Gauteng Business News

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HR: Why Shun Industry Outsiders, Corporate Reinvention is Vital


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The capacity to lead successful corporate reinvention increasingly features as a core requirement in the job specifications outlined by boards of directors in search of a new CEO, says Annelize van Rensburg a director of Talent Africa

At the same time, talent search professionals are left in no doubt that candidates from outside the company’s industry will be considered and may even have an advantage over industry or corporate insiders.

But by the time the talent search is complete, the successful candidate almost invariably comes from the industry concerned and on occasion may come from within the company that is supposedly looking for a makeover.

The mismatch between the quest for a new broom and the appointment of a tried-and-tested insider can be glaring.

Apparently, a strategic imperative – the need for new blood – has been forgotten and safety-first thinking has taken root in the weeks after the brief was given to the talent search specialists. Why is this‘

The question comes into sharp focus in view of the spectacular international success of arch-outsider Alan Mulally as leader of the Ford resurgence.

The ailing auto-maker surprised its industry by bringing in Mulally from the airlines division of Boeing. In the five years since then, he has boosted profits, rescued the share price and put Ford back on its feet without recourse to US government bailout funding. The transformation has been nothing short of remarkable.

How Corporate Reinvention Can Make a Massive Difference

Of course, the use of industry outsiders to lead acts of corporate reinvention is almost standard practice in the USA.

Warren Buffet, the world’s most successful investor, was famously brought in by Salomon Brothers to save the scandal-plagued investment bank. At the time, Buffet was billed as Wall Street’s “ultimate outsider”.

A little later, Robert Eckert was hired by Mattel Inc to drive the continued growth of this iconic toys and games business. He previously led Kraft Foods.

Local corporates may have missed some of the international successes, but South Africa also provides occasional examples of cross-pollination between industries.

Banking industry leader Tom Boardman founded and led Boardman’s Retail Stores before moving into financial services. Peter Matlare, CEO of food firm Tiger Brands, joined the packaged goods industry from Vodacom and the SABC. Telkom chairman Lazarus Zim has a successful career in both mining and ICT.

Most recently, diamond producer De Beers created a major surprise by bringing in a total outsider as its new boss. He is mechanical engineer Philippe Mellier, previously a senior executive at French engineering group Alstom, and a man with no experience of mining or southern Africa.

However, cross-industry forays like this are the exception in South Africa.

There are no guarantees of success, however. Outsiders don’t always work miracles.

One US executive made a celebrated cross-industry move some years ago and was initially applauded for short-term gains, only to be named a little later by business news channel CNBC as ‘one of the Worst American CEOs of All Time’.

The Pros and Cons of Corporate Reinvention

The ‘safe’ industry insider does not have to go through a period of intensive familiarisation with a new industry and its dynamics. He or she can hit the ground running.

In contrast, the outsider faces a steep learning curve. Successful cross-industry movers like Alan Mulally acknowledge that their first job is to listen, then listen some more.

Their advantage is the ability to ask embarrassing questions while taking nothing for granted. The reinvigorated executive team around the new leader stops making assumptions and starts to question old habits.

In the early stages of the search for a reinvention agent, a corporate chairman and directors typically acknowledge that a fresh perspective can be extremely valuable.

They may also acknowledge that new technology, new legislation and the emergence of a new consumer are having major impact on their sector. Past practice has therefore become less relevant to the formation of future strategy.

But by the time in-depth interviews are being conducted it is often apparent that the ‘comfort fit’ has growing appeal. Directorial decision-makers not only draw comfort from a candidate’s familiarity with their industry, but with qualifications, work experience and career paths that are similar to their own.

Suddenly, evolution seems safer than revolution. Continuity looks a better bet than a thorough shake-up.

In view of this recurring pattern are we destined for a perpetuation of the old norms. Is all the talk about the need for corporate reinvention so much lip-service‘

Perhaps not. If the break with the past at De Beers turns out to be an overwhelming success, we could very possibly see more of the same at other large companies. Alternatively, the risk of industry casualties at the end of today’s challenging business cycle could also stiffen the resolve of directors looking for new perspectives.

For the present, however, old habits die hard in the way business leaders are identified and selected. Corporate reinvention and change may be on the way, but is not with us just yet.

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