Earlier this year, the board of directors of Telxon, a manufacturer of wireless communications equipment based in Akron, Ohio, found itself in the midst of a management nightmare. Over a frustrating seven-year period, three CEOs had come and gone. Now the fourth was history. And before pulling the cord on his golden parachute, CEO Frank Brick piloted Telxon into an embarrassing nose-dive, earning the dubious distinction of being forced to restate and correct the reported earnings for the publicly traded company for 14 consecutive quarters.
As the Telxon board members began the search for a new CEO, they wondered why four seemingly well-qualified CEOs had failed to deliver. And they decided to make a change.
This time around, they included HR in the process. They transformed Meg Pais, vice president of human resources and administration, from a passive observer into a key player in selecting and integrating the new hire.
For example, when the board settled on finalist John Paxton, it asked him to meet with Pais to get an insider’s assessment of the company. Paxton jumped at the chance, eager to assess whether the company was salvageable before committing himself.
Pais spent two full days briefing him on all aspects of the business. “I didn’t hold back,” she recalls. “I told him the good, bad and ugly.” When they were done, Paxton took the job—and elevated HR to direct-report status. Pais emerged as an influential business partner and coach to the CEO, guaranteeing that Paxton received essential insights his predecessors chose to ignore.
While Pais was becoming more involved at Telxon, Laurel Marden was being left in the dark. Marden, the HR manager at Dynatec International in Salt Lake City, was caught by surprise when President F. Randy Jack announced that he was leaving after 17 years with the manufacturer and distributor of telephone accessories and houseware products. “I have no clue about the change in top management or the plans to recruit and integrate his replacement,” says Marden. “I’m unsure what will happen next. But whatever it is, I’m sure to be out of the loop.”
A Sagging Success Rate
Unfortunately, too many HR pros are -— like Marden -— out of the loop, working for bosses or boards who don’t appreciate the critical difference that HR can make. “HR is involved in the selection of top-level executives only 36 percent of the time,” says Valerie Sessa, research scientist at the Center for Creative Leadership (CCL) in Greensboro, N.C.
Perhaps it’s no surprise, then, that 40 percent of newly appointed leaders fail in the first 18 months, according to a recent study by Jacksonville, Fla.-based Manchester, an executive development and training firm. The study defined failure in a number of ways. “It could mean they were terminated, or that they resigned by choice. Or it could mean they are viewed as being ineffective,” says Marellen Aherne, executive vice president, in Washington, D.C. “Any way you look at it, it’s a serious problem.”
And it may be worse than it appears. “Overall failure rates may be even higher because companies tend to endure poor performance,” says Murray M. Dalziel, global managing director for organizational effectiveness and management development services at the Hay Group in Philadelphia. “You just put up with it because of the expense of trying to get out of some of these deals,” he says.
Often, executive failures can be traced back to a flawed selection process; in other cases, new hires are not given adequate coaching and feedback to help them adapt and succeed.
Both problems fall squarely within the purview of HR, which is why HR needs to be involved in executive selection and orientation. HR professionals can have a tremendous impact on the success of new executives—if they are given the chance and take the proper steps.
Defining Organizational Needs
When selecting new executives, a key first step is to analyze the needs of the organization. Often, organizations don’t think about the competencies they really need, thus ignoring the groundwork for the best decision.
Dalziel shares the following story: “One multinational food industry client of ours that was hiring presidents based on industry norms lost 12 of 24 hires within a three-year period. When it switched tactics and hired to fit the unique competencies of its organization, only two of the next 24 didn’t work out.”
Bill Shupert, senior vice president of HR at The Learning Company in Framingham, Mass., says good selection starts with an understanding that an ideal manager should offer a blend of managerial qualities.
“There are three types of managers,” he says. “The start-up manager has specific skills and gets his jollies out of building the business; the turnaround manager likes to turn around utter messes; and the maintenance manager likes to be told, ‘The business is running smoothly, don’t screw it up.’
“The successful general manager or VP,” says Shupert, “has got to have skills in all three areas. When I hire a CFO or CEO, I look for all three types and talk about them in the interview.”
Interviewing
Studies show that executives fare better when peers, subordinates and bosses participate in their interview process, particularly in a team setting. “It’s not a democracy, but you want them involved along the way so executives can decide if they can work with the key stakeholders,” Aherne says.
Stakeholder participation gives candidates a feel for the people they’ll be working with, and allows interviewers to take ownership of the process. “When you involve a group of people who will be working with the candidate in the selection, they and the candidate have a chance to begin assessing each other and developing relationships,” Sessa says. “When the decision is made, they’ve had a chance to compare this person to other candidates. Agree or not, at least they’ll know the rationale for the choice.”
It’s even good strategy to involve naysayers, Shupert adds. “I pick out the person who is the biggest pain in the ass and include him in the interviewing process. When you include known critics in the decision-making, it gets around the organization in seven nanoseconds. At worst it neutralizes potential critics; at best it turns them into advocates for the new executive.”
Shupert uses the selection process to pave the way for the new executive. He consults extensively, asking people in the organization what they’re looking for in the new executive. “I tell them ‘We’ve got a job opening; the guy didn’t work out and we don’t want to make the same mistakes. What are your concerns? How would you define success? What do you think has to be done in the first 90 days? How will you measure if it’s been done?’”
Info in hand, he folds it into the candidate’s interview. “You get a more meaningful interview because you understand the business issues that need to be resolved, and can ask candidates targeted questions. The person should understand the real issues and challenges. I tell the candidate, ‘I want to know what you’ll do in 90 days and how your people will know you’re successful,’” Shupert says.
Rolling Out the Welcome Mat
Once an executive says “yes” to a job offer, HR should oversee the integration process. This can be a vital element in ensuring executive success.
The integration process should include fairly standard items, such as briefing new executives on the company and giving them insights into its culture; but it also may need to include some surprising elements, such as time spent clarifying expectations, setting goals and coaching new executives.
It’s wrong to assume that top level executives don’t need the HR care and support that lower-level personnel receive as a matter of course. For example, research reveals that—even after extensive interviews and discussions—new executives often take charge without a clear sense of what’s expected of them. Somehow they fail to grasp what the boss wants from them.
“There’s an inversely proportional relationship between the amount of counseling a person gets from his peers and superiors the higher up you go,” says Dennis Alter, CEO and chairman of Advanta, a financial services company in Philadelphia. “Entry-level people have supervisors and HR people. But you bring in someone as president, tell them you want 20 percent return on equity, and leave them pretty much on their own.”
HR can help executives increase their chances of success by making sure they clearly understand the role they’re expected to play, says Aherne. Encourage them to confirm with their bosses what is expected of them in the
first year. Make sure they understand how their performance will be measured and ascertain their boss’s preferred method for getting progress reports and feedback.
Clarity is key. Everything should be set out clearly and unambiguously.
At The Learning Company, Shupert makes certain the message is hammered home by three influential stakeholders. “They are briefed by their boss, the CEO and by me from an HR perspective.”
Paint the Big Picture
A briefing by HR can be an essential part of helping incoming executives check the organization’s pulse. But it should cover more than HR issues.
“Offer the new boss a business briefing where you outline the background on all the senior executives and map out short-term issues that might bite him,” Dalziel advises. “Make sure the briefing is very focused on big picture concerns relating back to the people issues, like the efforts you’re making to build adequate bench strength. Don’t start with the traditional HR issues.”
Pais at Telxon agrees that the briefing must be broadly based. She points out that HR professionals have limited effectiveness when they are knowledgeable only about HR issues. “Whether it’s finance, IS, engineering or manufacturing, if you don’t understand all of these, you can’t be a successful business partner.”
In counseling Paxton, Telxon’s new CEO, Pais “spent a lot of time getting down into the VP and manager level, trying to understand what went wrong.” With her HR background and solid grounding in the business, Pais has become Paxton’s right hand, helping him craft Telxon’s comeback strategy. “He’s told the management team that he’ll be relying on me more than anyone in getting the organization on the right track,” she says.
With Pais’s help, Paxton was able to hone in on the root causes of Telxon’s employee morale problem. “The employees were starved for information,” says Pais. “It had been almost three years since the former CEO had been in front of people. The new CEO went to every location except our international site within three days of his appointment. I was there with him introducing him to people throughout the company.”
Hit the Ground Running
Once new execs are in place, HR should counsel them to move quickly, but prudently. New execs have to make their “mark and demonstrate change within the first 90 days,” Dalziel says. Execs should “take some symbolic actions in the first 30 and 60 days,” he says, but should avoid the temptation to make radical changes.
Shupert agrees that the first three months of an exec’s term are a make-or-break period. “There’s no such thing as a honeymoon period anymore,” he notes. “Executives don’t have a bad year; if they have a bad quarter, they’ll have one quarter more to fix it at best.”
His advice to a new leader: “You need some quick wins, so do something that’s simple and that everyone would like to see happen. Don’t over-promise and underachieve in the first 90 days.”
Keeping promises is crucial, says Aherne. “A major reason executives fail is they don’t deliver; they’re unable to achieve their two or three most important objectives, the things for which you will not be forgiven,” Aherne says.
Savvy leaders, such as David Frisch, don’t miss the point. Frisch recently took the helm of Condee Cooling and Electric, Inc., a 40-employee, $7 million electrical construction and cooling company on Marco Island, Fla.
Before he was offered the job, says Frisch, “the owner hired an efficiency firm to assess the entire operation. He’s made it clear that he expects me to implement the consulting firm’s recommendations. Based on their report, I knew I had to fire one guy right off the bat. Everyone knew he was a good talker, but never followed through. I fired him and everyone respects me for it; to them it was a major change.”
Avoiding Cultural Dissonance
A serious potential snag for new executives involves adapting to the style of a new workplace. “We’re finding that executives, especially from the outside, don’t come in ready to hit the ground running; they need help familiarizing themselves with the new culture,” Aherne says. As a result, Shupert advises new execs to “keep your mouth shut as much as possible until you learn the organization.”
To avoid problems, HR can glean clues about candidates by examining the culture at their previous jobs—and provide coaching to help new execs get acclimated more quickly.
“One of our new presidents came from a very large company with a rigid, hierarchical command and control philosophy,” says Advanta’s Alter. “We’re a much more informal place, and this individual had a rough first few months because the directive style and lessons he learned at the other company did not fit in here.”
Alter brought in an outside coach to help the executive adapt his style to the company’s. “Now he’s doing well,” Alter says. “Working with us and his coach, he was able to smooth over some rough spots.”
Coaching on Softer Skills
One of the chief reasons top executives flounder appears to be that they fail to build good partnerships and teamwork with their peers, subordinates and superiors. In a survey of 500 top executives by CCL, the respondents estimated that 27 percent of the executives they hire ultimately fail, leaving voluntarily or involuntarily, often within two years. In almost all cases, the departing executives exhibited sound business skills; the difference between winners and losers was their social skills, the ability to foster good personal relations with peers and subordinates.
Says Aherne of those who don’t pan out: “They’re poor team players.”
Dalziel adds that execs who don’t succeed usually “don’t have the softer skills, competencies that demonstrate emotional intelligence. They may be too inflexible, set in the way they did things before, especially if they come from the outside.”
There is hope, however, for those whose social skills aren’t up to snuff. The study also found that new executives who received coaching and training were three times more likely to succeed than their counterparts who didn’t.
As a result, organizations that fail to provide adequate coaching are probably shooting themselves in the foot. All candidates, whether internal or external, need coaching. “Internal people may know the lay of the land, but may come in with internal baggage,” says Aherne. “People from the external world may have a clean slate, but don’t know the internal politics.”
Coaches can come from inside or outside of the company.
Internal coaches should come from HR, not from the executive ranks, advises Shupert, who serves as internal coach for The Learning Company’s top executives. “Senior executives are hired to be good leaders, not good coaches, so HR does the coaching,” he says.
Other HR professionals find it preferable to beef up their internal coaching efforts with outside experts. Many agree with Advanta CEO Alter that the investment is worth the results. To Alter, an outside perspective is virtually essential during the transition phase. “To be in the soup while you’re cooking is tough,” he observes. “Internal coaches can be helpful, but it’s a more difficult role.”
Recently, Alter engineered a major reorganization at 3,000-employee Advanta and sold off the company’s credit card division. Embarking on a search for new leadership, he decided, with some trepidation, to go outside for six of eight senior management positions. “We were not in a steady state, so the new people could have had either a salutary or disruptive effect on the organization. I wanted to do whatever I could to tilt the scale to the positive side.”
To help, Alter bought into a program offered by Diversified Search, an executive search firm headquartered in Philadelphia, and leadership training specialists from Manchester. Diversified found the candidates, then Manchester’s Ph.D.s took over, providing psychological testing, training and coaching to help the new hires get acclimated.
Alter worked closely with his outside consultants and new executives. “We get in a room with you and your coach and ask you to identify the five things that are most important for success,” he says. “What relationships do you have to build with your colleagues, key reports, superiors? What obstacles do you see?”
Alter says his executive team gelled rapidly because it confronted cultural and interpersonal issues head on. In the one instance where a new executive was asked to move on, the process brought the issues forward sooner. In a session with Alter present, the new executive, two months into the job, was asked to describe what he thought he was supposed to do. “I want the keys to the car,” he replied.
To Alter, whose father began the business 50 years ago, the comment was revealing. “I told him, ‘no one has the keys to the car,’” Alter recalls. “You can drive the car, but I’ll be along for the ride. I want you to run a part of our business, but I have no intention of giving you control.”
Better Days Ahead?
Overall, experts agree that current executive selection practices are yielding a torrent of unhappy endings. “Everyone says human talent is the most important aspect of their business, but they don’t follow through,” says Judy von Seldeneck, president and CEO of Diversified Search. “Now it’s coming home to roost as so many managers fail and competition for replacements heats up.”
As the evidence mounts that so many key appointments are not reaching their potential, it’s likely that CEOs and boards of directors will look to expand HR’s role in selecting and developing top talent.
And that’s good news. When HR is involved in the executive search and the acclimatization period, the outcome can be much more promising. Just ask Telxon’s new CEO, John Paxton. When he considers where he’d be without Meg Pais, he knows that keeping HR out of the loop would be pure folly.
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Robert J. Grossman, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.
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