Although some replacements reach out for these top-level jobs, most have to be found and convinced that the tremendous risks are worth it. Responding to the growing need, executive search firms have developed systematic processes for finding the right candidate to fill executive slots at troubled financial companies.
“Our job isn’t to find the available people and hook them up with the job,” says John Salveson, a principal of executive search firm Salveson Stetson Group. “It’s to find the best person for the job.”
That means executive search firms must first learn everything about the company.
“We must understand the situation in its full depth,” Salveson says. “We must make a judgment about a company before agreeing to do a search.”
So Salveson Stetson, like most executive search firms, does its research firsthand. “If you talk to people and get different stories, that’s problematic,” Salveson says. “If you get the same story, that’s good.”
Knowing how a company got into trouble is important, but it’s not the whole story.
“You must make sure to paint the entire picture,” says Valerie Germain, a managing partner with executive search firm Heidrick & Struggles. “Many would assume you’d spend all your time on what happened, but that’s less relevant that what the company needs now. That’s the difference in understanding the leadership needed.”
It’s a lengthy process. In one recent search, even though Heidrick & Struggles knew both the organization and individuals within it very well, “we went out and spoke to 19 different people to see if the picture held together,” says Keith Meyer, vice chairman of the firm. “Our job is to come in and understand not just the hard, tangible facts, but all of these softer elements of how do they manage and how do they lead. We are constantly working on this. It’s part of knowing people.”
Before Heidrick & Struggles spoke to those 19 people, Germain says, “We spent huge amounts of time with members of the board, employees and former employees to see what the company needed to go forward. If someone is going to step in as a new leader, he or she needs to know if the team is ready to fight or if it’s leaving.”
Each unscripted, dynamic conversation lasted one to three hours.
“We’re looking to understand all of the obvious pieces as well as the ones that aren’t so obvious,” Germaine says. “We use a very rigorous assessment process to get the whole picture.”
Once the client’s history and plans for success are clear, it’s time to look for the right candidate. As Salveson said, merely looking for people who are available isn’t enough.
“For a troubled company, I’d look for a turnaround person,” says Janice Ellig, co-CEO of executive search firm Chadick Ellig. “People who take on these roles understand the risk, and the risk appeals to them. They are really turned on by the challenge.”
For a financial company client, Ellig would look for candidates in the same industry.
“The rules and regulations are so complicated and deep that you have to have that depth and breadth of knowledge,” she says.
Salveson takes a similar approach.
“We target candidates in companies or in industries that have been in similar situations. That’s where you start,” he says. “Candidates must be able to demonstrate that they’ve faced these kinds of challenges before and have succeeded.”
To find candidates with the right experience, search firms build databases, stay in constant touch with working and even retired executives, and spend plenty of time networking.
“We’re in the business of knowing, building and maintaining relationships with senior people, knowing client situations and knowing how to find matches with culture and leadership opportunities,” Germaine says.
Weeding out candidates is an essential part of the search.
“If a candidate is not interested in the challenge, then he or she will constantly ask about areas of risk,” Salveson says. “These kinds of questions are red flags for me.”
Other red flags are questions about work/life balance, travel and working from home.
If the situation isn’t right, even a suitable candidate might say no.
“A candidate may not take a position if the company is under heavy legal review by regulatory agencies,” Ellig says. “If the candidate thinks the board of directors isn’t fully supportive, he or she may turn it down.”
And, adds Salveson, “If the candidate doesn’t think the company will provide what is needed to succeed, he or she won’t take it.”
A crucial part of the process is ensuring that candidates really thirst for risk and can handle it. “Some people want challenges,” Salveson says. “I’ve done interviews with candidates where I’ve spent the first half trying to scare them to death.”
Germain says a key to success is knowing a person’s leading bias.
“Some people are attracted to situations that are a mess,” Germain says. “It starts with an intrinsic knowledge of what a leader wants. Some really enjoy high-risk situations. They view that as an opportunity, whether it’s saving a company, resurrecting a brand or doing it for the greater good, such as saving jobs.”
People also take such jobs for financial reasons. Salveson cites an instance where a CEO in one industry took a challenging turnaround job in another industry.
“They were facing a lot of challenges he’d dealt with 10 years ago, plus the stock was really low, and he was going to get a lot of it,” Salveson says. “He felt that once the problems were fixed, the stock price would increase greatly. So, one motivation is to create wealth.”
Challenge, financial reward and an opportunity to succeed hugely and publicly still aren’t quite enough.
“Deals close when candidates feel they understand the situation, can provide a solution and be successful—then they make a connection,” Salveson says.