No Match Found
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In this episode, Peter Englisch, Global Family Business and EMEA Entrepreneurial and Private Business Leader, Partner, PwC Germany, sits down with Andreas Von Specht, Founder of AvS International Trusted Advisors, to discuss how the search for CEOs has changed and steps private businesses can take in order to attract and retain top talent.
Host: Peter Englisch, Global Family Business & EMEA EPB Leader, Partner, PwC Germany
Guest: Andreas Von Specht, Founder of AvS International Trusted Advisors
Release date: May 16, 2023
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Andreas Von Specht: Many family businesses still lack experience with hiring top people from the market, and, especially when they do it for the first time, they get it wrong. And that's a very expensive exercise.
Peter English: Welcome from PwC. This is Up Next For Your Private Business, the video podcast series that brings together professionals from around Europe, Middle East, and Africa. To uncover how private business leaders, governments and policymakers can work together to build an enabling environment for private businesses to flourish and grow.
I'm Peter English, Global Family Business and EMEA Entrepreneurial and Private Business leader at PwC in Germany. Today we are talking about education, skills and talent, and their importance for private businesses. PwC’s recently published Private Business Attractiveness Index shows that good education and availability of skilled staff and talents have a strong impact on the private business landscape as well as GDP growth in the country.
But when it comes to building a good education system, what is the role of business versus government? What about the advantages or disadvantages that private businesses may or may not have in developing, attracting, and retaining the best talent for their business? To answer those and other questions I have the pleasure of talking with Andreas von Specht, founding partner of AvS Trusted Advisors, an international consulting firm. Andreas advises family businesses, family offices and financial investors on CEO and chair searches, board assessments as well as family succession planning and corporate governance projects. Dear Andreas, a warm welcome.
Andreas: All right, Peter. Thank you for having me.
Peter: So let us dig into the topic. What is your experience about the difference between public and private companies and their ability to attract talents. Are private companies more or less attractive?
Andreas: Well, I think part of the answer is probably around governance structures and governance systems.
So if you look at public companies, they have very sophisticated governance structures and they have their boards and their non-executives who act according to certain rules. And in private businesses very often you don't have that to such an extent. If you think about family businesses, for instance, where you have family shareholders, in conflict, at war, who kind of disagree on certain things, that is a poison pill for external executives who think about joining an organisation.
If you have. Private companies, family businesses that behave and act according to their strengths that we all know, you know, long-term decision horizons and investment horizons, flat hierarchies, quick decision making, and so on, so forth. Then they are probably for several people more attractive.
But the human factor, the emotional part, the emotional baggage that some shareholders sometimes carry with them, that can be a question mark and a downside.
Peter: How often do you find good governance in private and family businesses? It is something that is cascading down from the corporate world, from good corporate governance rules and now arriving also the private businesses and saying, oh, we understand we have a need for good ownership and business governance, or is there still a gap to close?
Andreas: It depends a little bit, I think, on the region or the country. But as a general point, I would say that over the last 20 years, many, at least sizable family businesses have worked on their governance. Have worked on family charters, have worked on rules, for family members as to whether they can join the business as a shareholder or even in an operational role.
I think the governance system in private companies has evolved and has become more professional. But you still have the exceptions from this rule. Even larger family businesses haven't given themselves a real governance structure, and then you just need one family member misbehaving and already you get into trouble.
Peter: Excellent. So, before we dig deeper into the role and finding the right CEOs let us stick a little bit more, for the starting point here, to the education system and the meaning and the role of a good education system.
What we found in our, in our survey, in our attractiveness index is that there's a strong correlation, as I mentioned at the beginning, between having a good education system in place, which means it's affordable, has a good standard, and the availability of skilled workers, and has a positive impact on GDP growth.
What do you think is the role of private businesses versus the role of government in developing and supporting a good education system in various countries? And do you see some good practices?
Andreas: Well, education is the key to the future, and so this is a very valid question.
And as we know, the education systems across, if you look at Europe or India, differ vastly. So yes, I do believe that private companies can play a role. The one example that I can think of immediately is the dual system that we have, for instance, in Germany, where companies and as you know, family businesses in Germany, are responsible for the vast majority of private employment, where private companies play a very active role by educating future talents, partly in their companies, partly at, universities and have an interesting combination.
So that I think is an example of almost a best practice example. It also immediately caters to the question, you know, why perhaps some unemployment in some regions is lower than in others because that, I think, leads to it.
Peter: Yeah. Do you have an explanation for that? Because in Germany, for instance, maybe as a result of the superior education, dual education system, do you think that one is impacting the other? Because currently, Germany shows a very low unemployment rate, compared to other European countries.
Andreas: I think it's a combination of factors. I think it has to do with Germany being an export country. It has to do with Germany having so many family businesses that employ people.
It has to do with the fact that these companies take an active part in education. It also has to do with something that happened several years ago, many years ago, the agenda 2010 of Chancellor Schröder at the time. I'm not sure everybody wants to hear that, but I think that played a very, strong role actually in reforming the labour market in Germany.
And then it's also true, I think that Germany has created a secondary labour market where jobs are very badly paid, but people are counted as non-unemployed. So, I think it's a combination of many things.
Peter: This is very interesting. And the current economic climate is also putting pressure on the labour market.
So on the one hand, we experience a shortage of talent, the war for talent. The buzzword that we hear all the time. But on the other hand, we currently see that there are layoffs at large scale from big companies in corporate. So is this an opportunity for private business? Is it a risk, the current situation that we are observing here with a war for talent on the other hand side and the need to adjust your workforce? So how do private businesses manage this from your perspective?
Andreas: First of all, I think these massive layoffs weren’t happening with top talents and super-specialized workers. But they mostly happened I think, as far as I can see with public companies and not so much with the German ‘mittelstand’ companies. And I think that's also true for other, other countries.
And then yes, of course, there is an opportunity. Family businesses tend to have a much longer outlook and a much longer horizon when it comes to their thinking. They think in generations rather than in quartiles, very often.
And so we know several family businesses where when times were really tough, there was a call for cross-cutting and the shareholder family decided that they wanted to keep the family together, and make nobody redundant. Or if they had to, as few people as possible. That is very different from the public sector, I think.
And I think the public sector will find that it might backfire because as you mentioned, the war for talent that exists, it becomes fiercer and fiercer and to rebuild a workforce of highly experienced people after the crisis is over will be extremely challenging, and some people will not forget what has happened to them.
I mean, you see wild, crazy examples. I remember a guy from a telecom company, 56 years old, who was gently forced into an early retirement program, which meant that he would have to work for another four years, fully paid, basically from home and without much work, and then was illegible for his pension.
And because there is no longer a system where you need to be careful earning an additional amount after you reach pension, he already has two job offers, from another telecom company. So it's, I mean, there are crazy developments and that at the time where talent really is a rare species.
Peter: So the war for talent will continue and especially on the top levels. But I think what you're just saying is that the family business could have a potential competitive advantage because of the long-term horizon because of a higher loyalty to the workforce and benefiting in the current situation and not participating at scale in the massive layoffs that we currently see in the market.
So, which leads me to another question, and we touch upon this a little bit earlier. So, let's talk about finding the right CEO. Yeah. The leaders who can weather the storm, and how you advise on the most important decision that private companies can make: the CEO position. How you are searching and finding and advising private businesses to get the right talent and this, super important decisions, or positions, sorry. How do you approach a decision between hiring an external candidate or grooming an internal candidate? What is the difference, and, what is, in your point of view, a good practice here?
Andreas: Well, first, I would say that in an ideal situation, a CEO successor comes from within.
And if we find companies where they have done what you said, groomed people over several years to qualify for the CEO position, that's great. And then, we can talk from there. The reality, unfortunately, is that many, many family businesses. Either don't have the luxury to hold onto CEO candidates for the future or haven't groomed them. And so they are almost forced in that way to go outside.
If there are internal candidates for the CEO position, I would almost in every single case recommend that they are benchmarked against top talent from the market. First, because that's good practice and good governance. But also to make sure that the family, when it comes to the final decision, is really at ease with its own decision and has trust in whoever is selected. Now it becomes a bit more complicated when a family has family members who feel they want to raise their hand for the top job.
Peter: This goes back to your previous point of good governance and clear rules. How to select the leaders or good family and corporate governance, right?
Andreas: Right. And it also, I mean, sorry, this is very basic, but it goes also to the point that you not only need to be willing to to fill such a position, but you also need to have the experience and the qualifications. And then it becomes interesting to see who it is, you know, in a position to judge whether someone has the outstanding qualifications and experience that you possibly find at the market. So that becomes a bit more difficult and challenging.
Peter: So, what is your recommendation, what is your advice for, business owners, private business owners when hiring a CEO and other C-level executives? Is there a best practice on how to structure the process?
Andreas: I think it starts with preparation. So I think before you even think about a search process, you should sit down as a family and think if you have very important questions. What is our SWOT [strengths, weaknesses, opportunities, and threats] analysis? What is our strategy? What do we expect from our top management? What does good look like? What are the competencies and experiences that we are seeking? Who is going to take part in the process? And I could probably name a few other very important questions and you realise I haven't even talked about the search yet.
So I think they need it. Do that because many, many family businesses still lack experience with hiring top people from the market. And they, especially when they do it for the first time, they get it wrong. And that's a very expensive exercise. So these questions are important. It's also important who is going to support you with this process.
And then it comes to the search process. And then, it isn’t over yet. After the search, it comes to onboarding and integration, which is also a very important part.
Peter: Yeah. This is what we see quite often when the onboarding is not done properly, in addition to other challenges that you mentioned.
I personally believe it's always good to know, not only what you expect from the talent that is expected to join your business, it's also important that you can articulate which benefits you can provide and what makes you as a company attractive for top talents to work for you. So it's a mutual attractiveness that should exist in an ideal situation based on clearly articulated principles, goals, vision for the future, and proper governance. So I fully agree.
Andreas: You would be surprised how many of our clients find it hard, not to say impossible, to conduct good interviews. And those questions that you just mentioned are very important for that.
Peter: This is why they're hiring you, Andreas, and your team. This is why they need professional support, in an ideal situation.
Peter: So what makes the difference between a good and an excellent CEO?
Andreas: Well, a good CEO is probably more a safe pair of hands and someone who can steer an organisation within predefined parameters and someone who will stay on course. Whereas an excellent CEO is probably much more than that. Someone who can be the captain on the bridge in stormy weather, someone who is decisive and determined and yet someone, and that is a major shift in the profiling of CEOs, is strong communication to all different stakeholders. Very good listening skills. And then, you know, we come to competencies and then we would say, you know, someone who has a very strong result orientation, is excellent in providing strategic frameworks and is a strong agent of change. Is able to lead and develop people and motivate people. Is someone who can facilitate and influence lots of different areas to look at. and that cocktail mixed in a mixer then creates probably excellence. And it's a rare species, believe me.
Peter: You mentioned a very important word, which is change, and I would like to translate it into the need for transformation.
All businesses need to transform these days, towards more sustainable goals, towards becoming more attractive for the best talents, but also to stay competitive in the mid-and long-term future. Especially if you have a long-term ambition from an ownership side. In this context, I see a trend that, slowly but truly, the board compositions are going to change, not only in the corporate world, but I hope also in the private business.
So what is your experience? Is it still the traditional composition of family and friend members or is there more change towards bringing experts who are challenging us and helping us to take us to the next level?
Andreas: It's no longer the tennis partner, the rotary friend, and the banker or a lawyer. Those times are gone.
I think I see, in many family businesses, a trend for more professional constitutions and configurations of boards, of non-executive boards. I also see a clear trend in you know, if you look at many family businesses, they are not obliged by law to have a supervisory board.
But still, they establish something like that, to have a sounding board, to have industry experts help them think through different scenarios, help them to think through internationalisation strategies, stuff like that. So, absolutely I see a trend there. which is also, which then also, calls for different profiles within the board to do what you mentioned.
Have a sufficient amount of diversity, have the right thinking when it comes to big trends, which are sustainability and governance that have also started to be seen in private businesses and, and have that on their board, available to, you know, basically, challenge and control, but also help and moderate the executive boards.
Peter: Last question. So the younger generation approaches work differently than older generations. This is what we hear all the time. As more millennials are now entering executive-level positions, has this already affected the way you search for executive talents?
Andreas: Yeah, it probably has. First, I mean, the search industry has undergone a major change in the sense that since social media emerged, over the last 20 years, probably almost everybody has put their CV on social media. And so, what I encountered, let's say 25 years ago when clients said, how on earth did you find a person like this? Those times are gone. That's no longer magic. This black magic box has been opened.
It's no longer about, you know, getting names or finding CVs. It's about the approach and the evaluation. And you know, the more, the more asked for or attractive these talents are, the more calls they probably get per week, and so more difficult it becomes to get close to them.
So that is one. Then the attitude of the new generations is very different. This is now no longer about a paycheck and a long-term career. This is about providing purpose. This is about the question of what this company is doing apart from earning money. Do I want to be associated with an organisation that is doing what we are doing?
Where can I leave my mark in that sense? So there are lots of changes that have taken place.
Peter: This was very interesting, Andreas. Thank you so much. So thank you so much for joining the podcast. I'm sure our audience found it as insightful as I did to everyone watching or listening. Thank you for tuning in.
If you enjoyed this episode, please subscribe to the podcast. We will release another episode each month. I hope to see you then. Goodbye.
Andreas: Thank you, goodbye.