search-consult Issue 12

2002 / ISSUE 12

The International Executive Search Magazine

The War for Talent 2: Update from McKinsey Professional Practices: The New Guidelines from the AESC

Ulrich Dade Exclusive interview with the Chairman of the Amrop/Hever Group

INTERVIEW

INTERVIEW

Search in Switzerland: Market Review

FEATURE

INTERVIEW

COMING UP IN FUTURE ISSUES:

www.search-consult.com SUBSCRIBE ON-LINE

Paul Reilly, Chairman & CEO, Korn/Ferry

Dayton Ogden, Chairman, Spencer Stuart

Search in Financial Services Market Review

Going SoloJim Norton after Korn/Ferry

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search-consult MANAGING DIRECTOR Jason Starr jason@search-consult.com EDITORIAL Pilar Gumucio Barbara Kwateng editorial@search-consult.com PRODUCTION Margaret Jaouadi margaret@search-consult.com

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search-consult is published by Dillistone Systems Ltd, Calvert House, 5 Calvert Avenue, London, E2 7JP, United Kingdom and printed by Printhouse Corporation, London NW10 6ST, www.printhouse.co.uk. All statements, opinions, and expressions are the sole responsibility of the authors and the Publishers reserve the right to amend / alter articles as necessary. The Publishers cannot be held responsible for any loss or damage, however caused, of any materials supplied. Any materials supplied may not always be returned.

No part of this publication may be reproduced in any format without prior written consent of the Publishers.

Front Cover: Ulrich Dade, Chairman, Amrop/Hever Group. Photography courtesy of Amrop/Hever Group. Š Copyright 2002 Dillistone Systems Ltd

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AESC Statistics suggest downturn over www.search-consult.com

NEWS

STATISTICS ON NEWLY BOOKED executive searches released today by the Association of Executive Search Consultants (AESC) indicate a strong 23% rise in the first quarter 2002 vs. fourth quarter 2001. After a few consecutive rocky periods, the total number of retained searches returned to just below the same level as one year ago (-6%).

Within manufacturing, searches in consumer products were up 60% for the quarter. Pharmaceutics and biotech searches improved by 46% on the quarter, but were still down 23% year on year. The manufacturing sector as a whole gained 9% for the quarter, but lost 9% versus the same quarter a year ago.

Banking and financial services posted an impressive 17% gain in the first quarter, following a year of declines in that sector, ending up only 10% down year on year. In the information sector,

AESC member firms reported a decrease in searches for executives in broadcasting and telecom of 8% for the quarter.

Searches in retail trade were also down this period, losing 13% for the quarter and 10% year on year.

According to Peter Felix, AESC President: "The first quarter of 2002 provides mild cause for optimism. Coming off the last quarter of 2001 when executive search experienced a dramatic slump to round off an already very poor year, an increase in search assignments of 23% is encouraging. Anecdotal evidence from our member firms suggests that business is firming up and that clients are approaching senior level hiring with more confidence. Because finding the right leaders is more critical today than ever before, the AESC is confident that as the recession draws to a close client organizations will rely heavily on quality executive search firms to help them make crucial hiring decisions."

COMING SOON Region-specific Search industry news, delivered by e-mail!

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Heidrick & Struggles Top Financial Headhunter quits to start new firm www.search-consult.com

NEWS

JOHN VINEY, THE CHAIRMAN OF Europe for Heidrick & Struggles intends to leave the industry's number two firm, later this year. Eric Sodorff, Heidrick's communications manager, confirmed Mr. Viney's eventual departure, but said no date has been set yet. He said, Mr. Viney still "has some projects to finish up" and must arrange with other Heidrick recruiters for the transfer of certain accounts. " Mr. Viney, a Cambridge-educated astrophysicist, was among the company's stars who had served on its board until last year. Mr. Sodorff said Mr. Viney, who has been with the firm for many years, "was one of the senior producers" at Heidrick.

Mr. Viney is expected to start a new search firm with other high-profile seniorlevel recruiters, including former Heidrick consultants.

Meanwhile, Elizabeth Hammond, one of the firms most prominent London finance specialists has resigned to join a former colleague, Trevor Foster-Black (ex of TMP Worldwide), at new firm Hammond Black.

Heidrick & Struggles said the parting, though regrettable, was amicable.

Hammond is still under contractual obligation to Heidrick & Struggles and is negotiating on whether she should be out of the market for a period of six months or less. If she stays out for six months, she would be back in business on October 4th.

With Hammond's departure, Michael Franzino in New York will now head the firm's global financial services practice.

HammondBlack plans to cover equity and equity derivatives. Anna Shields, Hammond's number two in the equity business at Heidrick, has moved with her.

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Ernst & Young's Heidricks' Pay ExSearch Practice CEO $11 Million Acquired www.search-consult.com

www.search-consult.com

NEWS

RESOURCES CONNECTION UK, A subsidiary of Resource Connection Inc, the provider of professional staff for project work, has agreed to acquire Ernst & Young's Executive Search and Selection practice.

Don Murray, Chairman of the Board, President, and CEO of Resources Connection said, "Resources Connection has ambitious growth plans for the UK. Our entry into the UK market has just begun and we will be looking for other acquisition opportunities, to complement our organic growth potential.

By continuing our expansion into the UK, we ensure our ability to serve multinational companies wherever they operate."

Bob Leach, Joint Managing Director of Resources, declined to put a value on the sale. He said he believed the hiring cycle was now "at its lower end" and that prospects from now on were good.

Chris Beer, the other Joint Managing Director of Resources, was head of the UK Ernst & Young practice until last year. He said, "As a recent leader of this practice, I know how excellent their portfolio is in terms of quality of people and the client base."

Under the deal, Ernst & Young will "refer opportunities" to Resources for a five-year period as well as give access to their candidate database.

Most of the employees of Resources Connection UK will be based at the Company's London office, while a number of employees will be located at Ernst & Young's offices to ensure the strong links remain between the two firms.

NEWS

PATRICK S. PITTARD, THE FORMER chairman of Heidrick & Struggles received total compensation worth almost $11 million in 2001, according to the firm's annual proxy statement filed at the end of last month. Mr. Pittard, who retired on October 1, 2001, received a base salary of $525,000 and a discretionary bonus of $100,000 in recognition of his role in facilitating the firm's goal of a smooth management transition. He was also awarded restricted stock units worth $1,012,813. In addition, Mr. Pittard was paid $6.7 million in cash to settle the firm's obligation to pay him a pension of at least $1 million per year for life beginning at age 60, and approximately $2.7 million representing the present value discounted at the rate of 10 % of the guaranteed salary and benefits Heidrick was obligated to pay him through 2005.

Letters

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Putting the Client Last-

The slippery slope of parallel processing DURING THE DOT COM BUBBLE, MANY RETAINED executive search firms became as greedy and as rapacious as the most dubious of the now extinct species of dot coms. Some sent raw CVs or candidates, without having interviewed them, to clients. Others demanded equity kickers and imagined themselves as venture capitalists.

One vestige of this arrogance persists. It is called 'parallel processing'. It means that a search firm will offer the same candidate to more than one client simultaneously. The truth is, that in today's softer market for talent, there is less likely to be the opportunity for this sleazy practice. Nonetheless, some large firms persuaded the Association of Executive Search Consultants, AESC, that this should be allowed under the new guidelines. As reported in the Wall Street Journal of the 7th of May, I wrote a strong dissenting opinion absolutely opposing this disgraceful practice.

Why should all clients and truly professional search firms get excited about a practice, which is no

longer widespread? The answer is that it goes against the principle that the search firm should represent the client and not the candidate and it should use its best interests on the client's behalf.

Those who defend parallel processing are on a slippery slope, where the client comes second to the interests of candidates and the search firm.

The argument, that parallel processing will only happen if the two clients both agree, is no excuse.

We in Boyden feel that to ask the client such a question is itself an outrageous betrayal of trust, no matter how innocuous or sugared the question may appear. The Search firm should be representing the client and the client alone with any candidate.

Retained search firms are meant to find the best candidate for the job. Parallel processing smacks of body shopping. It implies that the same candidate is so versatile that he/she can fit multiple clients' needs. It is another manifestation of an approach, which should be long dead, that of trotting out the usual suspects, or favorite candidates of the search firm to all comers, instead of conducting a thorough search. Some search firm's have reached a size where conflicts of interest between clients become the norm. They hold the secrets of competing clients, (Chinese walls have grapevines growing all over them). They have too many off limits problems. They weasel very tight off limits

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Chris Clarke agreements fout of clients. They have to in order to stay in business. Parallel processing is just one more manifestation of conflict of interest.

Our advice to clients is to put their foot down and not accept unprofessional practices of any kind and especially this one.

Christopher J. Clarke, President Boyden Global Executive Search

Breck Ray Opens Own Search Firm www.search-consult.com

NEWS

BROTHER OF PAUL RAY JR., President of Ray & Berndston, has opened his own boutique search firm Ray Partners.

Founder Breck Ray said, "I think it's a great time to start a search boutique in the industry. My father Paul Ray Sr. started his own firm in 1965 and this has been something that I have wanted to do for a long time."

The firm, which is also based in Fort Worth, Texas, currently consists of two partners and two consultants, all of who previously worked for Ray & Berndtson.

Ray Partners focuses on executive search assignments in the industrial, aerospace and defense, automotive, private equity and consumer products industries.

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Business Cards: Executive Research Firms

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Catherine Nathan joins Spencer Stuart as a

previously had served as Managing Director in the

Consultant. Ms. Nathan, a lawyer with over 15 years

Dallas office of Korn/Ferry International. With more

services practice at the firm's Atlanta office. Prior to

of executive search experience, will help build

than 12 years experience in headhunting, Mr.

joining Ray & Berndtson, Mr. Kelly spent 13 years with

Spencer Stuart's presence in the legal profession. Ms.

Mitchell has conducted executive-level search

Russell Reynolds Associates.

Nathan most recently served as Senior Partner and

assignments in technology and manufacturing

Practice Group Leader of the Global Legal Search

companies as well as technology-driven service

Practice Group at TMP Worldwide Executive

firms.

Search.

Heather Spence has resigned from A.T. Kearney to

medical devices and diagnostics practice and

Chicago-based

DHR

launch her own financial search firm in London. The

conducted consumer health and life science

International adds Ken Feldman as Executive Vice

new search firm, Spence Partnership, will cover a

assignments for Russell Reynolds Associates.

President in the firm's Boca Raton office. Mr. Feldman

broad range of markets, such as corporate finance,

most recently served as Vice President at A.T.

private equity, equity capital markets, debt capital

Kearney in Miami. Throughout his career in

markets and areas like hedge funds.

Ken Brotherston is named Chairman of Citipeople.

Previously, Mr. Brotherston worked for Korn/Ferry International.

executive

search

firm

executive search, Mr. Feldman has specialized in executive search assignments for wide range of

Working in Partnership‌

Stanton Chase International welcomes Bob Gladden

industries including; entertainment, media, sports,

Persona is a well-established research company providing highly proactive search solutions purely to recruitment companies. Our experienced in-house research team have knowledge of a wide range of industry sectors and research methods enabling us to deliver the results you need. ‌to deliver Solutions

to its New York office. With more than 10 years of

publishing, advertising, communications, consumer

executive search experience, Mr. Gladden focuses on

products, professional services and technology.

search assignments in the technology, operations

Our services include: Target List Compilation; Candidate Identification; Candidate Approaching International Assignments; Company/Departmental Structures; Bespoke Research Assignments

management and sales and marketing industries. He

For further details or a copy of our company brochure, please contact Michelle Whitfield-Speed at:

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has worked for The Stratford Group and A.T. Kearney

Spencer Stuart names Richard S. Lannamann as Vice Chairman of the firm's investment management practice.

James A. Langston has opened up his search firm Newport Search Consultants. Previously, he had been a Principal at Heidrick & Struggles.

Ferguson Partners, the Chicago-based executive search firm that operates in real estate and related financial service industries, appoints James Dell'Olio as the new Director of the New York office. Previously Mr. Dell Olio had worked for TMP Worldwide.

Tony Harris joins Abercorn International Search.

Previously, he had been Managing Director of SAP, a enterprise resource planning and manufacturing

Cleveland-based executive search firm Christian &

company. In the 6 years he had been with SAP he

Timbers welcomes Wayne Mitchell as Managing

grew the Australian business from $10m to $380m.

Director for the new Dallas office. Mr. Mitchell

Keep us up to date with any corporate announcements! Email editorial@search-consult.com

Independent Executive Research

Tel:+44 (0) 20-8682 4027 Fax: +44 (0) 20 8672 6808 email: GeorgeRoyce@cs.com

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B. Kelly as a partner in the consumer products and

Angeles office. Previously, Mr. Vied had headed the

Candidate identification and screening.

Assignments cover a range of industries, functions and levels from junior managers to board level.

Cross-border research in French, German and Spanish.

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Ray & Berndtson announces the appointment of Kevin

health care and life sciences practice in the firm's Los

ROYCE ASSOCIATES (est. 1994)

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Key moves in Executive Search this month

David L. Vied joins Ray & Berndtson as a Partner in the

Tel: (+44) 1423 529087 Fax: (+44) 1423 507466 e-mail: persona@personauk.co.uk Claro Way, Harrogate, North Yorkshire HG1 4DE England

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Annabel Hodgson Newton Research Associates, Unit A6, Hatcham Mews Business Centre, Hatcham Park Road, London SE14 5QA Telephone: +44 (0)20 7639 4844 Fax: +44 (0)20 7639 4833 Mobile: 07957 659103 e-mail: a.hodgson@newtonresearch.co.uk

search-talent For careers in Executive Search

TO RECEIVE SEARCH-CONSULT ON A REGULAR BASIS SUBSCRIBE AT www.search-consult.com

visit www.search-consult.com/talent Our unique access to search leaders in 26 countries ensures that we are uniquely placed to help you manage your career.

We have clients who are recruiting now. In the first instance, contact :

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search-consult ISSUE 12 2002

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The Amrop/Hever Group

One year on‌

By Jason Starr The first issue of search-consult included an interview with Anthony Saxton, the then co-chair of The Amrop / Hever Group. Saxton told the story of the merger between Amrop International and The Hever Group.

One year later, Mr. Saxton has retired and his successor, Ulrich Dade of Delta Management Consultants in Germany gives search-consult an update. n the context of a rapidly contracting search market, The Amrop Hever Group are justifiably proud of their performance in 2001. The group, with 280 consultants spread across 81 offices in 50 countries, achieved revenues of US$114 million, worldwide. Set against the 30% falls reported by some of the other firms, these results are seen as positive. Some member firms actually posted improved figures, whilst others recruited new consultants. Delta's own business in Germany was able to open its 6th office.

"The year 2000 was superb for Amrop Hever, both in terms of financial performance and the development of the group. We posted excellent figures and completed the majority of the integration process.

Last year was harder financially - we were down 11% - but even this fall was largely due to the loss of a couple of offices because of the merger. We were also able to complete the integration and move forward as a whole."

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The story of the merger is an interesting one. As individual networks, Amrop International and The Hever Group both had long and illustrious histories in the search industry.

However, the IPO boom caused pain to many of the search networks, and Amrop was perhaps the worst affected of all. A number of members either left to go public or were swallowed by international competitors. In particular, Amrop's representation in key markets was decimated; TMP acquired Lamalie Amrop (The US) and TMC Amrop (Italy); Heidrick & Struggles swallowed Mulder in Germany whilst the UK representative, Whitehead Mann, chose to undertake an IPO to fund the development of its business on a standalone basis. This left Amrop with an excellent spread of offices in the developing markets but without representation in some of the world's major search markets. Hever, on the other hand, did not have the breadth of coverage in the emerging markets, but could boast strong coverage in the UK (through Saxton Bampfylde) and Germany (Delta) and also had number of members in the US. The benefits of merging were clear and, after a period of discussion (during which Anthony Saxton visited twenty countries), an accord was reached in June 2000.

Today, Amrop / Hever is one of the most international organizations in the industry, a fact reflected by the make up

of the group board - 12 positions filled by 11 nationalities and today the number one in the world in terms of geographical spread, with offices across five continents.

Looking back, Dade believes that his members made the correct decision in staying private.

"I honestly believe that the IPOs really haven't worked out to expectations and plans. Some of the big companies have suffered because of it. Personally, I'm really not sure that it is the proper model for an executive search organization.

The business should be client driven, not profit driven."

He feels that the membership of a global network such as Amrop / Hever offers search firms and their clients the benefits of scale without the disadvantages of "public" overheads and profit targets.

"Speaking from my experience, clients are certainly comfortable with our structure. They want to work with a firm that will do good work internationally.

To ensure this is delivered, they wish to see consistent standards across offices.

At Amrop Hever we have a very strong board that issues guidelines and policies to ensure this.

Fundamentally, however, we believe that within these rules there must be enough room for the local organization to make decisions. I think that the clients appreciate this - a common approach whilst emphasizing

the entrepreneurial initiative, drive and involvement. What they don't want is a very loose organization. I certainly don't see our structure as a disadvantage."

Dade feels that a network has to be more than an impressive list of names on a business card. Whilst, in the past, members of the two groups worked under very loose guidelines, the combined entity is becoming more structured and organized under common policies and operation guidelines.

"Obviously, different markets have different needs and requirements. We accept, therefore, that it would be difficult to say, for example, that 'all assignments must be completed within a certain period'. Instead, our focus is on the process. Is the client regularly informed? Are the candidates regularly contacted?

How do we start the process? What documentation does the client receive?"

These procedures are backed up by an auditing system under which member firms are regularly assessed by overseas associates or, increasingly, by third party organizations.

"We want to make sure the client is constantly informed about the process of the search and we would like to use here a standard form of reporting. The best person to make professional decisions about a specific search is the local consultant; our focus at the group level is on ensuring that delivery is consistent and quality driven."

In addition to operational rules, the group also maintains guidelines on 'ethical' issues. Whilst the AESC has changed its stance on parallel processing (allowing, under certain circumstances, retained search firms to offer one candidate to two clients simultaneously), The Amrop / Hever Group frowns on the practice.

"It is a complicated argument but, in principle, we are against it. We also have firm policies on issues such as Off Limits and, again, adherence to these policies is controlled."

The alliance between Amrop and Hever may have ensured that the

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enlarged group could boast representation on most parts of the globe but, for Dade, this in itself, is not enough.

"We are not interested in 'growth at any price'. That is not an objective that we will pursue. Our desire is to retain our reputation for being a quality executive search organization. We want to be considered a top firm in every country in which we operate. In some countries, this is already the case. We are established at the very top level. In other markets, there is room for improvement and the Group is acting on that."

"For example, we need to strengthen in the US. Our coverage in Europe, Asia

Ulrich Dade and Latin America is excellent, but whilst we are not small in the US - I believe that if you combine the revenues of our US members we come in at number 12 - we do need to strengthen.

It is a difficult market, however. It is very, very fragmented and it is really not easy finding the right partners. Despite this, our membership committee has discussions underway already. In the rest of the world, however, I only see organic growth."

The Group has also identified deficiencies in certain practice groups.

When Amrop and Hever merged, they

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brought with them practice groups which, to an extent, overlapped. After the merger, the enlarged group selected 9 practice areas on which to focus (these were Automotive, Consumer Goods / Retail, Financial Services, IT/Telecom, Management Asset Evaluation, Healthcare, Media, Higher Education and Board Appointments). A management structure was put in place for each (with the practice heads being selected from amongst the practicing partners).

"We need to add strength in Financial Services and in Healthcare, for example.

We are already in a pretty strong position in these markets, but I do not feel that we are fully exploiting the potential at the moment. In some other markets, such as Media, we are exceptionally strong."

The approach to strengthening will always be to find established local suppliers. "Whilst on occasion there might be some interest in investing, partnerships based around local expertise works extremely well. When we are looking at a new member, we wish to see a firm that is already positioned at the very top end of its market.

It must be an excellent, professional firm. We also, of course, consider the emotional side.

Professional abilities are vital, but we must be able to get on with the people involved. We have to enjoy working together!"

Looking ahead, Dade believes that as the global economy continues to improve, the structure of the Amrop / Hever Group will prove to be more and more attractive for both its members and their clients.

"I am fully confident that by aiming at the highest quality service performance with our global network of independent and interdependent entrepreneurship, we pursue the right strategy for our customers' and partner firm's success."

www.search-consult.com

For more information, contact: Web: www.amrophever.com

ISSUE 12 2002 search-consult

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The

War

for Talent

An update of McKinsey’s 1997 survey on the war for talent found that it is escalating—despite the current economic slowdown and the end of the dot-com boom.

he war for management talent is intensifying dramatically. Last year, McKinsey updated a 1997 study in which researchers surveyed 6,900 managers (including 4,500 senior managers and corporate officers) at 56 large and midsize US companies. The update found that 89 percent of those surveyed thought it is more difficult to attract talented people now than it was three years ago, and 90 percent thought it is now more difficult to retain them.

Just 7 percent of the survey’s respondents strongly agreed that their companies had enough talented managers to pursue all or most promising business opportunities.

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Demographic and social changes have played a growing role in this trend. In the United States and most other developed nations, the supply of 35- to 44-year-olds is shrinking. And many of the best-trained people entering the workforce are not bound for large traditional companies: last year, a full 30 percent of MBAs in the United States preferred to work for a start-up or a small business.1And the proportion of computer science and electrical-engineering graduates who went to smaller companies rather than more established ones has risen to 37 percent, from 22 percent in the 1980s.2 The update also found that the companies doing the best job of managing their talent deliver far better results for shareholders. Companies scoring in the top quintile of talentmanagement practices outperform their

industry’s mean return to shareholders by a remarkable 22 percentage points.

Talent management isn’t the only driver of such performance, but it is clearly a powerful one.

Senior managers report that “A players”—the best 20 percent or so of managers—raise operational productivity, profit, and sales revenue much more than average performers do (Exhibit 1, on the next page). In one manufacturing company, the best plant managers increased profits by 130 percent; in an industrial-services firm, the best operations managers achieved increases of 80 percent. (The worst managers in both companies brought no improvement.) The senior executives in the year 2000 survey thought top performers deserve pay 42 percent higher than that of average performers—a far greater spread than most companies have but a solid

investment nonetheless.

The researchers found that paying an additional 40 percent to hire an A player could yield an overall return of 100 percent or more in a single year.

Despite the potential impact of top performers, both the 1997 study and the year 2000 update revealed a gap between awareness of the talent issue and an effective response to it. Only 14 percent of the managers in last year’s survey (as opposed to 23 percent in 1997) strongly agreed that their companies attract highly talented people. Only 3 percent of the respondents to both surveys strongly agreed that their companies develop talent quickly and effectively.

At a time of greater awareness of the shortage of talent and increased competition for it, the imperative to manage it effectively is more urgent than ever. Leaders must make talent a priority at all levels of their organizations, create reasons for top talent to choose their companies, rebuild their recruiting strategies, create plenty of opportunities for development, and learn to identify their A (as well as their less capable) performers and invest in them appropriately.

To accomplish these goals, organizations will have to pay greater attention to measuring performance and to feedback. In 1997, for instance, 71 percent of the respondents said that candid feedback on their performance was essential or very important to their development, but only 32 percent said that their companies provided such feedback effectively. Last year, an even greater proportion of the respondents— 89 percent—said that candid feedback is important, but just 39 percent said they had received it.

Companies that neglect these imperatives pay the price. Tolerating under-performers—especially underperforming bosses—carries the highest price of all. Subpar managers drive talent from companies and preempt positions that could have been used as development opportunities

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(Exhibit 2). Last year, nearly 60 percent of the respondents strongly agreed that they would be delighted if their companies were quicker to dismiss underperform-ers or to move them into less critical roles.

Organizations that take talent seriously can deliver greater shareholder value and start to realize the promise of competitive advantage through better talent. But the implementation of that strategy must start at the top: in the highest-ranked companies we studied, improving the strength of the talent pool is among

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the top three priorities of senior leaders.

This article was originally published in The McKinsey Quarterly, 2001 Number 2, and can be found on the publication's Web site, www.mckinseyquarterly.com .

Copyright (c) 1992-2002 McKinsey & Company. All rights reserved .

Reprinted by permission.

www.search-consult.com

For more information, contact: Web: www.mckinseyquarterly.com

EXHIBIT 1

Good people are great for business Mean of responses from 410 corporate officers “How much more does a high performer generate annually than an average performer?”

67% 49% 40%

Increased productivity in operations roles

Increased profit in general management roles

Increased revenue in sales roles

Source: McKinsey’s War for Talent 2000 survey of 410 corporate of offficers at 35 large US companies

EXHIBIT 2

The cost of a bad boss Percent who “somewhat agree” or “strongly agree” 58% of senior and midlevel managers reported that they have worked for an underperformer.

How did this affect them?

“Prevented me from learning”

76

“Hurt my career development”

81

“Prevented me from making a larger contribution to the bottom line”

82

“Made me want to leave the company”

86

Source: McKinsey’s War for Talent 2000 survey of 6,500 senior and midlevel managers at 35 large US companies

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Professional Practices...

Under the Spotlight The AESC upgrades its Professional Practice Guidelines

By Peter Felix, President, Association of Executive Search Consultants 12

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xecutive Search work has to involve itself in the most confidential issues affecting its clients and candidates. Ethical and professional practice is thus crucial to the profession's credibility and effectiveness.

The Association of Executive Search Consultants, the worldwide professional association for the executive search business, has just completed a thorough revision of its Professional Practice Guidelines with the aim of making them clearer and more useful.

In 1996, at the time of the last revision, great care was taken in the writing of the AESC's Code of Ethics and Professional Practice Guidelines to separate ethical issues from business decision issues - the latter being the subject of agreement between the search firm and the client.

Thus "off-limits", a long standing item of controversy and often confusion, was designated as a business issue for which black and white rules of ethics should not be written. In its deliberations the AESC had engaged leading representatives of the search profession and a Professor of Ethics from Harvard, Professor Lynn Sharp Payne.

Five years on, in October 2001, the AESC Board decided that the Professional Practices Guidelines should again be reviewed to clarify issues that in the intervening period had been the subject of controversy or on which the guidelines were less than clear. These included Reference Checking and Parallel Processing, both of which had been the subject of misunderstanding, adversarial press comment and, no doubt, some abuse during the intervening years.

To conduct this review the AESC Board established an International Panel under the Chairmanship of Judee von Seldeneck of the Diversified Search Group and Secretary of the AESC, with 15 senior representatives of large, medium and small member firms. By the end of the deliberations, which lasted six months and involved many drafting and redrafting sessions, the Panel had significantly revised the Guidelines and presented them to the AESC Board and the AESC

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European Council in March this year. The guidelines were agreed and adopted by the Association in April 2002 as its new foundation for the promulgation of best practice in the executive search profession.

Some of the main topics covered by the revised Guidelines are as follows : (For a full copy please refer to the AESC website at www.aesc.org/practice.html ) 1.

RELATIONSHIPS WITH CLIENTS The panel concluded that more emphasis should be given to the collaborative and consulting nature of executive search i.e. that search assignments should never be unilateral

Peter Felix and purely , transaction based in nature but rather involve collaboration and a mutual commitment to success on both sides. A satisfactory relationship with the client of trust and mutual confidence was regarded as being crucial to success of the assignment.

The new Guidelines also suggest that when discussing the parameters for the assignment the search firm should confirm in writing not only its understanding of the position in question but also key issues affecting the conduct of the search, such as off-limits. Many AESC members refer to the AESC Code of Ethics and Professional Practice guidelines and

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employ the AESC Client Bill of Rights ( see http://www.aesc.org/clientbill.html ) when discussing these matters with clients.

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REFERENCE CHECKING Although reference checking is obviously a key part of the search process it had become clear that there were no standard definitions of the terms used in this sensitive area. Thus what is meant by a "reference " check as opposed to a "background" check or "employment history" check was not clear.

To help clarify matters the Panel developed an appendix to the new Guidelines which defines terms and makes clear that reference and background checking require a collaborative effort between the search firm and the client, but that responsibility for clarifying who should do what must lie with the search consultant. For example, very few search firms have the skills or resources to conduct full criminal and civil record checks on candidates. Many clients will undertake this rigorous process by employing specialist third parties .

The added value that the search consultant brings should be in orchestrating and undertaking truly effective reference checks relating to the capabilities and reputation of the candidate in those positions relevant to the current assignment. How this process is managed must be agreed with the client.

Confirming these responsibilities in writing can help avoid misunderstandings or recriminations later.

(See attached Reference checking guide) 3. CONFLICTS OF INTEREST AND PARALLEL PROCESSING In all business dealings conflicts of interest can and do arise. It is rare that they are black and white in nature and the best course of action is always full disclosure as a first step.

The Panel carefully reviewed the issue of "Parallel Processing", whereby candidates are presented simultaneously to more than one client, as one such

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Conflict of Interest. It recognized that the basic principle, of representing the client's interest first, was one which was fundamental to executive search work.

Nevertheless, exceptional circumstances can arise where parallel processing might be justified. In such circumstances a heavy burden rests upon the search consultant to disclose and reach agreement with all parties concerned before proceeding. The new wording says: Provide to clients the member's undivided loyalty as an advocate and professional advisor in the process of negotiating with finalist candidates. Only in exceptional circumstances, and only with agreement in advance of all affected parties, may candidates be presented to more than one client simultaneously.

A guideline which countenanced no exceptions was considered by a large majority of the Blue Ribbon Panel to be impractical and likely to impose rules of a straightjacket nature. It was agreed that the new wording was a proper presentation of a standard which in no way endorsed parallel processing as desirable but instead imposed a high standard of compliance to disclose and reach agreement should it ever be practiced.

The revised Guidelines are an attempt by the search profession to engage more openly with the client and candidate community and to impose on the search consultant the responsibility for ensuring that sensitive issues associated with successful completion of a search assignment are properly addressed and, where necessary, confirmed in writing.

We hope that we have succeeded in this task but the professional Practice Guidelines will inevitably be subject to on-going review as changes in the business environment and developments in technology affect the executive search business. www.search-consult.com

The AESC welcomes feedback: Email: pmf@aesc.org

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STEPS TO EFFECTIVE REFERENCE AND BACKGROUND CHECKING The taking of reference and background checks is a critical part of the search process.

In order to avoid misunderstandings or problems at a later date the AESC considers it is the responsibility of the search consultant to clarify who will conduct reference and background checks, and to ensure that all parties involved, i.e., consultant, client and/or specialist third parties, understand their roles and responsibilities in the process.

The following guidelines are intended to help AESC member firms, clients and candidates better understand the definitions and processes involved in this phase of a search consulting engagement. However, member firms operate in many different countries and these guidelines should not be interpreted to contradict specific national legal requirements.

DEFINITIONS Reference Check: comments, oral or written, from current and past employers or colleagues concerning a candidate's strengths and weaknesses vis a vis the proposed position.

Employment History Check: verification of dates, positions and responsibilities during a candidate's professional career.

Educational and Professional Credentials Check: verification of a candidate's college attendance, awarded degrees and professional certification.

Criminal Record Check: a check of a candidate's name against appropriate district, regional and/or national criminal records.

Civil Record Check: a check of a candidate's name against appropriate civil records.

Background Check: this is a broader term often used to include all checks with the exception of the reference check.

Media Check: a check, often employing the internet, to see if a candidate has been mentioned in newspapers or other media during the past several years.

REFERENCE CHECKS Reference Checking is a way to expand understanding of candidates' skills and experience through the opinions of those who have worked with them. The intention is to build up a comprehensive picture of a candidate and to validate or challenge conclusions that the search consultant and client initially may have reached.

References customarily are conducted by search firms both in the preliminary stages of a search and, more comprehensively, in the final stages of a search as an individual becomes the favored candidate. At this latter stage clients may also choose to conduct references on the candidate. Since, at this point, discretion and confidentiality issues can be particularly delicate, AESC recommends that this collaborative process be carefully orchestrated by the search consultant.

The AESC does not recommend a specific number of references to be taken nor how far back in a candidate's professional career references should go. Rather, the specific reference checking process to be employed should be discussed and agreed upon between the search consultant and the client since the circumstances of each search engagement are unique.

BACKGROUND CHECKS Background checks seek to ensure the accuracy of more objective data such as employment chronology and educational credentials. They also seek to ensure that the candidate has no civil or criminal history that would preclude successful fulfillment of the responsibilities of the proposed position.

Many large corporations routinely conduct such background checks on all senior executive appointees, along with other screenings such as medical and drug testing.

Some do this in-house while others employ specialist organizations to conduct the checks on their behalf.

AESC recommends that the search consultant explicitly agree with the client as to who will assume responsibility for such background checks. Regardless of who conducts them the search consultant should ensure that there is agreement with the client as to the level of checking and degree of thoroughness appropriate to the engagement.

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Switzerland: A Small

Giant in the Heart of Europe

By Pilar Gumucio witzerland is at the heart of Europe. It is renown for its political neutrality, preferring to remain independent while at the same time, signing bilateral agreements with all the important trade partners to improve its competitive edge.

For example, although Switzerland is not a member of the EU, it is part of the EEA (European Economic Area). It observes many EU regulations and has a bilateral agreement with the EU that permits services and capital to be freely exchanged.

This Alpine country is a small laissez faire economy with one of the highest living standards. In fact, Switzerland has been ranked as having the highest per capita income in the world. An FT survey has ranked Zurich and Geneva among the 10 best cities to live in terms of the quality of life they offer.

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Switzerland's prosperity is based on a number of factors: political and monetary stability, a multicultural environment, world-class communications, first-rate infrastructure and a highly qualified workforce.

Despite its small population, the Swiss profit from their multilingualism and cater for various diverse multinational corporations. In fact, foreigners comprise approximately 25% of the Swiss labor force.

Switzerland generates 40% of its GDP from international trade. It is considered the 16th largest exporting country worldwide. This mountainous country is a very attractive location for many multinational companies as many global players have chosen to set up their European headquarters here. In addition, Switzerland holds many international organizations, such as the World Trade

Organization and the United Nations.

There is no other country in the world that has so many multinational companies and international organizations concentrated in such a small area.

This small giant boasts a very diversified economy and is a global competitor in industries such as: pharmaceutical; biotechnology; metallurgy; machinery and electronic products; chemicals; as well as watches, jewelry and precision instruments. In addition, this alpine country is renown for its expertise in banking, insurance, consulting and tourism.

BjĂśrn Johansson, Managing Partner of Dr. Bjorn Johansson Associates, describes how Switzerland has"Credit Suisse and UBS (two of the world's largest banks), it has Nestle (the largest food conglomerate), it has Zurich Financial

Bjorn Johansson Services (the largest insurance and reinsurance company based here), it has Novartis and Roche (two of the world's largest pharmaceuticals) as well as other industrial companies like ABB." THE CLOCK BEGINS TO TICK BjĂśrn Johansson reports, "Executive search began in 1959 when Dr. Egon Zehnder opened the Spencer Stuart office in Zurich." This activity made Spencer Stuart the first headhunter to expand its presence in Europe.

Pierre Tacier, Managing Partner of Leaders Trust International, describes how, "Executive search has been truly active since the mid 1960s. It's a phenomenon that is more than 40 years old‌ All the large US multinationals had their European headquarters in Switzerland in the 1950s and 1960s and as such, it was logical that executive search began here. " The fact that there are so many multinational companies have contributed to the development of the Swiss search industry. "No other country in the world has so many diverse multinational companies per capita. Many American multinationals had their European and Middle East/Africa headquarters based in Switzerland, such as Hewlett Packard, Digital Equipment, Philips Morris, Dow Chemical, and

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General Motors. These companies all used search to recruit their international top management teams", explains Bjorn Johansson.

He adds that it is interesting to see how so many search firms had their global headquarters based in Switzerland and thus, depicted its predominant role in Europe. "In 1964, Dr. Egon Zehnder opened up his own search firm, which today is among the top three worldwide.

TASA, who was later acquired by TMP, also started their operations in Switzerland in 1964 with Jim Fuljum opening an office in Zurich. Berndston International, now part of Ray & Berndston, had his firm in Geneva."

As in many parts in the world, search in Switzerland began with the big players.

Pierre Tacier remembers, "In 1978, when I started my own career in executive search it was really a game played by large multinational companies and large executive search firms. The medium to small sized companies had never heard about executive search."

As time passed, search firms began to broaden their client portfolios to include medium and small sized businesses, explains Manuela Fritschi, Consultant for Knight Gianella & Partner.

Bjorn Johansson states, "Today executive search is totally integrated in the business world, and has for the past decade. The concept is widespread and used by all sectors: large and small firms,

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THE MECHANISMS OF THE CLOCK Hazeline van Swaay, Managing Partner of Transearch Dayak, reports that executive search initially started in the German speaking part of Switzerland.

Since it represents 75% of the Swiss population, it is logical that most of Switzerland's economic activity be concentrated there.

Executive search then expanded to the French-speaking part of Switzerland, which represents 20% of Switzerland's economic activity and is in direct proportion to its French-speaking population, explains Roger Rytz, Office Manager of Spencer Stuart.

Meanwhile, in the Italian-speaking part of Switzerland, Pierre Tacier describes that there are no renowned search firms.

He adds, "Most of the companies will either go to Milan or Zurich".

The Italian-speaking region is a small market and, according to Bjorn Johansson, represents less than 5% of executive search.

He believes that one office in Zurich is enough to cover the demand generated in Switzerland. Bjorn Johansson has been in the executive search business virtually 15 years and his experience has shown that 70% of his assignments are completed in English with the remaining 30% conducted in German.

Nevertheless, Roger Rytz and Pierre Tacier, also veterans in the business, strongly recommend that search firms should be established in both Zurich and Geneva.

Pierre Tacier states, "There are differences in mentalities and different types of industries. If you want to do business, it is highly recommended you be established in both places."

Meanwhile, Hazeline van Swaay advocates search firms "should provide services in 4 languages: French, German, English and Italian. Though we document everything in English, due to the fact that most of our clients are multinational corporations; we speak the language of

Roger Rytz

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Pierre Tacier the client and candidate. This is a definite advantage as it allows people to express themselves in the language that they are most comfortable in, which enables better assessment of a corporation's culture or a candidate's personality."

THE CLOCKMAKERS Among the prominent search firms based in Switzerland are Dr. Bjorn Johansson Associates, Spencer Stuart, Egon Zehnder, Knight Gianella & Partner, Heidrick & Struggles, Transearch Dayak, Korn/Ferry, Leaders Trust International, Swiss Pro International, Denzler & Partners, Amrop, Reutimann Executive Search, Lombard & Howell, Signium International Engels & Harzheim, Kienbaum and Solidways.

Executive search is widespread.

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Hazeline van Swaay describes how on one level, most of the international search firms have a presence in Switzerland. Yet at the same time, you have a " number of one man/woman operations".

"In Geneva alone" reports Pierre Tacier, "there are 160 agencies calling themselves headhunters." Although he admits that 95% of them are in fact placement agencies and not pure search firms.

Bjorn Johansson explains, "Search was booming in 1990s as many firms opened offices calling themselves headhunters.

These firms did not operate in a thorough and professional manner. As such, during the boom years the quality dropped dramatically…. Now I am hoping that the quality will come back in focus."

In Switzerland there are initiatives being taken to create an organization that will deal with this issue of raising standards and enforcing ethics in the search industry.

VDPS, a Human Resource Consulting Association that has members from executive search firms, has taken on this challenge.

However, some of the search consultants we interviewed report that they did not take this association too seriously. The current President, Roman Bussinger, admits that none of the top 10 search firms are members of this association. Yet he and his association continue to strive to pass legislation and promote high ethical and quality standards for the search industry.

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WHERE ARE THE JEWELS OF THE CLOCK? Hazeline van Swaay highlights that the key difficulties in executive search are "linked to candidate availability and mobility. Given the small size of the Swiss market, [local] top talent often goes abroad for faster career development. Then there are the different regional cultures making it difficult to convince someone from Zurich to move to Geneva and vice versa. Having said that, the issue is often more for the spouse than the candidate him/herself.

Indeed the spouse will have to operate in the local language, whilst the candidate can conduct business in his mother tongue and English. Companies will have to recognize that they need to treat local hires like expatriate hires and offer comprehensive relocation assistance to the family even if it is from one Swiss town to the other."

Pierre Tacier disagrees. He recognizes that this difficulty did exist, and still may with mid-level executives. However, it is no longer an issue with top level executives.

Since Switzerland has a small pool of talent, Switzerland must look outside its borders to attract top talent.

Roger Rytz explains, "Switzerland was the first European country that systematically looked for foreigners. We have a bigger percentage of foreigners in our boards and top executive management committees than any other country. Our

KEY ECONOMIC DATA FOR SWITZERLAND

POPULATION GDP (US $) GDP PER HEAD (US$) REAL GDP GROWTH (%) 2000 REAL GDP GROWTH (%) 2001 GDP-COMPOSITION BY SECTOR AGRICULTURE (%) INDUSTRY (%) SERVICES (%) INFLATION (%) LABOR FORCE (M) UNEMPLOYMENT (%) EXPORTS (US $) IMPORTS (US $) TRADE BALANCE (US $)

SWITZERLAND 7.2 Million 238.9 Billion 33, 000 3.4 1.7 4.5 26.4 69.1 1.4 4* 2.2 94.7 Billion 96.9 Billion -2.2 Billion

25% are foreign workers

surveys indicate that over 45% of our executives are foreigners."

He further describes how, "Switzerland is attracting and needs so many foreigners." On one hand, "we do not have enough qualified managers because our population is so small." On the other hand, "we need so many foreigners to run our international companies. The typical Swiss company exports 95% of what it produces since our home market is too small.

Therefore, our companies have to develop their foreign markets at an early stage.

Therefore, we have to attract foreigners from these markets. The situation is exemplified since you have such a large

Hazeline van Swaay concentration of multinational companies that have their headquarters here."

Hazeline van Swaay reports that in 60% of their searches candidates are sourced outside of Switzerland.

All the consultants we interviewed state that the country where they look for candidates mainly depend on the industry and position required. Having said that, the most frequently mentioned countries for sourcing candidates were Germany, United Kingdom, Benelux, France, Scandinavia and the United States.

At the same time, Roger Rytz emphasizes that it is vital "to make sure that language and cultural issues are always respected."

THE CLOCK STOPS…

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As in every part of the world, the development of the executive search industry mirrors the state of the economy, which is obviously influenced by both international and national factors.

Hazeline van Swaay explains that Switzerland has mainly two types of economies: a strongly protected local economy, historically not very dynamic because there is not much competition.

Then there is a disproportionate number of multinationals with sometimes over 95% of their turnover outside our country.

Due to the global recession, the overall search industry appears to be on holdand Switzerland is no exception. Manuela Fritschi states, "There is no telling when the economy will take off again and businesses, specifically management teams, are choosing their investments carefully. Of course, they do use a headhunter when the pressure and need for change is strong enough".

As Roman Bussinger explains, there is still demand for specialists, but businesses are more concerned with costs. "The market is consolidating as search consultants are striving to improve standards as well as become more specialized." …BUT JUST A LITTLE Yet, despite the economic downturn, businesses are still using search firms.

Hazeline van Swaay states, "At the moment, the Life Sciences industry is a dynamic area.

Traditionally, the pharmaceutical industry has been based

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in Basel. For example, Novartis and Roche have their international headquarters here."

She adds that in recent years foreign pharmaceutical groups and important medical device companies like Medtronic (the world's largest medical device company) have set up their international headquarters in the French-speaking part.

The reasons are linked to the proximity of the Swiss Federal Polytechnical Institute, excellent University hospitals, as well as the fact that French-speaking cantons have become extremely attractive in terms of offering fiscal advantages. Within this context, it is important to remember that, "Switzerland's governing power lies with the individual cantons and not the central federal body."

Pierre Tacier also reports, "Life sciences as showing some movement in recruiting executives". In addition to Basel, he explains that the Geneva -Lausanne area is becoming more active with a number of biotechnological start-ups and the world famous bio-technical company Serono that operates there.

All the consultants agree that Financial Services, the backbone of the Swiss economy, is stagnant after so many years of enormous growth. Nevertheless, talent is always required for key positions. This sector still represents a significant amount of the total number of search assignments.

Moreover, Bjorn Johansson reports that many medium sized companies in the Industry sector are still showing signs of activity. Her continues, "Then there is the

WHERE ARE THE SWISS SEARCH FIRMS LOCATED?

Zurich Geneva Bern Lausanne

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Board of Directors… In the past year and a half, there has been a revolution in regard to the composition of boards. 40% of our work covers boards, which is double the figure when compared to last year."

Roger Rytz concurs. He has seen " a dramatic rise in the Board of Directors.

CEOs are very strong. CFOs and CIOs have also increased because of the difficulties in the economy as companies try to find the executive who will be the answer to all their problems."

Manuela Fritschi believes that an important factor for the rise of the Board of Directors is the sophistication "of recruiting processes and succession planning; most recently the Swiss Code of Best Practice (a proposal to reform the Swiss Corporate Governance) for the structuring and responsibilities of non-executive boards… [which have led to] a new CEO generation."

THE SMALL GIANT'S FOOTSTEPS The Swiss have always been known for their keen sense of innovation and

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precision, and this has transcended into the search industry. Switzerland has witnessed the birth of search in Europe. It has proven to be a highly competitive and diversified market as international search firms, small prestigious boutiques and one man/women operations co-exist

in this small Alpine country. Although Switzerland is suffering the consequences of the global recession, some Swiss search firms continue to be at the forefront of search. With the precision of a clock, this small giant is quietly gaining ground.

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ISSUE 1 ● Dr Jürgen Mülder Heidrick & Struggles ● Executive Search and Management Appraisal

ISSUE 2 ● Steve Potter TMP Executive Search ● Executive Research The Outsource Option

ISSUE 3 ● Jeff Christian Christian and Timbers ● Focus on the Whitehead Mann Group

ISSUE 4 ● Windle Priem Korn/Ferry International ● Chris Clarke Boyden Global Executive Search

ISSUE 5 ● Paul Ray Jr Ray & Berndtson ● Search in Germany The Law

ISSUE 6 ● Pat Pittard Heidrick & Struggles ● Germany's top 25 Search Firms

ISSUE 7 ● Russell S Reynolds Jr. Directorship Search Group ● Search in South Africa ● Corporate Governance

ISSUE 8 ● Hob Brown Jr. Russell Reynolds Associates ● Global Leaders ● Maintaining Quality in Search

ISSUE 9 ● Gene Shen - A.T. Kearney Executive Search ● Competition from within in house executive search

ISSUE 10 ● Dr Jürgen Mülder Heidrick & Struggles ● Executive Search and Management Appraisal

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ISSUE 12 ● Ulrich Dade, Amrop/Hever Group - exclusive interview ● The War for Talent 2: Update from McKinsey ● Search in Switzerland: Market Review

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E. Volpert, Executive Search La Closerie Sus-Chatel - CH 1272 Genolier Tel: +4122/366 21 00 Fax: +4122/366 21 51 Email: executive.search@span.ch

World of Search

In this issue we ask our panel to discuss the impact of the Enron debacle on the Search industry.

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Don Tuttle Tuttle Ventures Group

Nadim El Said The Amrop Hever Group

Clearly, the Enron/Anderson debacle has created a market perception of distrust for both big company's and some of the professional service businesses. I do not believe it has had a direct negative impact upon the search industry as much as the search industry has done itself a disservice as evidenced by all the articles in Wall Street and other major publications on subject matters including some search firms parallel processing candidates to different clients, litigation by clients due to search firms neglecting their off-limit guarantee's, poor reference checking on candidates backgrounds, large search firms greed to charge 33 1/3% cash retainer plus 1/3 of the candidates stock option package, etc. These are only some of the negative issues, over the last few years that have created an environment of mistrust in the entire search profession.

A search professional can no longer be like an "Art Critique" and assume that he/she is an expert in evaluating a piece of art work just because they have been in the business a long time. In the last several months, during the downturn of the US economy, we have been able to take the time to think "outside the box" and upgrade our evaluation techniques significantly.

It is important that the search firm due the proper due-diligence on the candidate's background. The worth or value of a candidate can be proved by looking at his/her past performance and validating this through the proper reference channels. We also believe that an executive's "past performance is the best indicator for future performance". It also shows the value each candidate brings to the business.

Additionally, our best advantage is our "Best Practices Evaluation Methodology" that we employ when we evaluate potential candidates. It can take up to 4 hours of interviewing each candidate to fully understand their background, experience, personality fit, chemistry fit and cultural fit.

I'd like to point out that the following comments are made in the context of Middle East markets with which I am directly involved. It is not easy to draw a profile of clients' perceptions and variation in their trust in professional services and executive search in emerging markets.

The best assurance one could give to their clients in the Middle East and elsewhere, is maintaining quality and integrity of professional service. The professional must somehow verify that client received desired value from their services.

Cultivate trust building performance continuously.

The reasons of executive performance or lack of it could be influenced by numerous factors other than the individual's mix of knowledge, skill, experience, integrity and bench; this mix forms the basis for executive search. Clients must assure for themselves that the candidate introduced by executive search are thoroughly interviewed and evaluated. After a hiring decision is taken, the client would have no reasonable basis to blame executive search for decisions the former had consciously taken nor can the client invite the search to participate in the hiring decision process. Furthermore, there are inherent market risks in hiring high-ranking executives. If these risks were to be passed on, in whole or in part, to the executive search industry, then fee levels would skyrocket. This is simply not feasible. One should always bear in mind that the search profession has specific responsibilities within their expertise, similar to the legal profession, to assure professional integrity of advice that they provide and added value it brought to its clients.

While strong candidates may be suitable for one assignment they may not be suitable for another. One might say this is evident; yes but assessing candidates must always be in relation to specific mandate

and could not be general. I don't think that candidate assessment processes in existence in the industry at this time are wanting in any way. It is the application of these processes with professional integrity that needs to be done. We are a bit Leery of psychometric testing through standard questionnaires not because such questionnaires are not useful but some users give them more importance than warranted. However, we believe that psychometric analysis undertaken by a recognized professional through direct interviewing is more valuable, it could reveal psychological or emotional aspect that do not come out even in thorough interviewing. We believe the effort should be undertaken by the client not search firm.

Widening scope of offering could precipitate potential problems in executive search in the future. Meanwhile, specialization maintains focus and promotes sustainable commitment and relationships with clients.

Nadim El Said

Do you have a question for a future panel?

Email editorial@search-consult.com 22

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Marco De Gasperi Hunters Strategic Executive Search

Colleen Quilty & James Mackenzie Alexander Mann Global Markets

The Enron case brought to explosion the issue of conflict of interests. Although the Enron case dealt with the conflict of interests between auditors, creditors, employees and financial advisors, it made me more conscious that all service companies and particularly we the search consultants, should closely analyze our behavior and the possible conflicts caused by it.

Although the potential danger has always been present, it often has been ignored. We should be more careful in detecting the potentially dangerous factors that exist in the executive search profession. In fact, most of our work is a possible source of conflict: we act in the interest of our client but we have to handle the candidates' interests with absolute integrity, respecting confidentiality, giving the exact picture of client and of the proposed position and in general counselling them at our best. Sometimes all this is not exactly what the client expects, and we have to make sure that he knows our firm's position.

The trend to expand the business and have Executive Search, Selection and Internet Recruitment in the same company has a strong potential risk. It is very difficult to keep a clear "off-limit" policy when the number of clients becomes extremely large and when the "off limit" policy is not generally an issue in Selection and Internet Recruitment. It is however essential in Executive Search: we are consultants in recruitment, not only recruiters, and we must get a deeper understanding of our client's organization to give the proper advise.

Another potential conflict of interests exists when we have two clients closely competing in the same market: even more so if they are searching for the same function at the same time. Even in difficult times we should absolutely avoid accepting the assignments: even if two different partners could handle the two assignments, the involvement of the team is too strong to avoid conflict.

There are certainly other dangers that should be looked into. What is apparent is that an "Enron case" in Executive Search would be lethal for our profession.

From the energy trading perspective, prior to Enron’s demise, the markets suffered from a serious skills shortage in a dramatic growth area with the liberalisation of the European energy markets. Enron was a truly visionary company in terms of pioneering trading in new markets, however premature they were in certain product areas!

They expanded very aggressively and certainly in London grew the company organically by hiring young, bright graduates who then embarked on the Enron rotation programme.

Some senior Enron players saw the writing on the wall several months before the demise and they wisely moved before the implosion. Some of these people were instrumental in directly hiring former colleagues into the new fold. It is true to say that almost every European energy company now has a contingent of former Enron staff.

Some key teams were marketed by senior managers and acquired by established energy trading groups wishing to expand their product coverage.

There has been a rise in demand at the senior end of the market and certainly at this level the supply from Enron was always thin on the ground. A track record within the oil, gas and power industries is now highly valued and whilst there are many talented people coming up through the system, the number of top level industry experienced candidates who is still scarce.

Colleen Quilty (Principal Commodities Specialist - AMGM) IMPLICATIONS OF THE ANDERSEN AFFAIR As a general observation, within Investment Banking and Professional Services search, the Andersen affair has not effected the perception of search

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firms amongst clients. The effects have been much more immediate than long term and image orientated. Clearly the affair has led to surplus of potential candidates within the accounting and auditing departments that will take some time to absorbed by this sluggish market, but a large number of the Andersen professionals have been snapped up by rival firms. It was widely believed that Andersen had the no.1 franchise in certain departments and the mistakes at Enron have not diminished that image.

I really don't think the clients trust in the professional services has been hit that hard. A lot of the clients came from the profession, and each time a disaster occurs (eg. Barings, BCCI) they tend to be fairly forgiving. Where, perhaps, this case is different is the intensity of public pressure that has meant some clients need to be seen to be reacting. However, I don't think these particular worries - ie the need for strong independent audit coupled with accurate and transparent accounting - has or will spill over into the search industry. The advantages we give our clients are far more immediate and tangible than a professional accountancy firm. We offer well interviewed candidates that can drive their businesses forward in a very tight timeframe and what is more, the client themselves have the final say as to whether to take them on.

However, the selection and hiring of a candidate involves teamwork involving both the firm and the client and therefore the responsibilities are very definitely shared. Unlike auditing firms, whose statutory and moral responsibilities are to shareholders rather than clients, the responsibility of a search firm is to fairly represent both parties to each other and to help the client fill their vacancy. Which individual is offered the role is ultimately the decision of the client and therefore the ultimate accountability for that hire lies with the client.

James Mackenzie (Director - Finance AMGM)

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By Simon Stephenson, SRA

n previous articles we have looked at the background to Executive Research and suggested the stages in the development of a research strategy. In this article we are going to briefly examine the various tools available to the researcher and how to get the best out of them. This discussion will be valuable not only to the new researcher but also to the person who has a few years experience under their belt. The latter is likely to have moved into a comfort zone with their own favourite methodologies for obtaining information and sometimes we all need to have our eyes opened and be challenged to examine new ways of doing business.

We are living in an information age, where the ability to access information is critical and equally as important not to get overloaded by it. How good we are at doing this largely comes down to experience and practice i.e. knowing what questions to ask and where to look; being targeted rather than broad brush.

It is important to speak to other

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researchers and to share ideas - after all we come across new ideas every day.

NEW TECHNOLOGY The arrival of the Internet has revolutionised the way in which we conduct our research business. It does, however, need to be used with care or else it will eat up time with only limited results. Firstly I would suggest that guidelines are set as to how the internet will be used; failure to do this will produce an illusion of progress via vast amount of useless information but no tangible results. Secondly, before embarking on an Internet search, have a clear strategy in mind, i.e. what is the result that you want to achieve, what search engines or industry sites might be useful and above all learn from previous experience. We have all flogged through a company web site to try finding a simple telephone number when actually a call to directory enquiries would be very much quicker.

Some simple advice would be to realise that in general US sites dominate

the web and so other one may need to be country specific when using search engines. The net can very cleverly hide the size of a business behind a welldesigned web site and so be sure to verify the size of companies from other sources. Keep a note of every useful site that you come across and look back through this list before you start a new project. Learn to use key words when accessing search engines, you will be constantly surprised as to what information is produced.

REFERENCE BOOKS/CD ROM'S Experience will guide you to hold a number of general and industry specific reference books, many of which are now on CD-ROM. In the UK we have a "Personnel Managers Year Book", which I only rarely use for it's original purpose of identifying HR Managers; it does, however, provide me with company telephone numbers, addresses, the size of the business and what they do i.e. invaluable information in an easy to use format. At the same time if you are about

to start a particularly difficult project, find out if there is a yearbook for the industry.

At the very least it will provide you with a structure to your research and maybe save you days of work.

CONFERENCES Conferences will provide rich pickings for industry specific information. Whilst personal attendance is sometimes the only way to really find out what is going on, one can very often find out details on the internet of key speakers, sponsoring companies and who attended.

Conference speakers are likely to be useful sources of information on industry specific issues and are likely to have a strong network of contacts.

ANNUAL REPORTS I am sure that most of our hearts sink when we are asked to read an Annual Report, however hidden somewhere in them is some extremely useful information. What they are not are quick sources of names: yes one will find the Chairman, MD, Finance Director and maybe some Divisional MDs, but they do not go much deeper than this. What they can do is to throw light onto structure and size, both of which are critical to conduct properly targeted research. Very often the summary pages will break down a major corporation into its constituent parts and give their turnover.

Failing this, having ignored the Chairman's bland platitudes about how well things are going in difficult circumstances, the Chief Executive will review in more detail how the operating units are actually doing - careful reading here will help to put a structure on the company.

The accounts pages will help expand these initial sources. Headings such as Segmental Analysis are useful where they breakdown the business either by product are or geographically and where additional information on size and structure can be obtained. Finally the long list of Non Executive Directors includes all their interests and may provide some further sources of

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information, if approached personally.

The most important thing to realise with Annual Accounts is that they should be examined right at the start of a project and should be ordered on day one and not left until you are scratching your head half way through!

SOURCES We will all have contacts in different industries who can help us on our projects. The important thing is both to identify the useful sources and to monitor how often we use them. It is possible to overstay our welcome and start to get a single view on an industry rather than spreading out the net and asking for advice from a variety of individuals.

Sources are useful at various stages.

Firstly they help to obtain a view on what is going on in a specific sector of industry, i.e. who are the major players, who are up and coming and who are shedding jobs. Secondly sources can help to identify the right individuals for the position that we are searching. It is important to remember that they are all busy and therefore any help to more precisely focus on who they might recommend is vital. You need to accurately and succinctly explain the sort of person that you are seeking, avoid generalities i.e. "a good communicator", but rather explain what this individual is to achieve i.e. "revive a work-force that has low morale and drive forward sales".

If names are given, you should ask if you could tell the candidate who recommended them and at the end of the project go back to your sources and let them know the outcome and thank them for their assistance.

TELEPHONE When all is said and done the telephone is still the most important resource that a researcher has available.

There are endless training courses available that will help one to achieve better results from phone use and certainly one can learn a good deal from working beside someone who is an effective communicator. I believe that

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there are a number of simple rules to follow. You should be prepared for your telephone call, know what results you want to achieve, understand the structure of the company into which you are going and where the individual that you are looking for will be based. You must listen extremely carefully, pick up the nuances of what is being said or as importantly not said. Through practice you will know the age and seniority of the person that you are speaking to through the tone of their voice. You must be persistent and assumptive i.e. there should be no reason why you should not be given the information that you asked for or that you should not speak to the Chairman of a company. Following on from this your tone of voice must be confident and relaxed and you should speak slowly. Finally you should record all the information gained as soon as possible - even if it is not relevant for the project in hand - it will have it's uses at a later date. Practice will make perfect and as you become more confident you will push back your comfort zone and start to ask additional questions, which are the hallmark of a good rather than an adequate researcher.

CONCLUSION We have covered a substantial amount of ground in this article and have left out a number of tools of the trade through lack of space. Do share your ideas with others, and never forget the ethics of what you are doing - it is all too easy to overstep the line on the telephone. It is vital to always confirm your information through other means as directories become out of date, receptionists are busy and will give you any old answer just to get rid of you and sources will give you names who have left the companies.

In the next article we will examine how to approach prospective candidates.

www.search-consult.com

For more information, contact: Email: simon@exec-research.co.uk

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Psychometrics

Search &

By Barbara Kwateng

he traditional search process relies on the skill of the consultant to evaluate a shortlist of candidates and determine the "best fit" for the position. Increasingly, however, as the search business model changes and consultants become involved in the assessment of existing management teams, the spotlight is being placed on how psychological techniques may assist in the selection.

Criticics of intuition as the primary decision making tool argue that, whilst it may accurately assess a candidate's current strengths and skills it may prove less accurate for predicting the candidate's ability to take on further responsibility or a new environment.

Furthermore in the face of equality legislation, intuition may hit an obstacle in proving itself to be valid and just. A consultant may have a gut instinct about a person with a similar background - he or she is able to understand how this person 'ticks'. This may be to the disadvantage to those candidates who have a different background to the consultant.

Psychometric testing, it is argued, can overcome these challenges and present itself as a fair process for finding and placing the best candidate. On paper, it offers a benefit for all parties involved; the candidate may see this method as an unbiased way to determine how well suited they are for a position, the client may understand psychometric testing as a

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process of predicting future skills and the consultant could use it as an objective means of confirming their 'gut feeling'. But why then is psychometric testing shunned in executive search and is there a formal role for psychology in search?

Spencer Stuart's Tony Vardy's answer to this is that "in my experience, psychological training provides a framework for assessing people's skills, understanding their motivation and future career planning". Yet at the same time, testing "is less relevant at the most senior levels where one is judging achievements rather than potential. In addition, many senior candidates in the United Kingdom strongly object to having to take such tests!"

However attitudes towards testing can vary from region to region. For example, in Turkey, Aysegul Aydin, Managing Director of Heidrick & Struggles sees a different attitude from the candidates.

"The candidates find psychometric testing interesting. They don't mind spending a few hours doing these tests in the hope that they will be more able to understand themselves!"

She acknowledges that this attitude is not universal. "French companies do like these tests and favour the results whilst other European companies and US search firms steer more clear of them. What is important is that these tests are adopted to the norms of the local market to secure validity."

Perhaps, therefore, the problem with psychometric testing is the way it is perceived. Is it that clients, consultants and candidates alike just don't see it as fashionable or personable as interviews?

Maybe they see it as too 'off- the- shelf' to offer them a valid perspective?

Kevin McGoingle is now a Partner at Russell Reynolds after 6 years at Egon Zehnder. He believes that "search requires an amount of urgency". Isn't psychometric testing the perfect solution to this urgency?

"Tests may be used as one of the final checks during the selection process.

Clients feel that they're not paying for tests but for the consultant's judgement. The search consultant, not the psychometric testing, is the driver of shortlisting decisions. The tests may be added at the end for security more than anything else," he adds. "To many candidates, the test is a little scary, perhaps a little intrusive. Many candidates are not prepared to undergo this kind of examination until they are almost at the altar with the client".

Tony Vardy agrees. "Testing is not a key decision factor. However, we do have some clients who like to use testing as part of the final selection between candidates who have previously been shortlisted through other methodologies".

Sometimes though, the 'human touch' needs to be underlined. Marie-Paule Kirscht, Managing Director of AT Kearney, Belgium, believes that "the decisive factor in finding the right person is the capacity

to analyse and evaluate the fit of the candidate within the setting and culture of an organisation.

Fit is a critical determinant, both for the individual and for the company".

Kevin McGoingle believes that the strengths of search consultants need to be understood before arguing the case for using psychometric testing in executive search. "Search consultants have the ability to synthesise info and cull out what makes people tick. They have the ability to identify and focus on situations which exemplify what makes a good candidate.

Not what they've done but how they've done it. Consultants can assess what unique skills person brings, for example, the extent to which they gladly take on responsibility rather than having it forced on them".

With a PhD in psychology, McGoingle's fellow Partner at Russell Reynolds, Dean Stamoulis, states "we have 3 psychologists at Russell Reynolds. In our searches we use behavioural interviews and our consultants are all trained in how to perform these".

AT Kearney's Marie-Paule Kirscht points out. "A questionnaire or a test will never be a substitute for the human processing of information a candidate offers. The human mind coupled with the best approaches known to identify successful candidates will hold up well over time. The best search consultants use everything they have ever encountered educationally, professionally, socially and personally on any given search". On this basis, testing may not replace existing search methods but rather complement existing procedures, giving them a sense of justice and objectivity.

This is the role in which testing is increasingly seen. A number of our interviewees agreed that wider use of psychometric testing is on its way. "We do not select candidates based on our hunches anymore but we make competency based assessments. To be able to conduct an objective assessment, we have to undertand the core competencies needed for the specific job and then use the evidence from an in-depth questionanswer session with the candidate"

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explains Heidrick & Struggles Aysegul Aydin.

Psychometric testing is already fundemantal to most Management Assessment offerings. Russell Reynolds management assessment practice uses testing for clients involved in succession planning or perhaps going through a merger or acquisition. For example, " we did a project for a forestry products company with revenues of $28 billion.

They were going through a merger and wanted us to come up with recommendations of who should get roles in the new look firm. We met with over 80 people from both organizations and came up with 40 people who should receive the management roles."

Dean continues, "once the project has been started, there will be a discussion meeting with the client and with the

Ayseg端l Aydin candidates. If we take the example that someone has been successful in midmanagement role. The client may be looking within his/her internal labour market to find a person for a new role.

Therefore they want to see nuances and take advantage of management assessment and the psychological aspect it offers." He continues by saying "we use personality and leadership tests. The person ends up describing themselves through their answers, e.g. their drive, aggressiveness, energ y and/or judgement."

According to Kevin McGoingle "management assessments are a natural outgrowth of search. We perform

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assessments for 1/3-2/3 of our core clients".

This allows Russell Reynolds to build an understanding of their client's company culture which may help during the next search, albeit to be conducted normally without psychometric testing. "The searches we do after assessment are usually highly successful. It's almost as though we're fitting a puzzle with our eyes wide open instead of closed" says Dean Stamoulis.

A concern of some employees who complete these assessments is that the results of these could be used to justify a dismissal. Yet Kevin McGoingle sees the "results of our assessments show that outplacement is low".

Testing has its critics. It has been argued that it is possible for a candidate to learn how to "ace" the tests. Psychometric tests may also encourage respondents to attempt to second-guess the ideal answers and therefore reduce the likelihood of objective tests which reveal the truth of the candidate. For Dean Stamoulis, the tests used in management assessments are "designed so that it is very difficult to understand what the marker feels is socially acceptable".

Search and psychology may be inseparable when tests are devised to predict the upper level or limits of a candidate's attainment and it can be proved that it has a knock- on effect of good cultural 'fit' between the candidate and the new employing organisations, easing assimilation into the firm.

The skills required to make a good consultant are described by our interviewees as 'judgement', 'project management', 'strategic insight', 'industrial expertise', 'sensitivity to people and company cultures', 'speed', 'intuitiveness', 'credibility' and 'persuasion'. A good consultant may offer a degree of insight which testing may not offer - the industry sees testing as a process designed to provide scientific support and consistency.

www.search-consult.com

For more information, contact: Web: www.search-consult.com

ISSUE 12 2002 search-consult

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