2006 AESC 10th Annual European Conference - Summary
Human Capital & Retained Executive Search: What Lies Ahead?

The AESC marked the 10th anniversary of its European operations during its annual European conference, held this year at the Villa Kennedy Hotel in Frankfurt on 16 November. The event was a great success, hosted in distinguished contemporary surroundings and well attended by 120 executive search consultants from Europe, the Middle East, Asia Pacific and the U.S. Here follows a summary of the day's discussions.

Brussels' Impact on European Corporate Governance, Prof. Theodor Baums

In May 2003 the European Commission published an action plan to enhance corporate governance in the European Union, this was the European answer to the US Sarbanes Oxley measures. Some of these measures are now in place, for example the 2004 recommendations to disclose executive compensation. There are no plans to set up a European wide corporate governance code due to the diverse range of firm structures.

Why Corporate Governance Matters to Retained Search, Prof. Theodor Baums, Hans-Martin Buhlmann, Dr. Florian Schilling, Dr. Stefan Schulte, Dr. Axel Smend, Albrecht Schirmacher

Board assessment is crucial in helping the Board become a more effective team. Highlighting deficiencies via an audit can often help to raise awareness of problems in function and can therefore improve effectiveness. Eighty percent of large public companies use a questionnaire to conduct their internal review, meaning only twenty percent use the more expensive process of contracting an external consultant.

The importance of the governance structure is often over rated and personal elements under rated. All Boards are very much alike in that they are composed of qualified individuals but often function poorly as a group. The main task of the Chairman is to maintain discretion and initiate input from Board members. Key criteria for Board members include: integrity, the ability to bring added value to the Board, business independence and corporate experience fitting the capacity of the Board. It is vital that Board members are free of conflict. For example, a CEO should allow time between leaving the position of CEO and joining a Board. In addition, Board members should have a thorough understanding of the business they are there to supervise. Achieving a diverse Board is also important.

“The letter kills” (e.g. regulation) but “the spirit keeps it alive”. Of course a degree of regulation is relevant to prevent dysfunctional behaviour. Supervisory Boards have become more sensitive towards rules and regulations and transparency is important. However, transparency can lead to public opinion which is often inaccurate, mainly because it is difficult to clearly judge what is occurring on the inside of a Board from an outside perspective.

Private Equity: What Lies Ahead for Executive Search? Heiner Rutt

Mergers and acquisitions mean change, including in top management. The typical profile that portfolio companies of private equity firms look for includes an Anglo-Saxon/US management style, because the thinking involved in this sector lends itself to this type of management style; in depth financial skills and understanding; a detailed knowledge of business; strong organisational skills; entrepreneurial qualities; and an international/cosmopolitan outlook. The management style in private equity firms is intense; managers tend to review the figures rigorously, day and night, because their commitment is personal.

Private equity is chiefly concerned with value. A traditional way of creating value was via multiple trading, which is valuable but rarely happens now. Value can be increased by either growing the business or cutting costs. Private equity people do not take dividends during the length of the deal; they leave the money in the company and focus on regeneration. A short term outlook is negative for private equity because the person buying the business will look at the long term prospects, therefore the future buyer needs to see the management have acted with the long term vision in mind.

Manage for Profit not for Market Share, Frank Bilstein

Market share and profit growth are conflicting objections. Everyone thinks that everyone else is obsessed with market share, creating a theory of "the others". Competitive intelligence is a waste of time unless it affects your customers. Embrace your competition, and when necessary, concede business to competitors.

Is the one third pricing model commonly used in retained executive search a blessing or a curse? The model is established and helps maintain pricing at a level throughout the industry, which is a blessing. But it means you can rarely go higher on price, which is a curse. It also provides an incentive for competitors to under price one another. Pricing models tend to be a blessing when first established and a curse later on when an industry becomes more mature.

Success depends on your confidence in advance of victory. Ask yourself before you go in to the next deal negotiation, "Do I have the confidence to draw the line when necessary?" Unlearning old habits is a difficult experience but vital if you want to part with old ways and avoid giving in to a culture of convenience.

Eighty percent of firms are under pricing themselves. If you give in on price once you will be bullied into low prices again in the future; the client will tell other clients that you back down on price and these clients will also pressure you to do the same. Do not give in to a client's demands for lower pricing, it is normal for customers to complain about pricing. Customers should be neutral when paying the bill; if they are happy with the price you are doing something wrong!

Seven Transformations of Leadership Capability, David Rooke

Are you missing something of blinding importance in the people you recruit? Managing the evolution of senior leaders can radically increase the success of an organisation for sustained periods.

There are many facets of individuality and a diverse array of characteristics and attributes. We are constantly making sense of our surroundings, referred to here as "meaning making", and cannot switch this off. Action logic describes this process which builds, continually, how we work and operate, and develops a fabric that is incredibly resilient to change. This is why people/leaders may not change after their thirties. Adversity, for example trauma, often leads to a new way of thinking and is a catalyst for a change in profile, often to an alchemist or strategist (see below). Integrity is at the heart of the strategy of evolved leaders; Nelson Mandela is an example of a late stage evolved leader.

It is possible to evaluate an individual's meaning making by listening to how they construct language. Consider the meaning making a candidate is experiencing as you interview them; what is he/she noticing and making sense of.

Leadership Profiles

Achiever: rational, goal orientated, seeking challenge, does not question process but is very much a "go getter", self awareness is low.

Individualist: self awareness prevalent, no longer chasing goals, feel they have chased goals and "is that it then?" - searching for something more.

Strategist: increasing sense of purpose beyond themselves, quest of individual to engage in world, sense of being an agent of something important in life but worries will never achieve destiny, displays humility and fierce resolve - there are few strategists at senior levels in organisations.

Alchemist: will not be satisfied working in a corporate organisation, do an astonishing number of things in a number of contexts, multi level/layer approach.

Ironist: less visible in society, on spiritual journey, have let go of ego.

Recruiters need to look further than the obvious places when searching for leaders. Few organisations recruit leaders who think outside of standard operating procedures and choose an alternative approach. Yet these are the types of people that organisations claim to want more of. Organisations cannot transform themselves without post conventional leaders, for example the alchemist or strategist profiles (post conventional behaviour is symbolic and not to be considered the same as unconventional behaviour). The recruitment challenge here is that these people do not fit obviously in an organisational structure and are often dismissed from their position because they are considered difficult to deal with. When hiring, it tends to be the cautious rather than adventurous choice made.

In trying to understand a client's needs, executive search consultants should ask themselves if the client organisation is ready for a post conventional leader.

Speaker: Brussels' Impact on European Corporate Governance

Prof. Theodor Baums is Director of the Institute for Banking Law, Johann Wolfgang Goethe University of Frankfurt; Member of the EU Commission's Advisory Group on Company Law and Corporate Governance; Former Chairman of the German Government Commission on Corporate Governance

Panel: Why Corporate Governance Matters to Retained Search

Hans-Martin Buhlmann is Founder and CEO, Vereinigung Institutionelle Privatanleger (Association of Institutional Shareholders); Editor, Insight Corporate Governance Germany; President, Club of Florence

Dr. Florian Schilling is Partner, Board Consultants International

Dr. Stefan Schulte is Member of the Executive Board; Executive Director Finance and Constructions, Fraport AG, Frankfurt

Dr. Axel Smend is Managing Partner, Deutsche Agentur für Aufsichtsräte (German Agency for Supervisory Boards)

Moderator: Albrecht Schirmacher is Managing Director, GWV Fachverlage GmbH, Wiesbaden; Editor of "Der Platow Brief"

Speaker: Private Equity: What Lies Ahead for Executive Search?

Heiner Rutt is Independent Investor and Former Managing Director, Germany, Carlyle Private Equity

Speaker: Manage for Profit not for Market Share Frank Bilstein is Partner and Executive Vice President, Simon Kucher & Partners

Speaker: Seven Transformations of Leadership Capability David Rooke is Managing Director, Harthill Consulting, Winner of the 2006 AESC European Research Award for Leadership and Corporate Governance

AESC 2006 European Conference Committee: Thomas Becker - Russell Reynolds Associates, Hans Berg - TRANSEARCH International, Richard Fudickar - Boyden, M. Jon Nedelcu - Nedelcu & Company/Leading Edge Executives, Gert Schmidt - Eric Salmon & Partners.