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Corporate Renovation Executive Search: An Illustrative Case
A typical, not an actual, situation.
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Green Tech Enterprises

A chance to make significant returns on an investment

Acme Capital Partners has identified a significant opportunity. Green Tech Enterprises is a firm that has been in existence for 15 years. Its annual revenue runs between 8 to 10 million dollars. Revenue has been stable for the last 5 years. Green Tech makes high speed gears from a special alloy. They can lubricated with a completely biodegrade lubricant.This lubricant also significantly increases the life of the gears. Green Tech is the exclusive distributor of these lubricants in North America. Wilfed Sanger, Green Tech's CEO, is now at the "life style" stage of his career. He no longer wants to put in the hours needed to make Green Tech grow.

The lubricant is made by a small European company, Niesand. Jose Gringas, its owner, spun it out of a major international oil firm about 12 years. The oil firm was not interested in developing this business line. But Jose, a chemical engineer with an entrepreneur's drive, saw this as a chance build something that could set him up in life. He succeeded. He is now ready to retire.

A chance for a break out

Marci Piederson, one of Acme's lead partners senses an opportunity. More and more interested in green technology investments, she ran across Green Tech through a banking connection. She did the market research on both "green gears" and biodegradable lubricants. The market numbers indicate significant potential . She arranged to meet Wilfed Sanger. She quickly decided that he would not take Green Tech where it could go. Then she flew to Eurrope to meet Jose Gringas. He was ready to sell Niesand. After 12 years of pushing, he wanting to enjoy other parts of his life.

Marci realized that Acme would have to get controlling interest in both Green Tech and Niesand. The firms needed to be combined into one. The new firm will need a new CEO. That individual know the industry. The person must believe Marci's analysis that there is a chance to grow the new company 20x to 50x in the next 5 to 10 years. The individual must have the energy, the skills and the drive to make this work. In return, the person will get a piece of this future. The time to make this happen is now, when the world is focused on green technology. It could be a major opportunity.

Marci knows who

Marci networks constantly. Marci has met just the person to be the new Green Tech CEO. She met Willameana (Willa) Sung at a networking meeting for up and coming women executives. She is chemical engineer and an Assistant Vice-President at a major oil company. Willa is frustrated with its size and slowness. Willa has several times shown that she knows how to do more with less when it comes advanced engineering and manufacturing. But given the current culture of the oil firm, she gets kudos' but not the significant promotions or bonuses.The lingering "old boy" components in the oil firm's culture may have something to do with that.

Since then, Marci has had a number of chances to interact with Willa. Marci is impressed by her, and believes that she has what it takes to lead Green Tech's growth. She gets her to sign a non-disclosure, and asks her to supper. They talk. Willa is interested. Marci gives her the files. They spend a morning together talking about possibilities. By the end of the meeting, they are both buzzing with excitement. Willa is hooked by the possibility of doing her own thing, and by the potential equity stake.

But Marci has some concerns

Marci believes that Willa will need to hire a new leadership team. But Marci has learned over her years as an investment partner that she cannot play "armchair" CEO. She represents the investment partnership, needs some distance from the day to day, so she can maintain an investor's perspective. She is responsible for making the deal which creates the possibility. It is the CEO's job to making the investment pay off. Once the deal is done, and the CEO is in place, Marci's job is clarify the performance expectations in broad terms, and monitor the firm's performance. Acme likes to have close working relationships with its CEOs. High growth companies go through ups and downs. The greater the degree of trust between Acme and the CEO, the easier it is work through these stresses. Their experience has shown them that their working relationship with the CEO is key factor in these break out investments. Marci arranges meetings for Willa with two of her partners. They, along with Marci, will be on the board of the new company.

Putting in place the right type of executive team

Marci knows she needs to influence Willa's choice of her senior leaders in three important ways. First, they must really know the marketplace in which they will be playing. That comes with "big company within the industry" career experience. Second, they must be able to do much more with much less. Many large company executives cannot make the transition to smaller companies where budgets are far smaller. Third, they must be able to handle the stress that comes with continuous dramatic growth. Year after year growth in the multiple range (2x+) creates incredible pressures. Every process and person in the company will be under continual strain. Ultimately, all of this pressure must be handled by the folks in the senior leadership group - the "inner circle". They work in an environment that is qualitatively different from that of established companies, where annual growth is measured in percentages. Many executives from large companies can manage larger budgets. But that is not the same skill as growing a small budget to a large one, quickly, under pressure conditions.

But first, the deal

First, Marci will have to put together the deal. She must make sure that the current owners are eased out control of the new firm. She must ensure that the purchase prices are reasonable, given that Acme will have to put additional capital into the firm to fuel its break out take-off. She must handle the legal complexity that comes with a deal that spans multiple legal and regulatory environments.

After several months of negotiating, she pulls it off. Both Wilfed and Jose agreed to sell for a combination of cash, minor equity stakes in the new firm and a very small percentage of future profits for the next 5 years. Willa comes in as the new CEO.

First familiarization, then action planning

After 6 weeks, Willa is ready to make her first people moves. During this period, Marci and Willa talked regularly. They deepened their working relationship. Willa has learned that Marci appreciates the chance to explore possibilities, as much as she values progress reports. Marci will reflect on issues that Willa raises, and help explore them from a variety of view points. She rarely offers "action advice". Instead, she acts as a trusted, private sounding board.

The six weeks of familiarization have given Willa a beginning sense of the capabilities of her main executive players, both in North America and Europe. She has a first appreciation of the underlying business dynamics in both firms, now treated as business units in the new company.

Willa knows that has too many executives. There is duplication in some of the back office functions. But she is not sure that a dramatic cost cutting exercise is the best way to position the new firm for growth. Willa realizes that she cannot conquer the European, Asian and the North American market places at the same time. At this point, she want to focus on North America and South Asia. Marci's analysis, and Willa's own industry experience, indicate that the both markets are ready to "explode" around green technology..

A tale of two cultures: the lubricant business unit

Willa knows that she has culture problems. The cultures of the Wilfed's Green Tech and Jose's Niesand are very different. The lubricant business in Europe has been run lean, with a "lets get it done" mentality which surprises her. Europe's approach to the work/life balance is socially different from North America's and Asia's. People there get 6 weeks of vacation, and generally enjoy the "European" life style. But Willa discovers that the leaders and the staff in the lubricant business are very competitively oriented. They have a world wide perspective. They have taken steps to position their business well for growth. They monitor their internal productivity against international bench marks. They use technology and talent to beat low foreign labor costs.

Jose has been encouraging entrepreneurial leadership growth in his direct reports for at least 3 years. Willa now knows that if Acme had not bought Niesand, a European investor would have. Jose had told her that he has been developing his management team to increase the value of the firm to potential buyers. He had been in dialogue with several other potential purchasers besides Acme.

Willa decides she will generally leave this management team intact for for now. She wants to promote the current head of manufacturing to be general manager of the European business unit. Willa will integrate her into new company's senior management team. This will allow Willa to get more insight into her abilities and potential scope.

Willa will make only one change, She will split the lubricant marketing group out of the business unit. It will no longer report to the general manager. Instead, it will be brought under the new company leader for marketing and sales she plans to hire.

A tale of two cultures: the "green gears" business unit

The culture in the gear company is very different. It has many long time employees. The layer of leaders below its former CEO have largely stopped pushing. Partly, this was in response to the previous CEO's "life style" mentality. But Willa also knows that this partly because they do not really have the capabilities to be energetic, growth oriented leaders. They have taken pride in their comfort and their life style rather than in the products they make and the customers they serve. Over the longer term, Willa realizes that she will have to replace most of them if she intends to growth this business dramatically.

Focus on marketing first

North America and South East Asia have the largest immediate marketing potential for "green gears". Willa will revamp the marketing effort to take advantage of this. As it succeeds, she will have to rapidly expand manufacturing capability for both "green gears" and lubricants. Willa knows that she cannot grow the in-house "gears" manufacturing capability under the its current leaders. But that may be the wrong thing to do anyway.

Intellectual property makes a business difference

Willa has reviewed the patents and other intellectual property owned by both firms. The gear business is far more open to competitive pressure than the lubricant business. Currently, the gear business contributes the major portion of overall revenue. However, any number of North American and Asian firms could give the gears business a run for its manufacturing money. Its intellectual property does not command market uniqueness. A lot of other firms could begin making very similar products, if the "green gear" market were to rapidly expand.

The lubricant business's internationally protected patents make it harder for competitors to threaten its market position. If it can grow its manufacturing capability as the overall "green gear" market grows, the way that Jose positioned its intellectual capital will give this business unit significant competitive edge. Licensing customized manufacturing by others or acquiring other similar firms and re-focusing their manufacturing capability on these specialty lubricants are real possibilities for dealing with the need to grow.

Sell: drive revenue growth

Willa will create a single company-wide marketing capacity. The lubricant marketing group will be its initial core. It will both sell gears and lubricants at first. It needs to start to build customer relationships with other firms that have the potential to manufacture and to use "green gears". They are all potential lubricant customers.

Willa sees the joint sales tactic as a way to rapidly growing revenue a number of times in a 12 to 24 month time frame, perhaps even as much as 5x. There will be tremendous learning as a result, especially as the lubricant management team deals with the impact of this growth on their manufacturing capability.

Hire a new marketing lead

Marci is impressed with her conversations with Willa. She realizes that she now trusts Willa's business insights, and that Willa trusts her not be an "armchair" CEO. Willa shows the right combination of short term drive and long term vision. Willa can clarify strategic options for the next 3 to 7 years. However, she is not captivated by her strategic vision. She implements 1 to 2 year tactics that move the business forward. She is prepared to flex her strategy as events unfold. She is focused on 1 to 2 year revenue. She addresses the limitations imposed by with the operating realities of the business and its past cultures.

Marci agrees that now is the time to hire Willa's new marketing lead. She backs Willa intents with her partners. Once that person is on board, he or she can start to progressively replace the gear business sales team with broader, more capable marketing professionals. This will have to be done carefully, so that existing customer relationships are not strained. Fortunately, the most senior of these folks are almost ready to retire. That will make things easier.

Picking a search firm

Marci suggests that Willa contact two people she knows in the executive search business. The first is the owner of a boutique search firm that specializes in specialty manufacturing. The second is the Executive Lead of WCI, which includes search in its business offerings.

Lunch with the Executive Lead of WCI happens first. He asks Willa to block out two hours. He says that lunch may only last an hour, but if they get on, then the second hour will be will worth while. Before lunch happens, he has e-mails her a non-disclosure agreement, and binds WCI to it.

Willa is glad she has booked the two hours. Although they come from very different professional backgrounds, Willa is quickly intrigued by her lunch partner's knowledge of organizational change and executive behavior. He listens intensely, in a way that puts Willa at ease.

What I need

Willa talks about her vision for the future of Green Tech. She briefly covers her thoughts about how to grow the lubricant business. She muses about perhaps selling the gears business at some point in the future. She positions the role of the new marketing head. First,this individual must drive the needed short term sales revenue. Green Tech Enterprises must ride on the current green technology enthusiasm on both the gears and the lubricants side of the business.

Create a "point to place" for my new culture

But it is not just a marketing job. The person in the role must create a group in that displays the new culture that Willa intends to create. Folks in this group must be customer oriented, results oriented, measurement fixated, and driven to succeed. They must be open to dealing with people in all three social cultures in which the new Green Tech will need to build working relationships and partnerships: North American, Europe and South East Asia. They must be capable of selling both the "green gear" product line and the lubricant line. Finally, they must be capable of working with the different types of people that exist in the "old Green Tech" and Niesand during the next two years, as the culture of both groups gets transformed into the new one. But doing all of this cannot be an excuse for not hitting the revenue numbers.

Deal with the people issues

The new head of marketing head needs to be a culture change champion as well as an excellent marketing leader. He or she will have will probably have to replace the entire old Green Tech marketing sales organization over time. It is not matter of "blood on the floor" and "swing my team in to replace the old team". Rather, it requires a careful replacement of the existing people while maintaining existing customer relationships and forging new ones. It will be important identify people inside the organization with the potential to take part in the Green Tech new marketing activity, and groom them to grow into at least of these jobs.

WCI' approach to search

By both his questions, and his summaries of her points, Willa's lunch partner displays the fact that he understands these business dynamics. When Willa indicates that she is finished describing the current state and her intents, he quietly takes over their meeting. He first focuses on the need to do explicit "personal capability to position performance requirements" fit evaluation and "personality and values to organizational culture fit" evaluation when assessing final candidates. This will particularly important in this case, where the ability to generate a new culture is as much a performance requirement as hitting the revenue numbers. All search executives say that they do this. But WCI addresses the how of doing so in a number of explicit ways.

He talks about the steps in the search, giving Willa both a paper copy of the steps and the way voice-over on mini-DVD. He describes the networking outreach they will do. He covers the behavior based evaluation and sorting he will do of initial candidates, generating a short list. He briefs her on how the short list will be reviewed with her to select the final candidates. He talks through how the final candidates are briefed, after they have signed appropriate non-disclosures. Based on these briefings, they are asked to first present, and then "problem solve" in meetings with Willa and others. He indicates how these activities can be used to predict on-the-job behavior and capability. Finally, he covers the importance of chemistry in final selection of a winning candidate, and how the ability to apply this intuitive judgment is deepened by this candidate evaluation format.

They briefly talk about pricing. The fact that it is time based, rather than retainer based, pleases her. The search process will have a far greater degree of transparency than she has experienced in executive search before as a result. He agrees to follow up with a proposal letter, which includes a project plan and cost estimates.

Getting on with the search

After meeting the partner from the boutique Executive Search firm, Willa calls Marci and says she plans to go ahead with WCI. Willa also indicates that it will be a "stealth" search until she accepts the final candidate list. Green Tech will be described in generic terms and not identified to candidates until that point. Willa believes that this is needed avoid unnecessary upset in the old Green Tech sales group. Finally, Willa suggests that the lubricant general manager, Marci and at least one of her partners should have some role to play in meeting the final 2 candidates. She will make the final selection decision. But she believes that the more people who provide input into crucial hiring decisions, the better the quality of the decision. It also deepens the successful candidate's commitment to the company and the role once they take the job. Marci agrees.

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