded company – 37 years old

The Dilemma of the Extreme High Potential

The extreme high potential can handle new challenges and roles almost as fast as you can promote them, but at times their promotions should be slowed.  This addresses the fact that some things must be learned over time.  For example, extreme high potentials can rise so quickly that they don’t live with the consequences of their decisions.  The other area we see that takes times to learn is executive maturity.  This is a nebulous characteristic, but one which is easily identified by peers and subordinates.  Lastly, humility is something which can be in short supply with an extreme high potential.  Slowing promotions coupled with good coaching can keep this type of executive’s ego in check.

We all want to have high potentials in our organizations, but extreme high potentials are their own special breed.  Handled correctly they can make large, positive contributions to the business.

The Importance Of Confidentiality


“This is confidential” 

We hear this all the time, but is it really?  In our world, the answer must always be yes.

When executive search is done right, the search consultant becomes just that – a consultant to a company and its senior team.  In this critical role we help senior leaders sort through a myriad of talent related issues.  This can include providing insights into competitor talent, helping manage through underperforming executives, benchmarking internal talent, and of course attracting new talent to the organization.  During all of these activities we must keep the veil of confidentiality.

This confidentiality also extends to candidates as well.  The executives we recruit are high performers who are actively employed.  They take a risk when they “raise their hand” to look at external opportunities and we (along with the client) must be sensitive to this.  It could be disastrous to have a candidate executive “exposed” to their current company.

Just as we extend this confidentiality to the candidates, we often ask the candidates to remember that many searches are truly “confidential.”  There may be business issues that dictate this secrecy or other personnel considerations.  So, when you receive a call from a search firm and they mention that the search is confidential, please respect this request.

In one real world example:  we were just starting a search for the top functional lead for a large publicly-traded company.  For a number of business reasons, the search was highly confidential.  One of the candidates in the process (and the lead candidate at the time) started to discuss the search openly.  It only took a day before this leaked back to the company.  Needless to say, the lead candidate was immediately taken off the consideration list.  The CEO was rightly concerned about the executive’s breaking confidentiality and how that reflected on the candidate’s character.

In summary – confidential still means something:  to companies, candidates and search firms.

Relocation In The “New Normal”

Relocation has always been a significant cost of recruiting a new executive.  Most of our clients expect that a full executive relocation will cost from $100,000 to $200,000.  The complicating factor of late has been the housing market – will the executive lose money on his/her home – and who will pay for this?  Over the last year, we have seen significant changes in relocation philosophies:

  1. Companies are more inclined to help executives with a “loss on sale” provision in their relocation package.  The higher level the executive, the more likely a “loss on sale” is available.  It often structured like this:  The first $100,000 is covered by the company, the next $100,000 is shared 50%/50%, and anything over this is the responsibility of the executive.
  2. Very few companies have a home purchase for newly recruited executives.  This is where the company will buy the house from the executive, usually for an appraised value.  This option rarely optimizes the price to the seller, but does alleviate the stress associated with selling a home.  It should be noted that internal company transfers usually have a home purchase option.
  3. Executives are more comfortable with losing money/breaking even on their home.  In the last year executives have come to the realization that their careers cannot be held “hostage” to their real estate situation.  This coupled with companies being more willing to help with “loss on sale” has executives willing to relocate again.

Our advice to executives:  The earnings you will receive from an accelerated career path will far outweigh the loss on a single home sell.  In some cases executives are getting the benefit of their new company substantially paying for a loss on sale that they would have taken on their own personal balance sheets.

Our advice to companies:  Be reasonable – not helping with “loss on sale” will put you at a significant disadvantage to other companies seeking the best talent.  Yet, ask the executive to share in some of the loss and put caps on the amount you are willing to cover.