ceo forum issue 15 - russell reynolds associates · cluding searches for the carlyle group and...

Bill McDermott CEO SAP

Edie Rodriguez President

Crystal Cruises

Bob Forrester President & CEO Newman’s Own

The Quarterly Publica on By CEOs and For CEOs

Tom Doctoroff President & CEO JWT Asia Pacific

The CEO Forum, Volume IV, Issue 4, 2014/15

In this Issue

CEO Interviews with: Maria Rodale

Chairman & CEO Rodale

Ira Melnitsky CEO

Tourneau

Dr. Martine Rothblatt Founder & CEO

United Therapeutics

Clarke Murphy CEO

Russell Reynolds Associates

Linda Zecher President & CEO Houghton Mifflin

Harcourt

Stephen Joyce President & CEO

Choice Hotels

Companies In This Issue . . . .

United Therapeutics Corporation (NASDAQ:UTHR) is a pub-licly-traded biotechnology company focused on the development

and commercialization of unique products to address the unmet medical needs of patients with chronic and life-threatening conditions. The company was incorporated in 1996 and is headquar-tered in Silver Spring, MD.

Tourneau began in 1900, when the Tourneau family established a watch-selling business in Western Europe. Since that time, Tourneau LLC has expanded and now owns and operates a chain of watch retail stores for men and women in the

United States. It also operates an e-commerce site. The company is based in New York, NY with re-tail stores in Arizona, California, Florida, Georgia, Hawaii, Illinois, Massachusetts, Nevada, New Jersey, New York, Pennsylvania, Texas, and Virginia. In addition, Tourneau has a watch repair fa-cility in Long Island City, New York.

Houghton Mifflin Harcourt (NASDAQ: HMHC) is a180-year-old educational and trade publisher in the United States, headquartered in Boston’s Back Bay. It pub-lishes textbooks, instructional technology materials, assessments, reference works, and fiction and non-fiction for both young readers and adults. The company employs

over 4,000 people.

Russell Reynolds Associates is a global leader in assess-ment, recruitment and succession planning for chief executive officers, boards of directors and key roles within the C-suite. With 350 consultants in 44 offices around the world, the firm works closely with both public and private organizations across all industries and regions. Russell Reynolds Asso-ciates helps their clients build boards and executive teams that can meet the challenges and oppor-tunities presented by the digital, economic, environmental and political trends that are reshaping the global business environment.

The CEO Forum, Volume IV, Issue 4, 2014/15 8

SAP (NYSE:SAP), founded in 1972 and headquartered in Walldorf, Germany, is a market leader in enterprise application software and helps companies of all sizes and industries innovate through simplification. The company has locations in more than 130 countries, with over 263,000 customers and 68,800 employees. At

the close of fiscal year 2013, revenue for SAP was $16.9 billion Euro.

Clarke Murphy CEO

Russell Reynolds Associates

The Art and Science of the Strategy of People


C larke Murphy is the Chief Executive Officer of Russell Reynolds Associ-ates and serves on the Board of Directors. Prior to his appointment as CEO, he was the Global Leader of the firm's CEO/Board Services Prac-

tice. While at Russell Reynolds Associates, Clarke has conducted a number of sig-nificant projects in the industry, including board of director searches for Wells Fargo, UnitedHealth Group and MSCI. He also has conducted CEO assign-ments for MasterCard, Genworth Financial, Aramark and Duke Energy, among others. In addition, he has led notable searches in the private equity industry, in-cluding searches for The Carlyle Group and Warburg Pincus. Clarke has more than 25 years of experience in the executive recruiting industry, joining Russell Reynolds Associates in 1988. Now based in New York, he earlier spent time in the firm's Frankfurt office and later in London, where he served as Deputy Country Manager. He also has acted as Head of the Americas. Prior to joining Russell Reynolds Associates, Clarke was a commercial banking officer in the Cor-porate Banking Division of Manufacturers Hanover Trust Co. in New York. Clarke is a member of the Council on Foreign Relations, as well as a member of the Board of Directors for the New York City Ballet. Previously, he served as a member of the Board of Trustees of the Convent of the Sacred Heart school and is a former Trustee of the College Foundation of the University of Virginia (UVA). Clarke received his B.A. in history from the University of Virginia.

many people working together to solve a problem for a client across offices or across practices rather than one person trying to get the most out of each year. It’s a fundamentally different structure. You headed up the CEO/Board Practice prior to be-coming CEO, and you also are a CEO, which pro-vides you with a unique perspective. What is it you are hearing most from CEOs that keeps them up at night? It will sound like a cliché, but it’s not. Almost every single CEO or board member I meet says, “I don’t have enough good people. I have plenty of capital. I have investors who want to do more with me. The world is clearly different from 2010 and now has more growth opportunities than we’ve seen in six years, but I can’t get enough people or keep my best people.” That, to me, is the biggest issue. Let’s discuss small companies before we go to large companies. If someone needs to hire a CFO, what advice do you have for getting the right person? Midsized companies, and even a lot of family owned companies, don’t have the room for bench strength. So each hire has to be a success because the cost of the

Robert Reiss: Russell Reynolds Associates is a very well-known entity in the CEO world. How do you differentiate yourself? Clarke Murphy: This probably is the most frequently asked question. I guess there are two things: First, our business has changed, in that we are as much in the retention business as we are in the recruiting business, helping clients not just to react to their problem today to solve an issue recruiting someone new but to make sure they are retaining the best people, and, competi-tively, do they have the best people? So it is less reactive and more forward-looking, helping our clients to prepare and build their business going forward. It is a different orientation to helping a client solve a problem. Second is our corporate structure; it is a privately held partnership. We can take a longer-term view about our own firm, where this is an industry that is largely “eat what you kill.” People tend to focus on the fee for now. It’s just the way it is. Ours is a firm based on collaboration. Going back to the founding of the firm, we have focused on

“Our business has changed, in that we are as much in the retention business as we are in the recruiting business.”

- Clarke Murphy


bad hire in a midsized company is brutal. So we tend to focus on the resume and the technical skills. But you have to equally focus on the cultural fit of a person–who can have the most incredible resume in the world or maybe worked for one of your competitors at one point–and evaluate if he or she is going to get along with others on your management team. Personally, I think–particularly for a midsized compa-ny–you have to have the third and fourth meetings out of the office, out of the conference room. Not just over a meal, but take a walk, play golf or do something for a number of hours outside a business setting to get to know a candidate better because the company can’t afford a hire who can fail in an organization of that size. How do you bring that to your organization? How do you hire and build the right culture at Russell Reyn-olds Associates? I am a huge believer in competitive sports. I realize that people who play team sports have won and lost and that they typically like winning more than they like losing. They also understand how to play in a group setting, which is very important at Russell Reyn-olds. Everybody has a different role. Everyone has different strengths and weaknesses. Another basic principle of our culture is that you return your clients’ calls first, and you return your colleagues’ calls second to help each other because, particularly in today’s world with information sharing, the knowledge transfer helps us get things done so much faster. So to me, people who have played competitive sports have an advantage. They very possibly have been in a

service business already in their life, whether having been a waitress in high school or working in a profes-sional service business after college. Most important to me is that they are intellectually curious because we have to get up to speed on different companies and different industries really quickly, and our job is not to find the known quantity and see if they’re available. We persuade the best people why they should be inter-ested in our clients’ opportunity and then see if they fit. If you don’t have an intellectual curiosity, you are not going to go find that person who doesn’t want to move, who is not on LinkedIn, who, theoretically, is not available. We recruit people. We don’t place them like a chess piece. Let’s talk about digital. The whole world is changing. What do you see happening that is impacting the tal-ent world? To state the obvious, the pace of change has never been so rapid or so accelerated as the world we are liv-ing in today. A couple of years ago, we saw digital transformation as pretty much the core platform of how we could help our clients, whether it was in the United States or elsewhere. I don’t mean an iPhone app. I’m talking about midsized industrial businesses looking at the supply chain in a different way. We are talking about international metals and mining and drilling companies operating in a different way. We put every single person in our firm through intense training around digital transformation business mod-els. Thus we are able to help our clients with digital–not just those in consumer electronics or high tech but those in industrial, healthcare or consumer durables


businesses as well. We say, “Look at what’s happening in other entities.” We know the impact digital is mak-ing because the people we are recruiting as a chief digi-tal officer or, increasingly, a board member who has digital experience has been game changing. When I speak with CEOs, they usually say they learn from other CEOs and other industries. Do you see that? Yes. We had a client in Spain that we digitally trained last spring. People realized they are in a very old-fashioned industry. Six or seven months later, they were still looking at the business from a technology framework, which was bits and bytes, not from a digi-tal perspective. In fact, we then led a series of off-sites around how we look differ-ently at what the roles are and what people need to do. Do you have any quick ad-vice on digital for CEOs? People think of digital as consumer electronics only. But it is much more than that. It is a fundamental stra-tegic change in your supply chain, in your operations, and how you communicate and interact with custom-ers and suppliers. Many people think of it as revenue enhancement, but it also is cost reduction. So the abil-ity to get to people faster–suppliers or customers—and to enhance the profitability is connected with having a digital strategy. In terms of digital maturity, where are most compa-nies, and what are the different elements of strategy that they should focus on to build the right team? The United States and the United Kingdom, and may-be the Scandinavian countries, are quite far ahead of

everyone else. Clearly, those that are large cap or ven-ture backed are very large and very small, respectively. The large have capital, and the small are nimble enough to make the necessary changes. I think the midsized company is learning what digital means to the business and how an organization needs to create change. Initially, it is strategic change, and then it be-comes operating change. Let’s talk about the strategic change, the operating change, the implications and what people need to look for.

Strategically, people should be trying to see the impact of what some of the imple-mentation of digital can be on their industry. For an insurance company, this might be thinking about preventive maintenance or putting into a car a digital transfer that says, “Take a different route to avoid icy roads that might cause an accident.” In a healthcare

company, it might be getting information much faster. From a processing standpoint, it might be eliminating all paper and going electronic, which is the simplest point, but also it is getting communications faster. It might be a supplier that is going straight from point of sale through the supply chain that eliminates three or four steps. It might be a billing cycle that eliminates two or three steps. It might be reaching people with proactive ideas to get a quicker reaction. So what are we doing to improve these things compet-itively and strategically? It is looking at the structure of the firm, which largely is resistant to change because people think it’s a change in technology. It’s not. It’s a fundamental difference of elimination through tech-nology. What advice do you have on how boards become more

“The ability to get to people faster—suppliers or customers—and to enhance the profitability is connected with having a digital strategy.”

- Clarke Murphy


effective in this new digital world? Going back almost three years, the most forward-thinking companies were adding a digital director. Many companies around the world said that was a bad idea because a single-purpose director is not the role of a board–you can hire a consultant. But the pace of change has been so fast that directors didn’t have time to have a digital study conducted for them, as they might have in strategy or in cost cutting or in marketing. So we now are deluged with companies saying, “Add another asset to the board who strictly focuses on the transfor-mation in our industry.” Again, it can be across any industry–it isn’t high tech only. If you were advising someone going to college, are there any specific majors you would recommend? I, personally, have many nieces and nephews who are in college right now. Whether they’re studying ap-plied sciences or marketing, I tell them to go to work for digital agencies in their sum-mer jobs. They should jump into things that are going on that are digitally related. However, unless one is studying applied math or engineering and is looking at the back end, which probably is the way to go, I think the marketing aspects hold a lot of promise. Let’s talk about your background; you majored in his-tory at UVA. I did. How does that tie in? Well, I don’t know if it does tie in. I’ve always been

fascinated with history. I think that you do learn from the past, unlike a stock price where past behavior does not predict future behavior. In history, past behavior does predict future behavior. So in our business, we are studying how people react, how they make decisions and how they perform under pressure because that will predict how they likely will perform in the future. How do you maintain the culture at Russell Reynolds

Associates? Well, you will laugh, but it is the same way we advise our clients. It is all about people. We spend a great deal of time nurturing our employ-ees. We probably have one of the lowest turnover rates in the partner ranks of our firm in the industry. We look at the life cycle of someone join-ing this firm from the day of the first interview so the candidate under-stands well what we want to do and what we stand for. We’re the only firm that doesn’t pay people on com-mission or formula. Ours is about how a group of people makes things

happen faster. I love team sports, quite frankly. People understand winning and losing; they understand their role on a team–and that’s what we do here. You get solutions faster with groups of people. How do you know in business whether you’re winning or losing? About 75% of the clients with whom we work ask us to come back again. We look at return rates of busi-ness, repeat business and win rates on pitches. As you know, there is an old adage: “You’d rather do business with someone the second, third, fourth or fifth time

“We now are deluged with companies saying, ‘Add another asset to the board who strictly fo-cuses on the transformation in our industry.’”

- Clarke Murphy


than keep going out to find a new customer.” In leadership philosophy, is there something you learn from sports that is fundamental to your belief of what makes an effective leader? Yes. You can’t have all captains or all quarterbacks on the team. If I’m working with an industrial client and we’re conducting a CFO search, the point about team-ing is critical. We’ll have someone out of our CFO Practice teamed up with the head of our industrial business because they jointly are going to better under-stand the client company and what works. So the CFO consultant will know the technical skill set that makes someone a good candidate; and the industrial consult-ant will know the company’s culture well and will be able to evaluate whether or not that candidate would fit. So the teamwork is what our role requires. Our CFO consultant is looking for technical skills. Our industrial consultant is looking for the cultural fit. Eric Spiegel, President and CEO of Siemens USA, who played football in college, told me, “Part of the key is every role has its importance, and you have to know that.” That’s correct. My great passion is racing sailboats. If everything goes perfectly, you do well, but if just one person doesn’t do his or her job, the whole thing stops. Was there one pivotal point where your career escalat-ed from there to where you became CEO? For me, it was during the financial crisis. We were doing a great deal of board and CEO recruiting under tremendous pressure for companies in trouble. I real-

ized that every board member is human. Each one said, “Oh my gosh, what do we do?” It changed the outlook of my work–and now the firm’s work–in help-ing them prepare for the future and not react to the current situation. That was the fundamental difference about bringing information and knowledge across in-dustries or across borders, saying, “Here is what’s up. This is what you need to know about. Here is how oth-ers are winning.” And that was fundamentally a shift that occurred in how we oriented our firm. It has been great having you on “The CEO Show,” Clarke. It has been a pleasure to be here. I appreciate your time.

“I love team sports, quite frankly. People under-stand winning and losing; they understand their role on a team—and that’s what we do here. You get solutions faster with groups of people.”

- Clarke Murphy


Robert Reiss and Clarke Murphy Interview aired 08/24/2014

ceo forum issue 15 - russell reynolds associates · cluding searches for the carlyle group and...

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