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Here’s Why Today’s Leaders Should Choose “And” Thinking

Here’s Why Today’s Leaders Should Choose “And” Thinking

by | 23 November | , , , , , | 0 Comments

HR Strategy, Work Culture by Elizabeth K. Olson
To the detriment of talent development and work cultures everywhere, we most often employ “either/or” thinking. Let’s talk about why today’s leaders should more often choose “and” thinking….

So many important aspects of human capital are nuanced and interrelated, yet seemingly polar opposites. For instance, recognizing the individual performer or recognizing team efforts. Showing respect for each person or showing respect based on performance and rewarding managerial-style performance or rewarding leaders.

Some organizations state only half of these pairs as desired values, hence the “or” between them. This is a mistake because when we see these values framed as either/or choices, we miss the synergy from leveraging the best from both sides. We cause harm from overfocusing on one value to the neglect of the other. After all, many values are interdependent, and ideas we think might be opposites are both highly desirable. The misleading part about this is that they need to live in tension with one another over time. These pairings can be called paradoxes, wicked problems, or polarities that require “and thinking.”

“And” Thinking Versus “Or” Thinking

Both inside and outside of work, complexities exist that require us to think about these tensions between seemingly opposing pairs, rather than choosing A over B. For instance, one critical thinking point for leaders is the push-pull between continuity and transformation.

Those business leaders often find themselves executing complex change initiatives that enable their companies to compete better. At the same time, they must create and maintain consistent foundational cultures employees can lean into – no matter what. All too often, when the message is only why complex changes are necessary, without acknowledging what has been going well (and what needs to remain in place), even the best plans blow up.

Everything done “the old way” is now wrong. Right?

This pervasive contradiction lowers morale and confuses, thereby sabotaging the energy and focus needed to implement the change.

Centralized Versus Decentralized Coordination

One of the biggest derailers for employees is the pendulum swing between centralized coordination and decentralized coordination. Organizations are frequently in a seesaw around this polarity. It’s as if one is better than the other, so they over-focus on one at the expense of the other.

For instance, a new chief executive officer is instituted and says: “We’ve lost the entrepreneurial nature of this organization, and we must decentralize and give control to each of the business units.” Because centralization and decentralization are interrelated, people complain there is no coordination and little ability to share services effectively. That causes the next CEO to say: “We have to centralize; everything is all over the map. Nobody knows who’s on first.” After finally getting used to the new structure, it whipsaws back to some version of the old one. With the average tenure of CEOs being three-and-a-half years, organizations must simultaneously focus on centralization and decentralization.

The Solution: Mapping Versus Gapping

One way around this conundrum is to institute a mapping process…

Instead of executing a gap analysis, which is how most people approach change, we think about the upside and downside of their preferred value or pole in the polarity equation. We then do the same for the countervailing pole. Then, as the diagram illustrates, we outline action steps for gaining the upsides from each pole. We also design strategies for avoiding the downsides of each if we over-focus on one pole to neglect the other.

That is “and” thinking.

Once we get the tension right between the different energetic poles, my clients find themselves comfortably resting in a virtuous cycle. They begin to get the best of both options, no matter how opposite those options seem. For many leaders, this comes as such a relief. Because those leaders, rather than focusing on the power of both – the “and” – tend to over-focus on one side of the equation. They then find themselves in a vicious and contentious cycle that isn’t good for them, their fellow leaders, or their teams.

Harness the power of both poles. Expand your thinking to “and.” You’ll soon create a virtuous cycle that will enable your organization to thrive, freeing your teams to unify under healthy “and” tensions versus the opposing camps that can form from “or” decisions.

Link(s) to Article:
https://talentculture.com/and-thinking/

Executing Talent Planning And Management When You Are Not In The Office

Executing Talent Planning And Management When You Are Not In The Office

by | 21 September | , , , , | 0 Comments

When the pandemic started, HR pros and talent managers learned very quickly how to use platforms such as Zoom, Teams, Skype, etc. The ramp-up was quite remarkable, really, and comfort levels were soon realized because after all, that was all that we could do. That was then and this is now. As the shutdowns stretch into the winter months, we are beginning to see that there are certain tactics that are missing.

Based on what I have heard from leaders in North America, Europe, and Latin America the piece that is missing is that two-minute conversation that you have when you’re walking down the hall. As all HR leaders know, those unplanned, spur-of-the-moment meetings are critical to leadership opportunities, team building, and coaching. Gone are the days of ducking your head into somebody’s office and saying, “hey, great job on that account,” or, “let’s take a couple minutes to just talk about another approach.”

What is the solution? Let’s get old-school and pick up the phone. Dropping a text or making a short phone call to say “good job” is where leaders need to be right now. The issue is that leaders need to remember to do this because these outreaches can easily fall to the backburner and then become old news or forgotten. These communications take little effort, but they are important. I recommend adding some structure to that. Having a list that you keep beside your computer that helps remind you to call a certain employee to say, “Thank you,” tell them they’ve done a good job, give them some feedback on something that maybe they could have done better. Make it a point to have that coaching moment.

To be sure, it is important for managers to find impactful ways to talk with their direct reports and manger during the pandemic, however, let’s remember that leaders should also do a good job of communicating frequently with his and her peers. Check in to let them know what your team is working on, your priorities, and of course, explore how you can support their priorities.

Link(s) to Article:
https://www.hr.com/en/magazines/talent_management_excellence_essentials/september_2020_talent_management/executing-talent-planning-and-management-when-you-_kf5ddvt4/

Now Is the Time to Build Your Leadership Bench

Now Is the Time to Build Your Leadership Bench

by | 15 September | , , , , , | 0 Comments

Podcast: https://soundcloud.com/middle-market-growth/build-your-leadership-bench

The economic crisis caused by COVID-19 has led many businesses to focus on challenges related to working capital, supply chain, or the accelerated shift from brick-and-mortar to e-commerce. Yet alongside these urgent priorities, talent planning continues to be important, particularly as companies position themselves for the post-pandemic future.

Bob Ryan, a partner at Shields Meneley Partners, and Keith Goudy, the managing partner at Vantage Leadership Consulting, return to the podcast to discuss the pressing issues related to talent management and hiring that business leaders and private equity owners are grappling with today.

Drawing on their experience working with clients, Ryan and Goudy describe how the COVID crisis has changed what companies are looking for in their leaders, and how to lead effectively when employees are working from home. They offer actionable tips for advancing diversity and inclusion initiatives in a virtual work environment, and they explain why succession planning is now more important than ever.

Ryan and Goudy first appeared on the Middle Market Growth Conversations podcast last year, in an episode titled “How to Get Hired at a Private Equity-Owned Company,” available here.

Link(s) to Article:
https://middlemarketgrowth.org/podcast-now-is-the-time-to-build-your-leadership-bench/

Work-from-Home Can’t Work Forever: Blackstone CEO

Work-from-Home Can’t Work Forever: Blackstone CEO

by | 03 June | , , , , , , | 0 Comments

The massive work-from-home experiment that businesses globally have adopted in response to coronavirus-related travel lockdowns has fueled a great debate on the future of offices: Will the practice become a permanent feature for employees? For Steve Schwarzman, CEO and chairman at Blackstone Group, the answer is not likely.

“This working from home is on one hand very efficient,” he said last week during a Sanford C. Bernstein investor conference. “At one of our meetings, somebody said, ‘Well, why don’t we do this all the time?’ And I said, ‘Well, you know, one reason is you can’t train new people like this.’”

Working from home appears to function well for existing employees, Schwarzman said. The crux is in the difficulty for new employees to absorb a company’s culture without personal interaction, he added.

“To run a great organization, you have to keep hiring people,” he said. “Particularly if you as a business are growing, you need more people. And those people have to learn your culture.”

Culture entails many aspects that require picking up cues from the more experienced, established members of a team on how the company does business, Schwarzman said.

“They have to know not just the mechanics of how you do a piece of work, but how do we think about it?” he said. “How do we think about risk? What do we believe is the right and wrong approach to be doing things from an ethical perspective?”

Communications over video can’t easily replicate those informal and formal discussions a team would have in an office setting, Schwarzman said.

“That’s really hard to do on television,” he said. “You have to have people sitting around talking about situations. It’s much more iterative.”

But some human capital experts say while new employee training is indeed a likely snag, it’s not impossible to maintain and build a corporate culture through remote technology.

Onboarding is clearly one of the challenges, says Bob Ryan, executive advisor at Shields Meneley Partners, an executive coaching consultancy, and managing partner at the Sierra Institute, a coalition of chief human resource officers.

“There are things that can’t be done as well virtually, and it’s very difficult to build a culture when people are not together,” he says. “Senior management helps to define the culture of an organization… and that’s hard to understand when you don’t see them day to day.”

Onboarding new employees virtually would be a challenge, Ryan says.

“Important training could be lost unless the new employee puts in a concerted effort to meeting all of their peers and stakeholders,” he says. “One of the most important groups that you need to learn from is your peers.”

Onboarding in a virtual environment is indeed “suboptimal,” says Laura Queen, CEO at 29Bison, a human capital consultancy.

“Video cannot replace face-to-face human contact,” she says.

But there are many ways that companies can still build and maintain culture via remote technology, and even increase productivity using such tools, Queen says.

“You don’t have to have face-to-face contact all of the time,” she adds.

Corporate culture often entails values, beliefs, and assumptions about the work experience transmitted through language and storytelling, Queen says. It’s possible to find new mechanisms to do that via technology, especially through tools that support learning and assimilation, she says.

One tool her team uses is Nuclino, an internal wiki platform where individuals can share intelligence on particular topics, a concept that also can work on communication systems such as Slack. Queen recently posted information about an arcane defined benefit pension question that sometimes comes up with the firm’s clients, so that other colleagues can tap it as a resource in the future, she says.

Ryan says his team has built a customized, confidential customer relationship management platform to similarly share internal information, specifically in response to the recent work-from-home shift.

Ongoing regular training and development can even be more effective in virtual settings, because many professionals have proven their willingness to participate and shown the ability to focus even better in video meetings, Ryan says. Zoom, Skype, and Microsoft Teams are all effective for such gatherings.

“What I am hearing over and over again is that virtual meetings are going to become a more consistent part of the future,” he says.

A bigger question that companies face is whether their embrace of working from home capabilities will define their identity to the marketplace, Queen says.

“If your viewpoint is that culture can’t be transmitted virtually, then it can become a self-fulfilling prophecy,” she says. “Long term it may be that a firm attracts people who are more willing to work face-to-face and less willing to work in a virtual environment. And that says to people who want a work-from-home opportunity, that this firm is not a place for you.”

That may become an important distinction, she adds, because working from home has gotten a big stage to showcase its utility.

“I think the horse has left the barn for knowledge workers with regard to the work-from-home situation,” she says. “There is an expectation that if you’re going to be a credible competitive attractive employer you’re going to have to provide some level of remote work capabilities.”

Link(s) to Article:
https://www.fundfire.com/c/2771153/340603/work_from_home_work_forever_blackstone?referrer_module=issueHeadline

To defend budgets in a downturn, L&D must focus on the future

To defend budgets in a downturn, L&D must focus on the future

by | 19 May | , , , , , | 0 Comments

Budget cuts and downsizing present an unfortunate reality, but that isn’t the full story for L&D, sources told HR Dive.

It’s an unfortunate reality during the COVID-19 pandemic, as with economic downturns past: talent development and training departments are likely to be subject to budget cuts and downsizing.

“History tells us that training is a line item that gets sought,” Dale Rose, president and co-founder of California-based consulting firm 3D Group, told HR Dive in an interview. “It’s a familiar path.”

But the trend is not necessarily a universal one, and Rose and others who spoke to HR Dive have worked with employers that take a different view. The difference between the current economic moment and that of the late 2000s recession, so goes the thinking, is that the underlying structure of the economy isn’t being impacted by COVID-19. “The one thing we do know is that this isn’t permanent,” Rose said.

Layoffs, furloughs and other cuts are taking up a lot of energy for organizations, Bob Ryan, executive advisor at Shields Meneley Partners in Chicago, said in an interview, but employers need to prepare for when the script flips. That means a certain percentage of staff should dedicate themselves to outlining the organization’s future, and “a part of [that percentage] needs to be L&D people,” he said.

As L&D professionals go into meetings with executives — in some cases to literally advocate for their department’s continued existence — their pitch cannot be to simply return to business as usual, Ryan said; “This is the time to be creative and show the CEO, CFO and CHRO that L&D is important, but it’s going to change.” Top companies, he continued, are opting to increase, not decrease, investment in talent after the pandemic.

“I believe the conversation with business leaders needs to start and end with how learning supports business strategy and outcomes,” Chris Holmes, director of global learning and development at Booz Allen Hamilton, told HR Dive in an emailed statement. “If learning is integrated as a part of a shared outcome, then the need to ‘advocate’ for training investment can be a very different conversation.”

L&D departments can also appeal to their role in shaping the organization’s future competitiveness. “The competitive advantage that companies have coming out of this is going to depend on their talent,” Cat Ward, managing director of JFFLabs, a division of workforce and education nonprofit Jobs for the Future, told HR Dive in an interview. “We’re moving into a pretty fluid environment here.”

Distance learning provides a way forward

It’s simple enough to say that talent development will be important, but how L&D professionals keep it top of mind during and after the pandemic will differ. Ryan described practitioners at one manufacturing industry client who took matters into their own hands by making reopening-oriented training videos with their phone cameras. L&D teams elsewhere have held Zoom calls to step back and brainstorm solutions for assisting workforces that may have moved to remote status during the pandemic.

Some teams will struggle with a learning environment that is more digital. “There’s the chance for disinvestment in workplace learning, and a lot of that is due to the fact that a lot of learning at work hasn’t been digital-first in nature,” Ward said. “If you want your business to be competitive, you need to be preparing your workforce for these changes.”

But digital transition can be an advantage for L&D teams, particularly those at employers that had not embraced digital transformation before the pandemic, according to Rose. “Maybe there are benefits to someone sitting at their home office; maybe they have more time,” he said. “The opportunity of the moment is to embrace distance learning.”

At Booz Allen Hamilton, employees are actually consuming more learning content, and they are particularly focusing on content covering how to work and lead effectively in a virtual environment, Holmes said.

One understated impact of the movement to online learning post-pandemic is that it could level the playing field for talent development. In his own experience doing online presentations with clients, Ryan said he’s seeing high levels of participation and engagement from learners. “I can look at 20 to 30 people as I’m leading the meeting, and it’s just easier to manage.”

Employers will still need to deal with some hurdles when it comes to online learning, Ward said, particularly ensuring all workers have access to a reliable internet connection and other necessary technology. Front-line and middle-skill employees will also need to be included: “It’s a business advantage that your entire workforce is able to keep their skill sets fresh and stay competitive,” Ward added.

It will also be difficult for talent professionals to advocate for internship programs, many of which have been cancelled or otherwise rolled back during the pandemic. But online delivery can help here, too, Ward said. Companies like Microsoft have opted to turn their internships into digital experiences, and the tech giant has said that this move will influence its approach to internships well into the future.

Virtual reality and augmented reality, previously used by globally spread, remote-based organizations to disseminate training programs, could also help navigate a situation in which on-site operations are suspended. Ward said she’s aware of companies that have considered sending sanitized VR headsets to employees so that they can train at home.

Reopening as a blueprint

COVID-19 may not be the disruption L&D teams anticipated, but it is nonetheless a reminder that the field’s future may lie in preparing organizations to adapt to massive change.

“The way we work has completely changed,” Rose said. As organizations look to reopen in an environment of social distancing and disease prevention, L&D could emerge in a highly visible role that supports all employees. “Caring for my people has always been important, but that’s more important now. If they’re going to be effective in their work, I need to be tending to them more than I might normally.”

This care can take many forms, from facilitating how employees should reorganize their schedules to literally helping them move from point A to point B within a facility.

Soft skills training is a particular area of emphasis for companies that moved remote. “I think that has just gotten really ratcheted up here,” Ward said. Workers and managers will need assistance adapting to phone-based and web-based communication, especially if they are used to an environment that is dependent on face-to-face communication. Even the subtler act of reading the body language of team members will require adjustment, Ward noted.

In some ways, moving to a remote basis can create a new standard for work itself. “It’s a different way of setting goals,” Ward said. “There’s much more of a premium on execution … and that is going to require even more communication.”

The pandemic is not just a chance for L&D departments to prove that their programs have a return on investment; workers are watching, too, and evaluating the responses that employers put forward.

“Remember that employees will remember and value the choices that companies make,” Rose said.

Link(s) to Article:
https://www.hrdive.com/news/to-defend-budgets-in-a-downturn-ld-must-focus-on-the-future/578182/

CalPERS diversity strategy using strength in numbers

CalPERS diversity strategy using strength in numbers

by | 16 April | , , , | 0 Comments

Vivien Killilea/WireImage

For private companies, fund forgoing 1-on-1 engagement

Betty T. Yee wants more engagement on diversity for private company boards.

CalPERS has a well-developed plan to encourage diversity on public company boards on its own and as part of industry organizations, but when it comes to private companies, officials at the largest pension plan in the country are choosing to work as part of an industry group rather than go it alone.

Asset owners haven’t tackled the issue of diversity at private companies until relatively recently. But as the number of private companies choosing to stay private longer increases, more investors are asking their managers about it.

In October, California Controller Betty T. Yee, who also is a CalPERS and CalSTRS board member, sent letters to the two public pension funds on Oct. 29 urging greater diversity on private company boards and asking them to put the matter on a future meeting agenda. So far, the investment committee chairmen have not decided whether they will do so, spokeswomen at both pension funds said.

Ms. Yee noted in the letters that just one-third of private companies have a goal to diversify their boards, citing data from the 2019 National Association of Corporate Directors Private Company Governance Survey. According to Preqin, women make up 19.7% of the alternative investment firms’ workforce, an increase of 0.9 percentage points compared with 2017, and less than 12% of senior roles in alternative investment firms. Ms. Yee, citing Preqin, noted that only 5.7% of private equity board members are female.

And in September, private equity investor industry group Institutional Limited Partners Association expanded its due diligence questionnaire, template and codes of conduct for managers, limited partners and portfolio companies aimed at supporting greater diversity and inclusion in the private equity industry.

ILPA is in the process of creating a road map to advance diversity across the alternative investment money management industry that will include research links and other resources. Organization executives expect to release it in the first quarter of 2020.

Promoting diversity
At the Nov. 18 investment committee meeting of the $385.1 billion California Public Employees’ Retirement System, Sacramento, Ms. Yee asked pension staff what they are doing to promote diversity at private companies.

In response, CIO Yu Ben Meng said ILPA represents the entire asset owner community and that that organization can have the most impact on the matter.

Private company board diversity has been a topic of lively debate in the private equity community, said Anne Simpson, CalPERS director, board governance and strategy, in an interview. She added that CalPERS has adopted principles encouraging diversity that apply across its portfolio, including private markets. “It’s a question of control,” she said. Limited partners in funds have no control over portfolio companies including diversity at the executive team and board levels, she said.

The question of control in its relationships with private equity general partners appeared to be a stumbling block for CalPERS on other ESG-related topics, too. Also at the Nov. 18 investment committee meeting, board member Ramon Rubalcava asked what CalPERS was doing regarding human capital issues arising as a result of private equity ownership of companies, such as the mass layoffs at the private equity-backed Toys R Us, which filed for bankruptcy in 2017.

Greg Ruiz, CalPERS managing investment director for private equity, replied that staff considers manager integrity when it is deciding whether to invest with a manager.

“When we assess managers, we assess them across many dimensions. … It’s important to partner with people with integrity so that is kind of first and foremost, and there are many complexities when you get into managing companies,” Mr. Ruiz said. “Once we enter into a partnership we are not in control. We are only one voice but (we are) an active voice.”

Expanding due diligence
Other institutional investors and a growing minority of alternative investment managers are turning their attention to portfolio company-level diversity. Some asset owners are adding questions about diversity at the executive and board level of portfolio companies as part of their due diligence before investing with private equity managers, said Emily Mendell, Washington-based managing director of ILPA.

The aim of the expanded due diligence guidelines and template is to measure employee gender and ethnicity by role, she said.

The association is hearing anecdotally and with consistency that limited partners are asking questions about diversity at the portfolio company level more and more, Ms. Mendell said.

“It’s no longer taboo and uncommon” to ask general partners what they are doing to diversify their investment team and portfolio companies, she said.

Investors are absolutely thinking about diversity, including at the portfolio company level, and CalPERS is at the forefront, Ms. Mendell said.

“GPs are almost expecting the question now,” she said.

But it’s up to the GPs to promote diversity at their portfolio companies and more of them are asking human capital professionals and others for help to get more women and minority executives on their portfolio company boards, she said.

Regulators weighing in
A recent global regulatory push to diversify public company boards is also having an impact on private companies and their private equity backers.

These efforts include the International Organization for Standardization’s December launch of a human capital reporting framework that includes workforce diversity, Congressional bills and the U.S. Securities and Exchange Commission rule under consideration that would require public companies to disclose workforce diversity.

The Human Capital Management Coalition, an institutional investor organization, had proposed the SEC rule in 2017.

Private equity firms are taking notice because portfolio companies that file to go public would have to disclose the diversity of their workforces if the proposed SEC rule is adopted, said Laura K. Queen, Doylestown, Pa.-based founder and CEO of 29Bison, a strategic human capital adviser for middle-market private equity and venture capital firms and their portfolio companies.

Investor action, pending regulations and a desire by many GPs to diversify their executive suites and boards as well as those of their portfolio companies and boards are causing some general partners to take action, she said.

“Boards of portfolio companies tend to mirror the networks and connections of their founders and so are mostly made up of highly educated white males,” Ms. Queen said.

While GPs have a long way to go to diversify portfolio company boards, there has been progress. When Ms. Queen and her team starting bringing up the topic of diversity and inclusion on portfolio company boards and executive teams in 2013, few GPs wanted to discuss it, she said.

Now, some 25% of the private equity firms 29Bison works with are considering populating their boards and portfolio company boards and executive and operations teams with more diverse individuals. The conversation most often comes up in succession planning, she said.

So far, the definition of diversity includes women and people of color.

“I would argue over time, it’s a limiting definition of diversity,” she said. Firms should be looking more broadly to include diverse personnel from groups such as the LBGTQ community, people with disabilities and people from different cultures, Ms. Queen said.

Hugh A. Shields, a co-founder and principal in the Chicago office of Shields Meneley Partners, an executive coaching and consulting firm, said he also sees investors putting more pressure on private equity firms to have better representation of women and minorities on portfolio company boards.

Particularly, the larger private equity firms and larger portfolio companies are trying hard to get better representation of women and minorities on portfolio company boards, he said.

“We are really starting to see more and more … portfolio companies are more open to diverse candidates,” he said.

Link(s) to Article:
https://www.pionline.com/governance/calpers-diversity-strategy-using-strength-numbers

Work-from-Home Can’t Work Forever: Blackstone CEO

COVID-19 Forces Work Culture Shifts for Private Equity Firms

by | 13 April | , , , , , | 0 Comments

COVID-19 Forces Work Culture Shifts for Private Equity Firms
April 13, 2020

The private equity industry, historically hesitant to accommodate flexible working arrangements, has had to embrace work culture shifts as the coronavirus pandemic forces employees to stay home.

Before Covid-19, flexible working in private markets was not indulged very often, according to a survey conducted by eVestment Private Markets and MJ Hudson of 311 employees from across the global private markets industry, including GPs, LPs, and outsourced practitioners of core functions. The survey found that prior to COVID-19, just 7% of private markets respondents regularly worked from home. Of the individuals who regularly worked from home 80% were executives or senior staff while not a single junior staff member reported regularly working from home.

“Hierarchy is important in private equity,” says Dale Rose, president of 3D Group, a consulting firm that works with private equity firms. “It’s harder to hold a hierarchy when working remotely.”

Working from home will be particularly difficult for junior members of the workforce, since they may have a less-established personal network, which is hard to expand and develop via digital channels as opposed to the “trust-factor and comfort” that accompanies in-person interaction, Rose adds.

On the other hand, this may be an opportunity many people have long been hoping for. “I think there is a lot of desire from people in the industry for flexible working,” says Graeme Faulds, director of private market solutions at eVestment.

Prior to COVID-19, working hours for employees of private equity and credit managers were already long. According to eVestment’s survey, 53% of respondents work more than 48 hours at the office per week on a regular basis, the upper limit of the European Working Hours Directive.
Nine percent of respondents say they regularly work more than 58 hours per week, and five individuals report regularly clocking more than 68 hours in the office each week.

While many workers may welcome the shift to flexible working, it’s not without potential negative side effects. In an industry where long hours are already the norm, and where many struggle to put work away, remote work could lead to an increase in overall work hours. That could  boost productivity in the short-term, but it also increases the risk of burnout, Rose says.

“It could be detrimental to the psychological health of these individuals who now can work harder and more,” says Rose. “They may be working in their sweatpants and their suit tops but they’re working 20% more time.”

In addition to working long hours, the survey found that many people in private markets already had a hard time putting down their work prior to COVID-19.

The natural pauses that were built into the workday, such as commuting, meals and weekends have eroded under lockdown, says Robert Ryan, executive advisor at Shields Meneley Partners, a consulting firm working with private equity firms.

“You can work all day, you can work every minute of the day. You can stay busy for 60 hours a week,” says Ryan.

https://www.fundfire.com/c/2707203/331553/covid_forces_work_culture_shifts_private_equity_firms?referrer_module=emailMorningNews&module_order=15&code=YldGeVkwQmpZWEprYVc1aGJHTnZiVzExYm1sallYUnBiMjV6YzNSeVlYUmxaMmxsY3k1amIyMHNJREV5T1RBd056QXpMQ0

Companies Appointing Fewer Finance Chiefs With Accounting Skills

Companies Appointing Fewer Finance Chiefs With Accounting Skills

by | 09 April | , , , | 0 Comments

At the 1,000 largest U.S. public companies, the portion of CFOs who are certified public accountants fell to about 36% last year, according to organizational consulting firm Korn Ferry. PHOTO: ISTOCK

Strategic, operations-minded finance chiefs are finding favor, with specialists increasingly taking care of the books

Directors of Hannon Armstrong Sustainable Infrastructure Capital Inc. congregated in the boardroom in late 2018. On the agenda: the ideal résumé of their next finance chief.

They wanted to fill the impending vacancy with someone who had expertise in raising debt and equity—a priority for the Annapolis, Md.-based investment firm.

The board also decided they could do without one particular qualification. Having appointed a chief accounting officer in 2017, they didn’t care if the new chief financial officer had an accounting background.

“It was almost counterintuitive, almost backwards,” said Steve Osgood, a board director at Hannon Armstrong and chairman of its audit committee. “But that freed us up to get a capital-markets-focused CFO.”

CFOs have traditionally emerged from the accounting ranks, with reputations as masters of cost management, corporate finance strategy, accounting standards and reporting requirements. But the role has morphed to the point that accounting expertise is often no longer required.

At the 1,000 largest U.S. public companies, the portion of CFOs who are certified public accountants fell to about 36% last year, according to data from organizational consulting firm Korn Ferry. That is the lowest figure in the six years Korn Ferry has been collecting the data, down from 46% in 2014.

Finance chiefs today often oversee more than just the books. They are increasingly in charge of human resources, information technology and elements of enterprise risk management. As a result, companies increasingly want skilled general managers who possess strategic savvy and a firm grasp of operations in the CFO seat.

“Technical accounting is becoming a smaller percentage of the job,” said Andrej Suskavcevic, chief executive of professional organization Financial Executives International.

Executives and recruiters trace this evolution to the aftermath of the global financial crisis, when companies increasingly wanted strategy-focused CFOs who would promote transparency and operational changes to spur growth and guard against threats. That was a change from the years after the 2002 Sarbanes-Oxley Act, when companies—under pressure to improve their financial reporting—often picked chief accounting officers as their finance chiefs.

The shift has had a ripple effect on the career trajectories of junior finance executives and others who were traditionally groomed for the CFO role.

Changing Role, Evolving Expectations
As the role of the CFO has broadened, some traditional areas of finance—tax, treasury and investor relations, for example—have grown increasingly complex, demanding more focused expertise.

“There’s no way a CFO can truly be a technician in all areas,” said Chris Stansbury, CFO of Centennial, Colo.-based electronics distributor Arrow Electronics.

The nuts and bolts of accounting are therefore increasingly being handled by chief accounting officers and controllers, executives say.

That played a role in Hannon Armstrong’s choice of Jeff Lipson, who has a background in issuing debt and equity securities but isn’t an accountant, as CFO early last year. Mr. Osgood, the audit committee chairman—and a CPA himself—said the board reasoned that chief accounting officer Charles Melko could take care of the books and research the accounting implications of new types of transactions.

Mr. Lipson, who was previously the chief executive of Congressional Bank and held treasurer roles at CapitalSource and Bank of America Corp., said having a strong accounting chief factored into his decision to take the job.

“We maintain a very close and constructive working relationship,” Mr. Lipson said. The relationship has enabled him to embrace a capital-markets focus. He helped the company obtain a corporate debt rating from S&P Global Inc. and Fitch Ratings Inc., and he led the issuance of $500 million in green bonds, which fund environmental projects—both firsts for the firm, which invests in energy efficiency and renewable energy companies.

The progression of the CFO role could also reflect changing expectations from Wall Street.

Analysts spend more time questioning a company’s business lines, future growth and potential acquisitions than they do scrutinizing its accounting, said Richard Bove, an analyst at Odeon Capital Group LLC. “The Street doesn’t care about accounting functions any longer,” Mr. Bove said. “They don’t get into the nitty-gritty anymore.”

Whether or not a CFO has an accounting background only tends to rise to the top of investors’ minds when the company faces an accounting problem or has a history of those problems, said Noah Kaye, an analyst at Oppenheimer & Co. Inc.

Advocates of the accounting profession say CFOs who lack accounting credentials could pose a risk to companies and investors.

Public companies registered with the U.S. Securities and Exchange Commission are required to have independent certified public accountants review financial statements to regulators. And while there is no regulatory requirement for internal CPAs to review financial statements, having a CPA in the finance chief seat can boost credibility, analysts say.

CPAs are held to a code of professional conduct. If they breach it, they could be suspended or lose their license. “If you believe that ethics bring value to an organization, the accountant offers something more,” said Michael Bryant, CFO of the National Association of State Boards of Accountancy, which serves more than 50 U.S. accounting boards that issue licenses and regulate the profession.

Building Know-How
To be sure, many CFOs-in-training still desire accounting backgrounds. Many boards still prefer an accounting-focused CFO, even if they don’t require it. And some boards still insist on a CFO with accounting credentials.

“The person in that position just needs to have an evolving skill set,” regardless of their initial training, said Bob Ryan, an executive adviser at Shields Meneley Partners, a career-transition firm that advises executives.

Finance chiefs without accounting backgrounds are still often responsible for the books and financial disclosures, so they must develop familiarity with accounting rule changes and reporting requirements. Exposure to the accounting side of the operation also helps them ask more probing questions about an enterprise, executives said.

“You need an appreciation of accounting,” said Kirkland Andrews, the CFO of NRG Energy Inc. “You want to be closely aware of all of the new provisions.”

Mr. Andrews spent 15 years leading debt and equity deals at Citigroup Inc. and Deutsche Bank AG before joining the Houston-based energy company in 2011. He developed a working knowledge of accounting over the years, gleaning expertise from an external audit partner and consulting with an enterprise resource planning expert on issues such as switching accounting systems after a company merger.

Lloyd Howell Jr. also had to build accounting know-how when he was promoted to finance chief of Booz Allen Hamilton in 2016. Mr. Howell, a veteran of the McLean, Va.-based government consulting firm, started his career at Booz Allen as an engineer and went on to lead business segments at the company. But he’s not a CPA.

To strengthen his understanding of accounting, he leaned on internal finance personnel as well as a cadre of experienced CFOs outside the company. That, plus the experience from previous roles, he said, has helped him serve as an effective adviser.

“CEOs seek a business counselor as much as a financial counselor in a CFO,” Mr. Howell said. “That candidate can speak to broader issues facing the company. The board seems more accepting of that.”

Link(s) to Article:
https://www.wsj.com/articles/companies-appointing-fewer-finance-chiefs-with-accounting-skills-11580293801

Avoiding Succession Planning Pitfalls

Avoiding Succession Planning Pitfalls

by | 02 April | , , , | 0 Comments

Leadership transitions happen in every company. Whether the transition happens suddenly amid news reports of questionable actions or smoothly after a retirement, a change in the top leadership of a company brings uncertainty throughout the organization.

In recent years, CEO turnover has been increasing, according to data from Challenger, Gray & Christmas, Inc. 2019 showed the highest rate of CEO turnover since the firm began tracking CEO turnover in 2002. Beyond the CEO position, turnover across the C-suite increased in 2019, according to the 2019 Crist, Kolder Associates Volatility Report.

“Obviously, succession planning is key,” said Dave Ramos, CEO of Washington, DC, based Shiftpoints Inc. and author of Drive One Direction and Decide One Thing. “However, many companies do not have fully-developed succession plans for their CEO. Sometimes the succession plan is not enough. Companies can get stuck in limbo because of the high degree of uncertainty at this time.”

Companies need to prepare now for transitions, but a traditional succession plan may not be enough. Failing to account for future business needs, lacking a diverse and robust leadership pipeline and ignoring plans to pick a favorite can all spell trouble for a transition.

Different Situations, Different Needs
“When a CEO leaves abruptly—whether due to illness, scandal, internal politics or other reasons—it can force an organization into crisis mode, often leaving C-suite leadership scrambling to maintain normalcy and reassure stakeholders that everything will be okay,” said Andrew Chastain, CEO of WittKieffer, an Illinois-based global executive search firm. “Having a succession plan in place for such an occasion that, at a minimum, designates an interim chief executive can help alleviate some of that pressure. Beyond that, careers and emotions are often tied to a certain CEO, and so it can be a trying time personally and professionally when a leader exits.”

However, succession planning serves more purposes than what to do if the CEO gets hit by a bus, said Bob Ryan, principal and partner at Shields Meneley Partners, a Chicago-based executive consulting firm. “The planning should focus personal development for key players, find business vulnerabilities, identify high potentials and get the board involved,” said Ryan. “The planning should also extend beyond the C-suite to critical positions throughout the organization.”

When planning for various transition scenarios, Carl Robinson, Ph.D., founding partner at Vantage Leadership Consulting in Chicago, says the company needs to ask tough questions around career and retirement interests and business needs.

“The company’s timing might be quite different than that of the individual,” said Robinson. “Roles are not static, and the competencies required for success today are unlikely to be the same for tomorrow. The company also needs to understand the ambitions, interests and requirements of those being considered for promotion. The maintenance and enhancement of culture is one consideration to promote from within, rather than hire from the outside.”

Drawing from a Robust Pipeline
Once the business needs are established, the company needs to take the next step of determining the appropriate candidates. Companies need to have a leadership pipeline that offers a diverse slate of candidates with a broad definition of potential.

“The challenge of identifying a diverse set of candidates rests with the organization’s broad approach to welcoming in the widest range of employees in the first place,” said Robinson. “Organizations that suffer from unconscious bias tend to confront the challenge that there are too few–if any–diverse candidates in their pipeline. This is a problem that needs to be addressed systemically and over time.”

Dale Rose, Ph.D., president of 3D Group, a feedback firm based in Emeryville, Ca., notes that the biggest mistake companies make is to use methods that are not valid predictors of performance when choosing successors.

“Too often, successors or high potentials are identified by senior leaders who have their own agendas and don’t reference valid data when making their recommendations,” said Rose. “One way to improve diversity in succession plans is to look more broadly at potential, rather than looking only at a recommendation, job history and industry exposure. While some job knowledge is essential—no one wants a marketing executive to be promoted to controller—leaders can cross functional areas more effectively today than ever before.”

Avoid Picking Favorites
While formulating a thorough succession plan may seem like the final step, companies can still stumble by failing to consult those plans when the time for transition comes.

“Many companies make succession planning an annual exercise to appease risk managers but then ignore the results when it matters most,” said Rose. “Companies spend considerable time and effort mapping out succession plans but then ignore the plan completely and pick a favorite of someone who is in a position of power.”

Rose advises that companies eschew this political mindset and empower HR to develop a rigorous talent assessment process for planning purposes and then leverage the plan when needed.

Succession plans are intended to reduce anxiety and uncertainty around leadership transitions, and companies will bolster their chances of success with a thorough consideration of business needs, a solid leadership pipeline and the courage to stick to the plan.

Link(s) to Article:
https://blog.hrps.org/blogpost/Avoiding-Succession-Planning-Pitfalls