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Searches becoming more complex under public eye

The original article was published in Shortlist 09.04.19

Executive searches are becoming more complex in the wake of intensifying public scrutiny and a rise in sudden, high-profile senior departures, specialists say.

"Boards are now a lot more exposed as a result of the past 12–18 months, and they can't tolerate any sorts of misgivings they might have in the past. They need to act more quickly and are forced to be more decisive on key issues," says Watermark Search International managing partner David Evans.

Cases where troubled CEOs and other leaders have been pushed out rather than resigning have had flow-on effects into other areas of business, he adds.

"We're doing a lot more due diligence on the existing leadership team to see if they have the ability to step up... before an event happens."

More boards are requesting internal leadership reviews of CEOs and their direct reports, Evans says, and "they're really trying to bolster their ranks to say, 'if an event does happen, how do we ensure the business has a strong continuity plan?'".

Russell Reynolds Associates executive director Melissa Cameron says there is growing pressure not only to have robust succession plans for CEOs, but for all of the C-suite, especially the CFO.

"This has driven an increased focus on having a robust succession plan with objective and consistent data, not just subjective opinion," she says.

More organisations are looking to adapt existing succession planning to current market conditions, Cameron adds. "They want to do this with as little disruption as possible, to ensure continuity and consistency for customers and shareholders."

Russell Reynolds' recent analysis of ASX100 companies suggests local succession pipelines are not as robust as they could be, with approximately a third of CEOs appointed externally, compared to around 20% globally, she says.

More due diligence expected

Search assignments are also taking longer, says Evans. "Given the scrutiny from the banking and finance Royal Commission, boards are even more interested and engaged in the search process. The background checking and reference qualification is going a lot deeper and a lot further back into one's profile."

At the same time, according to Taplow Group Australia managing partner Ian Stacy, clients expect shorter search timeframes, and for recruiters to be ready with insights into potential candidates' availability.

However, he says, exiting an executive from their current employment contract has become more complicated, especially due to complex factors including shares, bonuses or performance outcomes that are yet to vest, and non-compete or restraint clauses.

Global sourcing on the rise

Organisations were dealing with completely different circumstances one-to-two years ago, Cameron says. For example, the traditional route from executive to CEO was relatively predictable and usually Australian-based, with the biggest challenge around retaining leadership pipelines and ensuring they had appropriate levels of diversity.

Today, more clients are focused on digital and data transformation, customer experience, culture and conduct, and risk management, she says.

"Global talent is playing a bigger role in Australia than ever before and leaders are open to bringing in external knowledge."