Strategies for Cross-Border Recruiting: CEOs and Boards
August 27, 2013 – There are no search assignments more critical than those to identify and recruit a chief executive officer to head a large corporation. A CEO’s performance can mean the difference of billions of dollars in either direction so assembling the best teams to identify and recruit these important leaders is critical. The same high-end measure can be applied to tapping the most qualified directors for company boards – this key body sets essential standards for the company they serve. When a company has to look for its top leadership abroad it invites new challenges. Looking across various regions, countries and emerging global markets, companies, and their executive search counterparts, are oftentimes charged with searching in all corners of the world to find just the right professional. This broad-based effort requires the expertise of seasoned search consultants who use their substantial knowledge, vast contact base and a deep and wide-ranging understanding of both the client’s industry, global markets and the C-level positions they are approaching on each assignment, many of which are complex and require the “hands-on” touch that their clients regularly seek.
A leader in board and CEO search, Heidrick & Struggles has been one of the premier recruiting industry brands for 60 years. As the fourth largest global firm with revenue of $444 million, as ranked in 2013 by Hunt Scanlon Media, Heidrick & Struggles is a powerhouse in the industry: In 2012 the firm’s cross-border search efforts were staggering as they placed 2,587 executives across the globe. Of this number, 422 (16 percent) were executives who had to relocate to a new country for their next assignment – a term the firm calls ‘cross border movements.’ Moreover, approximately 27 percent were CEO placements while 25 percent were for corporate board director positions.
In order to better serve its clients on an international basis, Heidrick & Struggles acquired Senn Delaney in January 2013. Founded in 1978, Senn Delaney is widely recognized as the leading international authority and successful practitioner of culture shaping that enhances the spirit and performance of organizations. Senn Delaney’s passion and singular focus on culture, combined with decades of hands-on experience, have resulted in a comprehensive and proven culture-shaping methodology that engages people and measurably impacts both the spirit and performance of organizations. The acquisition was a significant milestone in Heidrick & Struggles’ strategy to build the premier professional services firm focused on serving the leadership needs of the world’s top organizations.
In the following interview, two of Heidrick & Struggles’ most seasoned consultants for CEO and board recruitment, John Wood and Anne Lim O’Brien, address the issue of cross-border search for these two disciplines. It is an in-depth and comprehensive look at the very complex, challenging and critical role they and their firm play in helping major global companies identify and recruit at the very highest echelon of leadership and corporate governance.
John Wood is vice chairman and partner, Heidrick & Struggles’ chief executive officer and board of directors’ practice. Based in New York, Mr. Wood has nearly 20 years of executive search consulting experience and an extensive track record of recruiting chief executive officers and board directors for a broad range of international clients. He joined Heidrick & Struggles from another leading executive search firm where he was a core member of their chief executive officer, board, private equity and consumer practices. He has completed nearly 200 chief executive officer and board searches in recent years. In 2008, BusinessWeek named him one of The 50 Most Influential Headhunters in the World. He is a regular commentator in the media on issues including succession planning, executive compensation and board assessment. Mr. Wood began his career in advertising and has held senior management positions at Grey Advertising (now the Grey Group) and Foote, Cone & Belding. He earned a BS degree in journalism and an MBA from the University of Oregon.
Anne Lim O’Brien is a partner and key member of the global consumer markets and chief executive officer & board of directors practices at Heidrick & Struggles. Also based in New York, she specializes in serving consumer clients, particularly at the CEO and board levels, within Fortune 500 companies as well as those financially sponsored by leading private equity firms. With more than 20 years of executive search experience, Ms. O’Brien has partnered with clients globally to solve their strategic talent needs, bringing a deep understanding of the challenges facing consumer organizations, especially within the consumer products and retail industries. She started her consulting career in Singapore as an associate with Price Waterhouse focusing on Southeast Asia clients. Throughout her career, she has kept a special interest in CEO succession and next generation leaders – especially in diversity talent, women as well as internationally experienced executives, based both in developed and developing countries. In 2008, Ms. O’Brien was recognized by BusinessWeek as one of the world’s most influential headhunters. She has served as a member of the Women’s Leadership Board at the Harvard University John F. Kennedy School of Government. She holds a BS degree from New York University.
Please describe how the process of cross-border search works from inception to completion including the steps of how each consultant and office is used?
(Mr. Wood): Board recruitments originate, almost universally, on a regional basis. It is very rare that we get a board or CEO assignment that does not have a high-level of proximity to a company’s headquarters. The U.S. board recruiting market is so developed we most likely reach out immediately after getting a phone call to the person with the most relevant expertise, whether functional or industry.
So this is a call coming in from the client.
(Mr. Wood): Yes. Many, if not most, of our board assignments come from clients where we have done board work already. The wonderful thing about directors is that it’s the gift that keeps on giving – there is always a retirement approaching, so we tend to have a higher proportion of repeat clients. Therefore any subsequent action by us is centered on the pre-existing relationship with a specific consultant and bringing in others as needed. Often for a board assignment, we will determine the selection criteria after some analysis of the existing competencies, experience, tenure and diversity of the board – and we will reach a consensus, typically with the head of the nominating committee. For cross border searches, for example, we might agree that we are targeting a retiring CEO who knows the industry and has Asian experience. And that will send us off to a specific consultant to develop a list of candidates who fit those criteria.
If a call comes in to you on a cross-border CEO search, for example, walk me through how this process works if you are coordinating this in one or two countries.
(Mr. Wood): Without referring to a specific client, I will provide you with a live example of this. We recently did the CEO search for a company headquartered outside the U.S. with offices in several locations in North America. Working with the search committee, we came up with a list of criteria, including the need for a truly international profile. In developing the candidate list it became clear that CPG general managers experienced in leading the type of highly evolved brand equities often found in luxury goods and truly global brands like Coke and Pepsi was needed. We also knew the growth markets for our client are largely Europe and Asia. In getting the right consultants to participate in the search, knowing the importance of Europe to their growth plans as well as knowing the importance of brand equities, we reached out to one of our consultants in Paris who actually had an evolved perspective on luxury goods. As the search unfolded, we realized that we found several desirable candidates in Asia, we brought in one of our CPG consultants based in Tokyo who had some proximity to the right level and the right types of companies. The selection of consultants we engaged in the search was directly related to the search strategy and where we were going for candidates.
How typical is it to bring in another consultant from another office at the pitch stage on an assignment like this?
(Ms. O’Brien): With my global clients, cross-border board and CEO as well as CEO succession searches are becoming a common and regular feature… as they become ‘glocal’ so does our search strategy and execution. We had a recent Fortune 200 board client who was looking for specific board representation and expertise in Latin America and Asia. In that case we did not have to bring our partners in for the pitch but showcased the relevance and value of our partners’ local connections and reach and we ended up working very closely with our partners in Asia Pacific, particularly Hong Kong, Shanghai and Singapore to locate the candidates from Asia Pacific. For Latin America, interestingly enough, the answer was sitting in the U.S. – a Latin American with both relevant American and global experiences. So while our search strategy and approach is very global we don’t always assume that the answer is outside the home country.
(Mr. Wood): I think this is also where a clear distinction could be made between board recruiting and CEO recruiting. CEO recruiting usually takes place in proximity to headquarters because that is where that candidate will likely be located. For CEO recruiting, you can find prospects anywhere but you have to convince them to move. While board recruiting is truly international, it’s hard to get somebody from Tokyo to be on a board on the East Coast of the U.S. because they are exhausted when they get here and by the time they wake up the board meeting is over. And you have to ask them to do this a dozen times a year.
What are some of the nuances in developing a candidate pool of potential CEO candidates that includes multiple regions?
(Mr. Wood): Relocation, relocation, relocation!
(Ms. O’Brien): To me, it’s about the ability to assess the cultural sensitivities of CEO candidates based on their experiences outside their home countries. It is important for us to be able to gauge if the value system or what these corporate leaders hold true and important are relevant and align well to our client’s needs. There is a trend we see in the advent of the ‘global citizen’ – a business leader whose accumulated experiences inside and outside their home country, with the experience mix operating in developed and developing countries – who has that comfort and confidence living and working anywhere in the world. That is an important nuance in determining if a CEO candidate from outside the home country of the company is qualified for the role where cultural fit is concerned.
To what extent have companies today increased their desire and demand that includes recruiting a CEO from a country that is different from where that company is headquartered?
(Mr. Wood): It’s still pretty rare. International experience is valuable but specifically saying, “I need a CEO candidate from outside this region,” is seldom a requirement. International perspective and expertise in a certain region is often cited but the company is more inclined to look at the totality of experience than where they are presently residing.
(Ms. O’Brien): Clients have the appetite and it comes down to how liberal the client is in their thinking and how conservative they become in their choices. When we go into a CEO or board search we take a global strategy… in today’s context, a lot of the high potential talent, especially ready-to-be CEOs in major corporations, are on assignment outside their home country. They are being groomed or rounded off in preparation for CEO succession. It no longer matters about the client’s requests, desires or demands, but it matters that we propose to them that a search is global because the talent could be sitting outside and, to John’s point, very likely its home country to home country with the collection of prior international experiences.
As so many companies are growing exponentially and globally to what extent are those new markets to identify a CEO playing a role here? Are looking at these markets becoming more of a trend today?
(Ms. O’Brien): I think John’s earlier company example is essentially a good case because it did pull in our people from various regions and yet at the end of the day the answer was sitting right here in the home country, someone with a lot of global experience and previous international tours.
(Mr. Wood): The key nuance here, and it’s probably the single largest gating factor in attracting candidates, is that CEO recruiting requires you to stay at the headquarters location for the rest of your career. And that is usually okay if it’s an American returning to the States, or if it’s a foreign national and they are happy to reside in the States. It is a significant factor in attracting people. Fortunately the U.S. is a pretty nice place to live, with a great education system, and a vibrant economy etc. So attracting people here from abroad, either Americans returning or foreign nationals, is actually easier than what our colleagues have to go through in other parts of the world.
Do you find that most cross-border CEO assignments target ex-pats and if so what are the advantages in tapping a candidate with that profile?
(Mr. Wood): The simple answer is the ease of relocation. It is the No. 1 factor in attracting people. Identifying the people is pretty straight-forward and that’s almost a mechanical process. Knowing their interests and abilities to move to different parts of the world is the key point and is often where we will focus the discussion.
When using multiple consultants in one or more countries on a single CEO assignment how challenging is it for them to gain a full understanding of the culture of the company that might be based in another country?
(Mr. Wood): The consultant that has the greatest proximity to the client will describe the culture to the foreign consultants. That is usually enough information to get the initial screening, the initial approach to candidates and, as a candidate has an interest and their candidacy evolves in a positive way, it usually engages the consultant that has the highest proximity to the company – the culture, the greatest insight and they begin the screening process on cultural fit. It’s sort of check the box at the outset and then as you get the candidate pool narrowed, and your information about each of the candidates grows, the consultant who understands the business is usually the one on point there and can help decide that. So it evolves through the search.
How much of a discussion on culture do you have among the consultants who are teaming on an assignment like this?
(Mr. Wood): Quite a bit and I would also add to the mix corporate governance style right there with it. For CEO recruiting that’s a critical component, almost as often as culture and, in certain situations, it overlaps quite a bit with the culture. Please understand that half of the global economy is driven by family-controlled businesses and they are very idiosyncratic and they have their own culture and their own corporate governance. We need to understand the drivers of fit, drivers of the business, the communication, where the strategy emanates from – all of those things need to be clearly understood by the consultants on point and if you are leading a search you better understand all of those things. The candidates are going to ask and it’s going to be a key determinant of their subsequent success, so you better know it.
(Ms. O’Brien): There is definitely one cultural nuance that is emerging quickly as an ‘ask’ in any senior executive search particularly at the CEO and boardroom level: ‘The Global Citizen.’ Someone who speaks a common language to the next person, CEO to CEO or CEO to board, about their experiences and their knowledge, strengths and capabilities across the global platform; someone who understands the nuances of different countries whether it’s inside or outside of the home country.
Boards also tend to have their own cultures separate from the company. I assume a lot of this comes into play when you are engaged in board assignments.
(Mr. Wood): Absolutely. There are three primary criteria that we focus on. 1) Capacity: does the person have enough time or does their calendar overlap; 2) Competency: director recruitments are quite frequently based on having the right skills and experiences to bring to bear on the business, whether it’s conducting the business of the board or advising on the strategy for the business and, 3) Compatibility: this is equal parts culture, communications style, character and those are generally the three things we hire on. The last one, compatibility, requires that you need to know the culture, not just in the company, but the board room, including how much they communicate, and how much independent perspective can they tolerate — so it’s a central criterion.
To what extent do your consultants provide services to assimilate a CEO into a new company especially if you are bringing in a CEO from a different region?
(Mr. Wood): This is such a great question for us because we just made an acquisition of a business called Senn Delaney. And the reason we made the acquisition is because the insights that we can provide, not only of the current leaders of the business, but of the prospective leaders of the business. We are in discussions on how we can give CEO candidates an early start on what the culture is like. We have done that intuitively in the past, but we have not done it as an explicit, separate practice and we are right in the midst of doing that.
How much of an increase have you seen where companies are now seeking to fill board seats with directors from a number of countries?
(Ms. O’Brien): We have seen a significant increase particularly from our board clients who are major global corporations in the Fortune 500, looking to attract an internationalist or globalist into their boardroom. In those cases, these boards tend to host at least one if not two meetings outside their home country, particularly in or close to a strategic market/region where they have likely recruited their international board member, e.g., China, India or Brazil.
I am a little surprised that companies today are not seeking board members from other countries especially large corporations.
(Mr. Wood): It’s just harder. With the higher level of engagement and scrutiny, the level of commitment is increasing not decreasing. So it is increasingly rare to get a sitting CEO residing outside the U.S. to be actively engaged in a North American board. It still happens but it’s a long, long putt.
What regions or countries are most active today where companies are seeking talent at the C-level from abroad?
(Mr. Wood): There is definitely a difference between being an importer and exporter. The U.S. is, by far, the largest importer of talent. It’s also the world’s largest economy so it’s not surprising that we would be attractive to a candidate. It’s not just that we are pulling them in; they want to come here. So that will probably remain unchanged especially as China’s economy grows and they are not actively bringing them in as they are bringing them up, educating them and dropping them into their future demands.
(Ms. O’Brien): The U.K., U.S., China, Brazil, India, Switzerland, Singapore. Not a big surprise that the U.K. and U.S. are the net exporters of talent although they tend to ask that we source globally in C-level searches. Then you have the BRIC countries looking for C-level leadership talent who can bring the business and management sophistication from those who have developed markets experience. And then another group which has established themselves as key regional corporate centers for global corporations – Switzerland particularly Geneva and Zurich for Europe; Singapore for Asia Pacific; Dubai for Middle East and Africa; and Miami still is the regional gateway for companies expanding into Latin America. So it follows the economies of the countries: global business leaders or being the hotbed of high growth and emerging markets which has become the grooming ground for a lot of C-level talent.
To what degree has Sarbanes-Oxley affected how and where companies recruit board members today?
(Ms. O’Brien): In my experience, there has not been a huge deterrent affecting interest in serving U.S. corporate boards. On the contrary, we see a lot of interest in qualified board candidates whose intellectual curiosity and business interests have them listing an American or European board as priority destinations for their next board opportunity. European board candidates seek the American board experience and vice-versa, as they seek to expand their corporate governance experience – and the U.S. and U.K. appear to have some of the most evolved practices. So, Sarbanes- Oxley has not deterred interest in serving on American corporate boards…however, in the American boardroom, the challenge remains to properly allocate sufficient time beyond overseeing core compliance issues to focusing on the strategy and succession issues of the company.
