April 1, 2016 – In the not-too-distant past, the majority of CEO and board director roles were almost exclusively filled by white males. But changing social demographics have compelled companies to make drastic modifications to their leadership ranks, and to look more broadly at these seats of power. Today’s chief executives and directors are a growing mix of genders, ethnicities and professionals with a broader, more global vision.
In the following interview, Dan Grosh, managing partner of Calibre One – ranked No. 21 on this year’s ‘Hunt Scanlon Top 50’ ranking – discusses these shifts. He describes how his firm, which handles a dozen or so CEO and board director searches annually, takes a look at the fundamentals of board recruiting, and lays out three issues at play when companies attempt to ‘pull the trigger’ to bring in more diverse professionals into their senior ranks. Finally, he defines the universal attributes of successful CEOs and director-level candidates.
Dan, Calibre One conducts roughly a dozen CEO and board assignments annually. Is there a specific focus by industry or geographical location to these assignments?
By industry, it falls into technology and many of its sub sectors like e-commerce, IoT, SaaS, cloud, IaaS, hardware, healthcare IT, fintech, mobile, consumer web and others. Geographical location is widely spread. I am estimating 66 percent of our CEO work is in the Bay Area, NYC, Austin, London or LA. However, more and more CEO, board and other C-level searches have taken place in unique locations that wouldn’t be considered tech hubs, like Reston VA, Orlando, Albuquerque, Minneapolis, White Plains NY, Bangladesh and others.
Small to mid-sized search boutiques are increasingly being seen as a preferred recruitment provider choice. Do you agree?
I agree. However, it is still taking time with Fortune 500 companies; there remains a heavy misperception to overcome. Firms like us have done extremely well with venture and private equity-backed organizations and we often beat the Big 5 for emerging growth and mid-sized company CEO searches. There have certainly been several breakthrough moments for boutiques with Fortune 500 CEO assignments over the last 20 years, but it is still the exception, not the norm, as the Big 5 are viewed as the ‘safe choice.’ We continue to fight the misperception that bigger is better. That said, we win more private-equity and venture backed business simply because the Big 5 firms are not well suited for this type of work. First off, they have very high minimum fee requirements. For instance, a $5 million growing technology business is likely not going to pay their minimum fee requirements for a CEO search with set 0-30-60 day terms, regardless of outcome. Venture practices at large search firms have struggled as it can be difficult to make a decent living for search consultants in the huge firms serving emerging growth clients.
In what way?
First, the larger firm commission plans pay out significantly less than that found at the boutiques. The larger firms are built on Fortune 500 volume and the high fee business volume that it generates. We boutiques have thriving technology practices right now while a lot of the big firms are losing great tech consultants to firms like ours. In addition, several phenomenal search consultants, in both large firms and boutiques, have departed, moving into top private equity and / or venture firms as internal talent partners. Furthermore, we think like venture, we are entrepreneurially-focused on hiring entrepreneurial talent. Several of us have run small businesses in the past as well. And, I would argue, we know the candidate pool much better within the emerging growth sector and have built deeper relationships throughout. As evidenced by your statistics in last year’s ‘Hunt Scanlon Top 50’ ranking, the boutiques are growing at a much faster rate than the Big 5, and I wouldn’t be surprised to see that trend continuing well into the future.
What have been some of the more dramatic developments in corporate governance that you’ve seen?
Although there is constant evolvement of governance issues and changing regulations, the fundamentals of how we approach a board search have not changed. Of course, diversity remains a very high priority on board searches for most of our clients. But each search is unique depending on the size and type of entity as well as the specific role that specific boards member will play. Certainly, having a global background has been a constant theme requirement as has domain experience and ‘connections’ for business development and channel opportunities for our client companies. One interesting recent trend is that we have been asked to represent a GM / division president of a Fortune 500 technology company to help put this individual on several external boards. In other words, we are acting as the ‘agent’ for this executive, reversing the traditional process. I have learned from some of our friendly competitors that they are seeing this as well and are taking on similar projects.
Women and minorities have been grossly underrepresented in the boardroom, though we are seeing improvements. At the CEO level, we’re seeing slower progress. Do you feel it is your responsibility to make certain there is a more diverse slate of candidates put forward on each search you conduct, and where does the responsibility for diversification sit — with the recruiter or the client?
Both. There are many statistics on how immense the gender gap remains, especially in technology. This persists as one of the leading dilemmas of our time. Frankly, it is an embarrassment for the technology community that we service. More and more of our clients are requesting a diverse slate of candidates. However, it has been a challenge to get them to pull the trigger on diversity CEO and equivalent prospects. Consistently, there tends to be several issues at play: First, lack of experience. So many of our clients are looking for ‘been there, done it’ prior CEO experience and not willing to look at the up-and-comer; Second, a talent shortage. In the up-and-comer profile group, let’s say at the VP sales or VP product level, there are simply not as many women and minorities in comparison to other VP functions, like marketing, for example. Finally, competition remains incredibly high in this tight technology labor market. For the few women and minorities that do have prior equivalent experience, everybody on the planet is after them. They are highly insulated in their current roles and tend to be very well compensated. I agree that the gender and diversity gap has improved considerably for independent board members, but the gap needs to tighten. It is our job as search consultants to educate our clients on the barriers and our moral responsibility to fight for equality.
What is the No. 1 attribute you look for in CEO and board candidates?
There are always multiple attributes we seek. Each company is unique in its history, team make-up, structure, and size. So, the challenges vary. That said, there are certain characteristics and attributes that are universal: integrity, consensus builder, problem solver, someone who can deal with adversity well, versatility, drive, curiosity and passion. I am obviously omitting several others, but these are the key things we look for when I’m trying to identify the next best leader for our clients.
Contributed by Christopher W. Hunt, Publisher, Hunt Scanlon Media and Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media