I’ve had the opportunity to be involved in the hiring of senior leaders for our clients for the past 45 years and have been able to observe what characteristics of leadership are most effective in delivering a well-run organization that is sustainable for not only the current equity sponsor but will also benefit the eventual purchaser of the company. In recent years, the hiring criteria for c-suite executives has evolved, particularly as it pertains to filling executive roles.
Historically, priorities for hiring senior leadership were strongly focused on an individual’s technical (hard) skills, as well as focusing on candidates with direct industry and functional experience. This formula proved to be successful for many executive hires, but certainly not all. Under these requirements, we saw too many losses, and sponsors and search firms were challenged over time to become more analytical to understand what truly works (and doesn’t work) when hiring individuals to successfully lead companies. While a “tried and true” playbook may have worked well in the past, today’s market landscape has grown in complexity and competition, and out-of-the-box thinking is now critical to drive results in a company.
We have all seen that COVID already has had a lasting impacting on the workforce. As a result, there has been a paradigm shift where companies are seeing an increased value in assessing candidates that may lack some of the industry experience but can demonstrate that they can successfully drive and lead businesses. We have seen numerous examples where a C-suite leader looks good on paper – checking all the boxes for what is believed to be the “right” background for an open role. They have run businesses the same size or larger, they know the industry, and appear to have been successful in their previous endeavors. However, many of these very executives faltered during the last year, and one must ask why? I uncovered several critical skills that these leaders lacked during the global pandemic, a time of turmoil and market disruption. The exposure of leaders who were unable to navigate businesses through the recent periods of stress and uncertainty has set the stage for a new set of requirements that PE firms are focusing on when hiring leaders of their partner companies. Here are four key trends shaping the evolution of executive hires in today’s landscape.
The growing importance of EQ
During this recent period of market disruption and uncertainly, we saw that in many cases, past experiences and successes do not always translate into prosperous future outcomes. It is critical to recognize changes in market dynamics, and truly understand why an executive may have been successful (or not) based on market conditions. Today, hiring managers should not only be assessing hard skillsets, but also the softer skills of their potential future leaders. It is the soft skills–like communication, teamwork, problem-solving, and critical thinking—that will help an organization assess how well the candidate will be able to steer their company through not only the good times, but potentially the bad.
The two soft skills of leadership that have been mentioned more than ever in the past year have been communication and inspiration. It is assumed that all leaders are required to be bright, decisive, strategic, etc. but now more than ever boards, CEO’s, and sponsors are looking for ways to assess how a leader will communicate and inspire with their teams. During the interview and referencing process there has been an increased emphasis on how leaders showed up for their teams during the pandemic and how their teams respond throughout remote working, decreased travel, and infrequent face-to-face meetings. Hiring personnel also are working to uncover how quickly their leadership adapted to a new environment and how they are anticipating handling potential changes in the future.
Building a strong supporting team
In today’s extremely competitive market for talent, effective leaders must clearly demonstrate their ability to build and retain the right team. Employees have become very comfortable working remotely and many believe this is the wave of the future. The pandemic has opened a whole new thought process around work and what constitutes as the right work / life balance. The best leaders are listening to understand the needs and flexibility preference of their employees, while maintaining an eye on what is needed to best serve their customers and achieve established business goals and targets.
Workforce dynamics may be evolving; however, equity sponsors still have an obligation to their LP’s to achieve their forecasted goals – and this comes through hard, focused work. It is more critical than ever that company leaders maintain the drive and sense of urgency that has always been synonymous with success in the private equity world. Once again, communication and inspiration from all functional leaders should be a trademark for executives. Leaders today are required to be more hands on, and they need strong supporting players that can help them execute under compressed / aggressive timelines. Furthermore, the current tight job market is highlighting the growing importance of both retention and attraction of candidates, both of which are very front of mind for organizations today.
Why Hiring Business Leaders Today Is Different Than in The Past
Another trend we are seeing is increased demand from hiring leaders to attract candidates that can demonstrate cross-functional expertise. The best CEO’s, Presidents, and General Managers have often been exposed to several different functional areas within an organization. Leaders that have worked across the organization have an increased understanding of what to look for during times of trouble and how to react to it in a more expedient manner. Exposure to different functional areas also demonstrates an individual’s ability to adapt to different roles, which may allow the person to step in if necessary or effectively guide other leaders to improve their stature in the organization. CFO’s are a prime example of a function that is looked upon by the equity sponsor as the eyes and ears into a partner company. Today’s CFO must have a strong working knowledge of all the major functional areas based on the importance of their relationship with the equity sponsor. A private equity CFO is such a significant role that we built an entire practice around this singular function so that we could identify every equity backed CFO in the market, and have a true understanding of their track record, and the attributes needed for success.
Long overdue momentum in prioritizing DE&I
There has been much written and discussed around how the recent pandemic will change trends and focus in the hiring of their leadership. As much as the pandemic has had an effect on the types of skills and areas of focus that are important when hiring leaders, the increased attention now placed on diversity, equity, and inclusion (DE&I) during the hiring process is the most apparent change we have seen broadly across the market. I do not believe these are trends that we will see change or go away anytime soon, and they shouldn’t. These two critical changes in how organizations assess and attract talent have opened the floodgates for widespread change in leadership teams that was not widely considered enough in the past. Emotional intelligence (EQ) and DE&I considerations are at the forefront of any critical hiring discussion in today’s marketplace. If recruiting firms and hiring managers are not paying strict attention and are not being proactive in these areas, they will run into significant push back from not only their investors but their employees, and even their customers / clients.
Every individual that I speak with expresses a strong desire to get back to normal. Whether it is related to family functions, restaurants, travel, sporting events, or the elimination of wearing masks, people have a desire to return back to their way of living pre-pandemic in some regard. When it comes to assessing, choosing, and hiring talent, however, there will be a new normal. This will include an emphasis on DE&I hiring at all levels and a new skill set as to how to best attract and develop this talent base. A remote workforce in some capacity will remain in effect as leaders determine how to best structure future workforces to meet both the needs and demands of internal employees and external customers. Communication and inspiration will remain pinnacle requirements for individuals in leadership roles. Hard skills will remain important, but soft skills will increasingly be the factors that differentiate a qualified leader from a truly successful leader.