By Tim Watts
The appointment of Fred Hilmer – a management academic with no media management experience who reportedly said that he does not read newspapers – to the chief executive post at John Fairfax Holdings was a surprise to many. But the decision of the Fairfax board highlights a growing trend in the recruiting of senior management.
Gone are days when the ability to manage an organisation effectively was considered to come from years of hard-earned experience in the ranks, understanding the organisation and its clients from the bottom up. The increasing professionalism of managers has ushered in an era of portable executives. The head-hunters estimate that the typical tenure of chief executives has fallen from between six and eight years in the 1980s to about three years for a new appointment today. A growing number of top managers are following a freelance career, traversing the globe applying an ever expanding set of skills to a variety of organisations in a range of industries.
David Pumphrey, partner at executive recruiters Heidrick & Struggles, interviews hundreds of executives across the spectrum of countries and industries every year. “Clearly, the career aspirations of executives have changed. They no longer see themselves in a 10 or 20-year term at a company. They see the executive role on a project basis, getting the company to the next stage and then using those skills elsewhere. It is the portfolio career, working for a number of companies, adding to your skill base with every post.”
The future for managers holds a new series of challenges. Flexibility, mobility, portability of skills and rapid learning: these will be the characteristics of the successful managers of the next decade. Individuals will be forced to accept a career with many short, intense periods of information gathering, followed by quick bursts of strategy formation and chaotic brackets of radical organisational change-management.
A recent American Express survey of European executives, academics, trade-union officials and politicians on the future of the workplace found that the life of the manager in the next century is likely be one of longer hours; short, sharp stresses; increased business travel; and extended periods of unemployment. Adapting to this new environment will require new kinds of management skill. It will also require a new approach to personal life, as the long-term workplace relationships, geographical stability and everyday routine that now mark the career of most managers become things of the past.
Managers will increasingly work from home offices. They will require the technological literacy to participate in the communications media of the Internet and e-mail. And they will need the self-assurance and entrepreneurial qualities necessary to maintaining several work projects at the one time and to soliciting new sources of work constantly.
The first signs of the new era can be seen in the growing number of American executives being recruited to the top ranks of Australia’s largest companies. High-profile individuals like Frank Blount at Telstra and Paul Anderson at BHP are being plucked from executive ranks in distant overseas markets to meet specific organisational needs at Australian companies. The trend is not restricted to chief executives. In the information technology and finance sectors, middle management talent is being increasingly acquired from international labor markets as organisations seek individuals with particular specialised abilities.
Pumphrey believes that special types of manager with discrete sets of skills are emerging. “There are specialist executives who are expert at restructuring companies after the downward cycle, and there are managers for expansion, for the growth-oriented activity in the good times.”
One can appreciate the appeal for individual executives of a frequently changing managerial challenge, however traditionalists may doubt the effectiveness of the freelance executive, seeing it as a short-term solution. Most observers suggest that the change is compulsory and is being forced along by the globalisation juggernaut. The technology-driven increase in the pace of economic change is actively shortening senior managers tenure and is leading many companies to turn to the freelance executive.
Ian Crichton, managing director of the consultancy Remuneration Planning Corporation, says: “Companies are constantly being forced to re-orient themselves. They need a new perspective from an outsider to achieve this. The second-tier managers within the company simply aren’t being considered.”
However, the detached perspective of a new manager does not necessarily ensure success. For every effective outsider, such as former oil executive Peter Smedley at the financial services group Colonial, there is an under-achiever.
Deloitte & Touche Consulting partner Bill Kemp says: “In most cases, thinking strategically requires a deep knowledge of the market in question. Having a grasp of the interaction of competitive factors in markets takes a bit of learning.” Kemp says that companies in Australia’s newly competitive electricity market are hiring managers from industries with a strong consumer focus to help them build strategy.
A good understanding of consumption dynamics seems to be one of the most transferable aspects of management. Brian Singer has built his Victorian surfwear company Rip Curl into a global brand with annual sales of more than $150 million. He believes that brand-building skills are highly transferable. “We don’t sell product. Our expertise has been in building the Rip Curl brand, and that is something we could move into other areas.”
Another successful manager, Gerry Harvey, executive chairman of the retail phenomenon Harvey Norman, claims that despite globalising trends in all aspects of business, national boundaries are the biggest barrier to the transfer of management ability. “We have a particular mind-frame in Australia. Americans and Europeans can take two years or more to figure it out, to capture that cycle. It isn’t easy. You have to stick to your knitting for the most part.”
A recent BRW survey of the best-value chief executives in Australia’s top-50 listed companies presents a different picture. The Telstra chief, American Frank Blount performed very well, second only to Harvey himself, in delivering the best return to shareholders for every dollar of his salary. Westpac’s Bob Joss, who has been the managing director since he was recruited from Wells Fargo Bank five years ago, was also in the top five. However, the below average performances of several other imports do bear out Harvey’s claims.
Harvey says that although Fred Hilmer’s appointment to Fairfax surprised him, he was impressed by the screening process the company’s recruiters undertook before offering the position. “When he was being considered I understand that [chairman] Brian Powers got all his senior executives out to have a chat with him and asked them if they thought they could work under him. They all said they could. That was smart, I think.”
Most executive head-hunters confirm that a candidate’s record as a manager in organisations is the main assessment tool. Experience and demonstrated managerial skill are critical guides to the strength of individual candidates. But whether experience as a successful manager of a mining company is a guide to a person’s ability to manage an insurance company is hard to gauge.
Paul Gibson of the Department of Management at RMIT University says: “The way someone has interpreted their experience determines the use of their experience. Experience consists of non-reflective judgment; some degree of experience is specific. In the case of a manager moving from BHP to AMP, it is possible that judgment based on experience may not serve them very well.”
Differences across industries are not the only variables. Gibson cites the example of Lee Iaccoca, who was fired from Ford and went on to be phenomenally successful at the rival car maker Chrysler. “At Chrysler his management skills in influencing government policy makers were very important.”
There are certain basic management skills that are portable. Gibson says: “The ability to articulate values, to form strategy, to communicate to peers and subordinates; these are all broadly portable but they are constrained by culture. The master skill of management therefore is the ability to read context and see how to adjust your skills based on how the context has changed.
“You need time to read context and you face the problem of the feedback loop: who is going to tell you if your style is off-centre? This is particularly an issue for executives who have been recruited from outside an organisation. They typically don’t receive very much corrective feedback.
“What is required is targeted elicitation. Instead of asking How am I going?, make comments like: I’m concerned that when I ask a lot of questions in meetings that I’m putting too much pressure on you. ”
How then can those new to the management profession or those seeking to adapt to the changing environment in companies develop the ability to transfer their skills successfully across companies and industries?
Gibson says: “It is useless to try to forecast what is going to happen in industries or organisations in 20 years or even in five years time. The pace of change is increasing and all activities are becoming more global. Companies are wanting to transform quickly and it is often easier to bring in an outsider to implement change than to promote an employee with political ties to existing staff members.
“There are generic and broadly transferable management skills that are now starting to be taught well in universities. These are mainly people skills, such as conflict resolution and consensus building. But we are seeing improvements in the training of strategic ability and leadership.”
Peter Cebon, senior lecturer at the Melbourne Business School, says that in the rapidly evolving economy of today, the key thing managers need to acquire is the habit of learning. “This is the value of the MBA. One can learn a great deal on the job, performing the functions of management within a working organisation. However an MBA expands these functions from the particular to the general. It creates a framework against which you can judge your direct experience. It is also a safe environment in which to explore new ideas. In the real world you can’t really trial new ideas with confidence – it is just too risky.”
Cebon says that any exposure to people and companies from different backgrounds to your own is extremely valuable. “This teaches you to go beyond what you are used to and absorb what is going on at the leading edge elsewhere. For example, the management of innovation and research and development is a major concern to most organisations. If you take a look at the way innovation occurs in Silicon Valley in the US, it is very different to most industries in Australia. There are large networks of small firms which research in a co-operative way: interacting, sharing ideas and achieving strong results. Observing new forms of management practice can only add to your effectiveness.
“Bigger companies like BHP have a need for new approaches such as this. You need to know when to focus on the marketplace and when to think about innovation strategically, outside the box. Unless managers are exposed to new ideas they are going to miss potentially important changes in their organisations.”
Cebon believes that the biggest and most important and potentially fruitful step for many managers is the one they take backwards away from their direction-setting role to consider objectively the organisation of which they are a part. “You need to develop that habit of learning, to realise that is possible to sit back and observe a meeting you are participating in and learn from it.”
He points to the example of Bank of Melbourne chairman Chris Stewart, who brought a background in film production to his post at the regional financial services group that has recently merged with Westpac. Cebon says: “Stewart was able to assess the new environment and draw on very specific skills in networking and raising money that he developed in the film industry.”
The many stages of the merger between Bank of Melbourne and Westpac illustrate the complexity and vast array of skills required of the manager of a large organisation in the modern economy. Stewart and his team first had to develop the macro-level strategy of the merger, considering it and the various other options in contrast to the more passive approach of preserving the status quo. Such decision making requires deep understanding of not only the banking sector and its internal trends and dynamics, but also of the theoretical underpinnings of the range of new structures that the Bank of Melbourne could work towards adopting.
Following the decision to pursue a merger, Stewart would have had to undertake the delicate process of canvassing potential candidate companies. Given the destabilising potential of such a process, skills such as effective internal and external communication and consultation were probably required, in addition to the more straightforward strategic and financial expertise demanded in seeking out and putting a proposal to the right companies. Once an initial agreement with Westpac had been reached, Bank of Melbourne management would have needed to engage in the protracted bargaining and compromise manoeuvres that are necessary to reach an acceptable merger plan.
Finally, the change-management process itself – actively smoothing out the transition from one organisational structure to another – draws on a further set of skills linked to the complex area of workplace culture. A detailed understanding of interpersonal relationships and group dynamics is required to manage the highly delicate process of disrupting established hierarchies and creating new structures of authority.
There is no doubt that the era of the freelance manager with a highly mobile set of skills is on its way. Whether the remarkable appointment of Fred Hilmer to the key management post at Fairfax will be the first of many “specialist manager” recruitments at Australia’s largest companies is yet to be seen. In the meantime, Gibson voices a doubt. “Hilmer’s appointment was a crisis-driven decision. It is unlikely to start a trend; it’s too radical.”
However, if the fortunes of Fairfax undergo a marked improvement under the guidance of the former professor, the option of appointing a specialist manager will be hard for other companies to ignore. Managers should keep an eye on Hilmer’s performance to gauge whether such appointments are likely to develop into a trend.