Choosing a chief executive officer is one of the most critical duties any company’s board of directors has to carry out, but how do they actually approach filling such an important role?
‘Taking the wrong decision, recruiting someone who isn’t up to the task or doesn’t fit in the culture of the organisation, can have significant consequences,’ warns Brooks Macdonald chair Chris Knight.
He and his colleagues faced the recruitment challenge a year ago, when Brooks Macdonald co-founder and former chief executive Chris Macdonald stepped down from his role in April 2017.
Caroline Connellan, the ex-head of HSBC’s UK wealth business went on to take over the position.
Knight says that the process was facilitated by the fact that Macdonald (pictured above), who led the business for 25 years since its founding in 1991, informed him of his decision to retire long before.
‘We were fortunate because Chris Macdonald gave me good advance notice of his wish to retire. He told me a couple of years before that it was his intention,’ he said.
‘It enabled us to think carefully about the type of person we wanted and to spend a lot of time drawing up a good job spec before we started the process of looking for the right individual.
'In Brooks Macdonald’s case it was particularly important because Chris, as founder of the business, ran it successfully for 25 years, so his retirement was bound to be a pretty big moment in the history of the company.’
When the board commenced the hunt for a successor, it came up with a number of characteristics the new CEO should possess. It was especially looking for someone who could continue the growth of the business, which had reached £9 billion in AUM by 2016.
It also wanted someone who had experience in asset management, that understood the regulatory environment and was able to manage change ‘given that the industry is going through a lot of it at the moment’.
Knight highlighted that boards are increasingly spending more time on succession planning generally, because it is such a critical area. Anyone suitable for such a job will usually have at least a six-month notice period, which ideally requires companies to start the process of hiring at least a year in advance of the actual departure of the CEO.
‘There is always an element of luck as well,’ Knight pointed out. Assessing both internal and external candidates made it a long process for Brooks Macdonald; the firm was fortunate to find Connellan (pictured below) at a time when she was ready to make a move.
A helping hand
For those who do not have two years’ warning, however, there are a number of recruitment firms specialising in the financial services industry.
One such company is The Somers Partnership, a recruitment firm that helps private banks and wealth managers find candidates for executive positions.
Founder Mark Somers said the process for his firm usually takes about three months.
‘We work with the company and stakeholders to find out what the future plans for the business are and what the current state is. We identify the gap between where they want to be and where they are,’ he explained.
Following this deep dive research into the company itself, the firm starts looking for candidates. An initial list of 100 potential candidates is then narrowed down to the final six.
He also highlights that hiring the wrong person is a risk and points out that this can especially happen if the firm tries to ‘do it on the cheap’.
If full market research is not conducted and the company underbids, this is a short-sighted approach and a risk that is actually self-imposed, he says.
Companies need to think ahead, he argues, saying: ‘It requires quite a lot of foresight. If the CEO has an accident or is headhunted, they have to put their processes into action.’
It can be a challenging time for a company when it loses its CEO, but sometimes one easier route can be to bring in someone who already has a relationship with the company.
For example, a company that recently had a seamless change at the top is Blu Family Office. The firm recently appointed Nick Rees as CEO, taking over the responsibility from one of the founding principals, Christian Armbruester.
Rees had been working with Blu for a couple of years while he was at Absolute Return Partners, which was a shareholder in the family office, therefore he was already familiar with the business.
It was a deliberate decision to bring him on board to support the growth of the business and build the necessary infrastructure to facilitate its future plans.
‘He [Christian] was the CEO, but he was also the CIO so had multiple hats and as Blu was growing, we wanted to clearly delineate the roles and responsibilities in the business,’ Rees said.
CHANGES AT THE TOP IN 2018
- IFG Group names Kathryn Purves as chief executive to replace John Cotter
- Harwood Wealth Management joint chief executive Neil Dunkley steps down, with Alan Durrant assuming the role of sole CEO
- Arbuthnot Latham chief executive Ian Henderson to leave the private bank for ‘personal reasons’
- Multi-family boutique Blu Family Office appoints Nick Rees as its new chief executive officer
- Alan Mathewson takes over as chief executive of Brown Shipley, replacing Ian Sackfield
- New St James’ Place chief executive Andrew Croft takes the reins from David Bellamy, who becomes an adviser to the company
- Scalable Capital announces that co-founder Simon Miller will assume the UK CEO role, as current chief executive Adam French focuses on international responsibilities