Quit Driving Through the Rear-View Mirror

Most industries, indeed most companies, face unprecedented change. Digital disruption is a threat even to digital disruptors and securing the diversity of skills and experience to ensure the ongoing viability of the business has become a challenge for most organisations. In this edition of Overture, Fidelio argues that the Executive Search industry has a very specific contribution to make — it has the thinking and tools to keep companies looking forward and therefore moving forward. If driving through the rear-view mirror is the problem, Fidelio demonstrates that Executive Search can be an important part of the solution.

An Imperfect Market

The Search industry readily comes in for criticism. Certainly it is a sector that has not always covered itself with glory and it is also a sector that is clearly vulnerable to technological disruption. Indeed with the rise of technology platforms like LinkedIn, the Executive Search industry has been compelled to define much more clearly the specific value that it adds. Liquidity of the executive job market; access to senior talent; benchmarking and external perspective — these are all good things.

Fidelio suggests that Executive Search has a key contribution to make which is often overlooked and poorly understood and that is to enable companies to understand what skills and experience they need to move forward and then to provide access to that talent.  This is surely a truism. But it is not the service that many Search firms have traditionally provided; and, to be fair, nor is it the service that clients have traditionally demanded.

Fidelio has frequently written about increased gender diversity including at Board level. Certainly in the UK, the initial Davies Report, Women on Boards, published in 2011, identified reliance upon personal networks as part of the problem in Board appointments. The Search industry, which had traditionally not focussed on Board appointments, engaged in the process and in October 2015 the Davies Review announced that UK had achieved 26% female representation on FTSE 100 Boards.

But this is far from the full picture. In the recently published Inquiry into FTSE350 Board Appointments, the Equality and Human Rights Commission (EHRC) was unequivocal: businesses are failing to find the best candidates as their pool is too narrow. The EHRC cited “outdated attitudes and opaque selection processes” and went on to state: the Davies Report’s “headline achievement [of gender diversity] masks the reality of how individual companies are performing”.

[in hiring, there remains] continuing reliance on ‘old boys’ networks’ to source candidates, reluctance to cast the net more widely and selection based on vague notions of ‘chemistry and fit’

Professor Laura Carstensen, Commissioner, EHRC, April 2016

Firmly Looking Forward

A criticism that is often heard is that a relatively small number of women who are sitting on Boards are repeatedly approached for further Board roles. Talented and qualified women who are not on the radar screen struggle to be considered for their first Board role. The market is far from perfect.

The EHRC research has implicitly identified where the Executive Search industry can best make a difference. It is not by building a pool of candidates who are recycled from one role to the next, although Fidelio absolutely endorses the importance of creating a pipeline and is active here with “A Seat at the Table”.

A criticism that is often heard is that a relatively small number of women who are sitting on Boards are repeatedly approached for further Board roles. Talented and qualified women who are not on the radar screen struggle to be considered for their first Board role. The market is far from perfect.

No, the real contribution that the Executive Search industry can make is collaborating with clients to understand the purpose of the role and what it must deliver. These findings can then be translated into a Role Specification and a Candidate Brief which articulate the attributes, skills and experience necessary to deliver the role’s objectives. This upfront investment forms the basis to approach the market with a fresh perspective in order to find the best Candidate for the role.

This is inherently a forward-looking exercise. It will cast the net wider and, critically, provide the client with access to Executives and Non-Executive Directors who can deal with tomorrow’s challenges.

Executive Search can best make a radical and constructive difference for clients by undertaking the heavy lifting. The majority of Board Directors and senior Executives recognise that new skillsets are needed in the organisation and that diverse teams perform better. The excellent research by Credit Suisse on Women in Senior Management and McKinsey’sDiversity Matters, for example, is now tracking the positive economic impact of gender diversity.

While the benefits of driving forwards as opposed to through the rear-view mirror are clear, achieving this transition is tough. And the main reason is not ill-will. It is our inbuilt tendency to be fearful of change and, left to our own devices, to hire in our own image.

What Works

Professor Iris Bohnet of Harvard Kennedy School has recently questioned the efficacy of tackling individual unconscious bias. Instead, in her recently published book What Works, she argues that focussing on de-biasing organisations and processes rather than individuals can have a much greater return.

This is absolutely where Executive Search can make a difference. The best chance companies have of ensuring access to the talent they need is being willing  to re-design the recruitment and appointment process and  to focus on “what works”.  That includes:

• An honest and frank analysis of what the role needs to deliver — including a robust challenge of pre-conceived ideas.
• Building internal alignment and agreement before embarking on the Search. Political wrangling is better dealt with upfront rather than being allowed to sabotage the process at a later stage.
• A Role Specification and Candidate Brief which focus on the attributes, skills and also experience to be successful in the role. Clarity is the friend of objectivity in the hiring process;  the “we’ll know it when we see it approach” is not.
• A transparent, timely and well-managed identification, approach and selection process. Substantial data and intelligence is captured in this process and smart organisations will be hardwiring learning into each and every Search.

Cultural Fit

And what role does culture play in all this? Quite rightly regulators have flagged the importance of culture, in particular in Financial Services, and are holding the Chairman and the Board accountable for achieving a positive culture. But culture is difficult to define and cultural change is even more difficult to measure.

Particularly at Board level where groups of individuals come together for relatively short periods of time and need to be effective, cultural fit is deemed to be very important. But cultural fit can  also be a highly subjective part of any Search process. The Executive Search industry has a role to ensure the insistence on cultural fit is used wisely and does not allow a very substantial element of unconscious bias to creep in.

As the EHRC implied, the Executive Search industry has the potential to play a positive role in achieving diversity and equipping organisations for the future. But Executive Search can equally become part of the status quo in which case it is perpetuating today’s models of leadership rather than uncovering the leaders for tomorrow.

Chains of habit are too light to be felt until they are too heavy to be broken…

Warren Buffett, Investor

If the Search industry fails to participate in the heavy lifting described above, which involves intellectual rigour and a willingness to challenge, its clients will continue to rely on the rear-view window.

And while technology is undoubtedly a disruptor to the Search industry, it is not necessarily the champion of objectivity it may seem.

Is Technology the Answer? 

Recently the BBC explored the digitisation of the recruitment process in the BBC Radio 4 In Business Podcast, Recruiting by Algorithm. The use of analytics was hailed as the next step in a much more objective and effective recruitment process. Very obviously big data has potential benefits for understanding what talent is needed and how best to access it.

One algorithm was described as determining applicant suitability in the first instance by a direct comparison to the current team — assessing on shared values and cultural compatibility. There is obvious benefit in being able to put metrics around that notoriously subjective concept of culture. But beware. If the goal is to look forward and diversity has a value, we surely need to be extraordinarily cautious about hiring mechanisms that perpetuate the status quo.

Technology can bring disruption and challenge which should be taken very seriously. But as we have seen in industry after industry, technology alone is seldom the answer. In the Search sector we should be very wary about embedding practices that encourage rear-view driving rather than supporting clients in shifting to the future.

Fidelio Drives Forward 

As a Board Development and Executive Search consultancy, Fidelio has deep expertise in shareholder engagement, stakeholder engagement and embedding diversity. These are three areas of complexity which feature prominently on most Board agendas and are best resolved with a clear strategy and vision for the future.

For this to succeed companies require fresh skills and perspectives. Fidelio secures access to that senior talent and our Search methodology is forward-looking. We recognise nonetheless how difficult it can be to quit “driving through the rear-view mirror”.

Executive Search has a critical role to play in promoting diversity, innovation and competitiveness. Fidelio is committed to being in the vanguard.

Fidelio High Notes – May 2016