January 2008 – A kingmaker learns to wear a crown

It must be frustrating sometimes for headhunters, working in the background as corporate kingmakers, speaking with chief executives almost every day, sifting through reputations, trying to establish whether individuals have the qualities needed to run a multinational business.

They see and hear a lot. They’re helping to pick the team but the nature of the job means they are not going to get the chance to run the kind of businesses that they see among their clients.

But headhunting is a business too. Since the two biggest headhunting firms, Heidrick & Struggles and Korn Ferry International opted for publicly incorporated status they have needed to adopt administrative managerial structures, even though true headhunters remain some of the biggest hitters in their revenue and income earning.

When Kevin Kelly, a seasoned headhunter at Heidrick & Struggles became the company’s chief executive officer in 2006, he took advantage of the opportunity to analyse the role of chief executive from a personal perspective.

The result is CEO, The Low-Down on the Top Job, an illuminating book that combines the headhunting perspective with that of the chief executive.

The book is timely since the chief executive’s role is coming under ever increasing scrutiny. Those who get it right, such as Jim McNerney, first at 3M and now at Boeing, are lauded by shareholders and analysts. Those who fumble the job, such as Robert Nakasone who left Toys R Us in 1998 just 18 months after taking over, must wonder where they went wrong.

The time allowed to get things right has shortened dramatically in the past 15 to 20 years. A recent Cranfield School of Management study found that the UK’s top 350 quoted companies were changing their chief executive on average every five years although Booz Allen Hamilton’s 2007 survey of CEO tenure suggested that turnover might have reach a plateau with a slight decrease in the number leaving office among the world’s 2,500 largest public companies in 2006.

The number who leave because of poor performance has also risen, quadrupling since the mid-1990s, according to the same study. The type of individuals occupying these jobs has changed also. Research of career paths carried out by Professor Monika Hamaori at the Instituto Empresa Business School found that the loyal company man or woman is becoming increasingly rare. So is the single-industry and single job function.

Instead, the new breed of CEO has moved around more, often having worked internationally for more than one employer. They’re getting younger too and when they do take on top jobs they can expect to be held against much more rigorous performance standards than those used to measure the success of a previous generation.

For this kind of risk they can expect to receive increasingly impressive rewards. Even before share options, pension and other perks, the average salary of America’s biggest 500 companies in the Forbes magazine’s 2006 survey of executive pay was $10.9m.

If we are tempted to believe that any of this comes easily, a glimpse of the regime adopted by Mr Kelly to study for his MBA - another increasingly prominent merit badge among chief executives – gives an idea of the commitment required for these jobs.

While holding down a headhunting job at Heidrick & Struggles he was getting up at 5.30 am each day to cram in two hours study and putting in another eight to 10 hours work at weekends when working for an MBA at Duke University’s Fuqua Business School.

In his book, Mr Kelly includes a “typical day of a CEO” from his own experience, starting at 5.45 am when he gets up for a run and ending after 11pm when he has finished speaking with various members of his executive team on the telephone.

Then there’s the relentless travelling. The book notes that Kevin Roberts, chief executive of Saatchi & Saatchi, the communications and advertising group, clocked up 175 nights in hotels on business travel during one 12 month period.

Why do these people travel so much? A lot of it has to do with relationship building. In spite of all the advancements in video-conferencing and emails, most company heads prefer to rely on face-to-face meetings with their teams and clients. Internet-based social networking has yet to penetrate the business lifestyle of chief executives.

But some things are changing. Gradually chief executives are becoming more international in their backgrounds. Typical of this new breed is Carlos Ghosn, president and chief executive of both Nissan and Renault, the car manufacturers.

Brazilian-born Mr Ghosn was brought up in the Lebanon and educated in France. Earlier in his career when working for Michelin he was based first in France, then later in Brazil, all the time moving across functions. This pattern of experience, says Mr Kelly is becoming a model for those who aspire to the top job in a leading multinational company.

But will this model change? I agree with Mr Kelly’s argument that tomorrow’s chief executives will need to be more entrepreneurial. Carl Schramm, head of the Kansas-based Kauffman Foundation that develops ways of promoting entrepreneurship, says in the book that “Seventy per cent of college kids want to work for themselves.”

But Mr Schramm has identified a significant problem face by entrepreneurial graduates inside many large companies. “A lot of our CEOs grow up in cultures in large corporations where they talk about entrepreneurship, but still hunt these entrepreneurs down and knock them off, because they are disturbing inside companies.”

This poses a real problem for professional recruiters such as Mr Kelly who believes that chief executives in future are going to be younger, more entrepreneurial and increasingly diverse in the national backgrounds. How can they encourage more entrepreneurial understanding among their clients?

Faced with aging populations in Europe and Japan, it would seem logical that recruiters are going to be looking for ever younger options. At least this seems to be the book’s conclusion. I would like to have seen more discussion of a few more adventurous possibilities. For example Mr Kelly mentions, almost in passing, that in the past year or so several older bosses have been “pressed back in to service.” Gerry Grinstein was brought in at Delta at the age of 71. Could not this be a future trend as demographic change begins to bite?

In the long run I would suggest that it’s the job, rather than the people, that will need to change. The chief executive role has become something of a sausage machine in recent years. On a good day, says Mr Kelly, it is the best job in the world. It is also, he admits, “a gruelling, stressful and often lonely existence.” Yet in future, he predicts, the role will become even more challenging. Is this a good thing? Maybe it is if your aim is to build a career. But it doesn’t seem a great way to build a life.

CEO, The Low-down on the Top Job, by Kevin Kelly, is published by FT Prentice Hall, price £20.

See also: Choosing your headhunter