Recruiting Big-Firm Execs Can Cause Unplanned Waves at Smaller Companies

By Michelle Rafter

Feb. 10, 2010

It’s one thing for a small or midsize business to scoop up high-caliber talent cut loose by a bigger company because of the recession. It’s another to make sure the big fish is comfortable in a small pond—and the minnows who are already there don’t feel displaced as a result.

Bad times in financial services, real estate and other industries in the past year saw lots of big fish move to smaller ponds. But assimilating high-power executives accustomed to working in much larger settings—and the accompanying mind-set—takes effort.

To help with the transition, management experts and HR directors at companies that profited from big firms’ recession-induced layoffs recommend doing extensive vetting before a hire to make sure someone’s a good fit in what often is a drastically different corporate culture. They also recommend having detailed goals and using outside coaches to keep incoming execs on task and on track.

But it’s not all about the new guy. If there’s any chance a company will go after an A player from a Fortune 1,000 company instead of promoting from within, HR managers and upper management need to alert current employees ahead of time, involve them in the process and craft contingency plans in case anyone decides to jump ship rather than take orders from an outsider.

“I can’t think of a more risky situation than when an executive from a multibillion-dollar corporation enters a multimillion-dollar company,” says Ted Bililies, partner at ghSMART & Co., a Chicago management consultant that helps private equity-backed companies make C-level hires. “They won’t have the armies of minions” they once had, and their leadership and communication skills will be more heavily tested, Bililies says.

Also, because top executives at smaller companies spend relatively more time in the field with customers and employees, “there’s a hardiness factor that many execs don’t take into account.”

Recession’s silver lining
The recession has been good to Woodruff-Sawyer & Co., a corporate insurance broker based in San Francisco with $61.3 million in earnings last year. In 2009, two high-level executives at separate competitors came knocking after hardships at their firms left them seeking new opportunities. Earlier, when another competitor ran into financial trouble, Woodruff-Sawyer purchased the firm’s West Coast retail insurance operations, picking up eight high-profile employees in the process to bring its workforce to about 275 people.

Adding all those executives and assets will help the company’s bottom line in the long run. But bringing A players into the fold isn’t as simple as giving them a corner office and a big paycheck, says Melody Silberstein, Woodruff-Sawyer’s senior vice president of human resources. Regardless of their pedigree, Silberstein does thorough due diligence on potential candidates, including extensive interviews to make sure they’re not just interested in the company because they have nowhere else to turn.

“We don’t want to be someone’s temporary landing place,” she says. As part of the process, candidates go through a prescreening process just like any other prospect and interview with current employees from all levels. Prospects and their spouses or significant others also join Woodruff-Sawyer partners at dinner or other social events to make sure it’s a good culture fit.

It’s not uncommon for CEOs or boards to hire superstars because they “fall in love,” but just because A players are available doesn’t mean they’ll be a good fit, Bililies says. He advises companies to have solid corporate strategies and succession plans already in place, so when hiring opportunities arise, directors and hiring managers can evaluate candidates against them.

John Sensiba, managing partner of a 100-person Bay Area CPA firm, designed just such a program several years ago in advance of bringing in a high-level executive from a national accounting firm. Previously, “We’d have someone come to us who’d been thinking about leaving a Big Four CPA firm, and we’d do our best to make it work within our strategy. But the results were kind of mixed,” says Sensiba, with Sensiba San Filippo.

That kind of strikeout is expensive.

“Not only have you invested a lot time in the process, there’s a public relations impact as well, and if six months later the person goes somewhere else, that PR hit is big too,” Sensiba says.

Sensiba’s program, which he has begun presenting to national CPA groups, includes extensive background checks on a prospect through a company such as Kroll, and talking to professional colleagues to get a read on a person’s reputation, ethics and work ethic. The idea, Sensiba says, is to make sure “they’re not coming here thinking they’ll be on vacation on the job or be able to cruise through the last part of their career.”

Sensiba’s program also maps out expectations for a new executive’s first 180 days, including meetings, trainings and key milestones. For the first 60 days the individual works one level down from the job they were hired for to learn the ropes. For the next two months they work with one client before stepping into their permanent position, “with lots of support and regular check-in meetings,” Sensiba says. “We take it as a moral obligation to help them be successful.”

Managing expectations
Even if you do everything right, some employees may feel snubbed and leave, so it’s best to acknowledge and plan for that possibility, says Bililies, who encountered such a situation recently. A company board he is advising opted to hire an outside CEO rather the COO who wanted the position. In that case, the board felt the individual wasn’t up for the job.

But to reach that conclusion, Bililies urges performing a rigorous evaluation on all internal candidates “because many times there’s a grass-is-greener philosophy and they’ll bring someone from the outside when in fact they have talent on the inside and don’t know it.”

At Woodruff-Sawyer, Silberstein manages current employees’ expectations by talking to anyone who might be affected by an external hire beforehand. If it’s a department getting a new manager, she asks for input from the whole team on qualities they want in a new boss to make sure it’s a good match. If it’s an individual who thinks the opportunity should have gone to them, she’ll talk to them privately about reasons why the company made a different choice.

“We’re very open with our communications,” Silberstein says.

So far it’s working. The big fish that joined Woodruff-Sawyer during the recession are still there, and things are going “really well,” Silberstein says. “Our colleagues are comfortable telling us if we’re not doing anything, and if there was a lot of discontent we’d hear about it.”

Michelle Rafter is a Workforce contributing editor.

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