the new european executive

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The global financial crisis ushered in a period of economic and political volatility in Europe that shows no signs of abating. Rapid change, relentless unpredictability, and high levels of uncertainty are the norm, and success in this landscape requires leadership skills and styles that differ markedly from those that dominated in more a stable busi-ness environment.

In mid-2012, Korn/Ferry International surveyed and interviewed more than 100 senior executives from across industries in the European Union and studied our extensive database of executive profiles to create a portrait of this much-needed New European Executive—an agile, innovative leader whose essential roster of talents are hard-won and hard to find. Recruiting, hiring, developing, and retaining the New European Executive is not simply a luxury; many businesses have realised that increasingly, it is a matter of survival.

January 2013

The global financial crisis wiped out not only monetary assets, but also swept away the model of leadership that had dominated for decades. A Korn/Ferry survey of European executives about their business concerns and talent needs revealed marked shifts in the last few years. Executives who once could steer growth with a confident, steady hand must now have the fluidity to manage disruption, and maximise the creativity—and opportuni-ties—that can emerge from constraint.

The perspectives of a CFO master classby Michael O’Callaghan and Chris Campbell

By Jim Tapper and Iain Manson

The New European ExecutiveLeadership for recovery and growth

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The global context: Fiscal clouds, prolonged uncertainty

European leaders struggling to rekindle and sustain growth in their companies continue to confront daunting financial challenges with scant relief in sight. The International Monetary Fund’s (IMF) October 2012 Global Stability Forecast offered a snapshot of interlocked economies facing sputtering growth or stagnation, twinned with political peril:

Instability in the Middle East in the wake of the Arab Spring threatens the region’s political structures and the world’s energy supplies. Political deadlock in the United States has pushed it perilously close to a fiscal cliff that could throw its delicate recovery back into recession, with global repercussions. Even China, the post-crisis engine of global growth, will likely see annual growth in its GDP drop, from 7 percent to 5 percent in 2013, the IMF said.

In the Euro Zone, where the IMF predicts tepid GDP growth of 1 percent in the second half of 2013—up marginally from a 0.4 percent decline in 2012—uncertainty reigns. The euro has been stabilised in recent months by the promised infusion of €80 billion from the European Financial Stability Facility, but the rifts continue to widen between the Euro Zone’s stronger “core” economies and the weaker ones on the periphery. The flight of capital is an ongoing issue as well.

In 2013, unemployment rates are predicted to remain at levels exceed-ing 25 percent in Greece and Spain, and 16 percent in Portugal, even as enforced austerity measures exacerbate social tensions. Fears about the viability of the common currency resurface with each new political flashpoint. And the commitment from both creditor nations now assuming the risk of other countries’ sovereign debt and the debtor nations facing externally imposed fiscal restraint often feels strained, near to breaking point.

The European Community’s (EC) October 2012 economic forecast shows consumer confidence sitting at -25 and

private consumption dropping 0.4 percent through 2013 before inching up 1 percent in 2014 in the European Union. The sovereign debt crisis, the EC reported, has led anxious households to increase their “precautionary savings,” further perpetuating the cycle of economic contraction.

Fears about the viability of the common currency resurface with each new political flashpoint.

Agility required: A snapshot of today’s landscapeOne board member described the cascading change the business faces. It operates in a faster-paced market with greater competition. Customers are more demanding, sales cycles are longer, and access to capital is tight.

To keep pace, the company’s leaders must shift strategy more rapidly and more frequently, often with much less information than in the past. More emphasis is placed on communicat-ing the business vision to employees to keep them engaged, informed, and effective. And decisions, he said, must be bolder and focused on innovation.

The imperative? Run, don’t walk, toward an ever-shifting destination.

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Converging concerns in European executive suites

This precarious economic and geopolitical picture, and the business challenges it creates, are stirring up anxiety for nearly all business leaders. Among the executives we surveyed, the top-of-mind concerns fell into two broad categories: the economy and the workforce (Figure 1).

The stability of the euro led their economic concerns, followed by flagging consumer confidence and access to capital, which has tightened severely. This top three list reflects a daunting business climate: even as they make extreme contin-gency plans for currency frag-mentation and struggle to find capital, they must also cultivate new strategies to win over wary consumers. The other option? Look for new customers—some-times far outside traditional markets—then scramble to meet their fast-changing demands.

Tighter fiscal policies and rising competition among EU member states were the other dominant economic concerns that emerged in our survey. Both factors have magnified the strain on companies, amplifying uncer-tainty and rendering pre-crisis plans and processes obsolete.

As predictability crumbles, some executives described moving forward as akin to driving in fog. “All decisions are short-term,” one told us, saying his company was setting three-month or six-month goals rather than yearly ones. The stability of a company, paradoxically, can hinge on its making rapid and frequent strategic shifts.

As predictability crumbles, some executives described moving forward as akin to driving in fog.

Figure 1

Ten top-priority business challenges since the onset of the financial crisisKorn/Ferry surveyed 109 business executives, business academics, board directors, and chairmen and asked them to rank their top-of-mind concerns.

1. Stability of the euro currency and monetary union2. Consumer confidence3. Tightening fiscal policies4. Lack of access to capital5. Rigid labour markets6. Boosting development of workforce7. Keeping the talent pool engaged8. Rising competition between EU nations9. Moving from shareholder to stakeholder10. Inflexibility on wages

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Innovation, challenging even in flush times, is a must-have survival skill in this climate. Executives frequently reported reconfiguring whole processes or procedures to build organisational resilience to the mar-ket’s unabating ambiguity.

The second set of concerns that emerged in our survey pointed to the human, in-house repercussions of volatility and rapid, unsettling change. For some companies, memories of 2008-2009 traumas are still raw. One executive described how his company’s revenues had dropped 50 percent year over year in that period, requiring labour force reduc-tions, across-the-board pay cuts of 20 percent, and a shift to crisis mode that has become the norm.

Today’s uncertainties reverberate against that backdrop, reflected in survey respondents’ concerns about wage inflexibility, rigid labour markets, and keeping the talent pool engaged. Employees are stressed about fears of redundancy and shrinking salaries, and yet keeping them energised is essential. A tandem concern, boosting development of the workforce, reflects companies’ need to plumb the abilities hidden among the smaller staffs. Both leaders and individual contributors need to be flexible enough in their skills to meet fast-changing market demands.

Retaining the most valuable employees is harder now than it was before the financial crisis, one executive told us. Key employees, many of whom are more accustomed to success than struggle, are “willing to vote with their feet,” he said, and will seek job security elsewhere if the company’s strategies are “not automatically successful.” The price of failing to

motivate, engage, and build loyalty in top talent, he said, was potentially losing “all your best assets because people just walk out the door.”

The final top-of-mind concern among executives reflects many organisa-tions’ post-crisis emphasis on sustainability over short-term gains for investors. This change brings with it a new focus on balancing the imperatives of the equities markets with the needs of customers and workers. That shift in orientation—emphasising stakeholders not just shareholders—is a marked departure for some companies and it too requires altering perspectives and strategies.

Motivating others: Acknowledging incremental successesThe ability to redefine success in a flat economy, and in doing so motivate teams to persist through unaccustomed adversity, is a highly valued skill today.

One executive described creating a post-crisis environment in which “we take pride in what we’re doing well, and acknowledge it, even when ambitious goals are not met.” He stressed the value of collaboration across the company, “showing everyone is on the same side.”

Today, he said, “We work as though sailing a ship through a storm and celebrate our successes,” acknowl-edging the entire crew, not just the captain.

Employees are stressed about fears of redundancy and shrinking salaries, and yet keeping them energised is essential.

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Taken together, these concerns pose a matrix of leadership challenges that differ significantly from those before the crisis.

An executive profile to match today’s challenges

This daunting roster of challenges (see Figure 2)demands a class of leaders with new capabilities and strengths. Executives who once could steer growth by building on continuity or incremental progress must now have the fluidity to manage disruption, and maximise the creativity—and opportunities—that can emerge from constraint.

The composite picture of the New European Executive—one able to rekindle and sustain growth—is a leader more visionary, more driven by competence and expertise, more flexible and adaptable to rapid change, more courageous, and more strategic than before the onset of the financial crisis.

To establish the profile of the European business leader required today, Korn/Ferry’s EMEA office looked at both leadership competencies and personal leadership styles.

In the summer of 2012, we asked European executives which of 26 competencies from Korn/Ferry’s Leadership Architect™ suite were most crucial for executives to have in the post-crisis period. We then compared those results against the norms for Europe from February 2007 to March 2008.1

Figure 2

Shifts in leadership challenges

Establish mid- to long-term strategies in stable markets.

Make rapid and frequent strategic shifts as required.

Utilise easy access to capital. Employ creative financial methods in restrictive capital environment.

Service predictable levels of customer demand.

Adjust to customer needs in an environment of rapidly changing demand.

Build/scale workforce skilled at current products and services.

Build workforce with flexible skills to meet changing demand.

Position/re-position existing propositions for current demand.

Innovate new products and services for shifting customer needs and to find new markets.

Strategy

Category Pre-crisis Since crisis

Finance

Customer

Skills

Product

Figure 4

Changes in leadership and thinking styles

SocialApproachable, engaging, responsive; one who initiates relationships.

IntellectualLogical; credible, professional, data focused.

ComplexAnalytical, quality focused; seeks the right answers, plans carefully, detail focused.

Action FocusedFast; bottom-line oriented, efficient, time focused.

ConfidenceCan do attitude and the willingness to take on challenges that involve risk or conflict.

HumilityThe capacity to adapt one’s behaviour to fit the circumstances.

CompetitiveDriven by influence, power, achievement. Values status, advancement, winning.

ExpertDriven by competence, knowledge, expertise; needs stability and security.

Leading Style


Thinking Style

Emotional Competencies

Values and Motivation

Figure 3

Shift in competency importance rankings

Managerial courage: Evaluating the data, bucking the trendsOne manager we spoke with challenged the conventional wisdom that has put a high premium on the labour savings bought by moving manufacturing to Asia. Instead, he brought his plants back to Western Europe to be closer to the customer and discovered that faster response times to customer issues, quicker delivery, and the ability to provide larger quantities of product faster than the competitors, quickly negated the increased payroll. The payoff: Profitability doubled.

1 The 2007-2008 leadership competency norms were drawn from Korn/Ferry’s Voices as-sessment data. It was the peers, bosses and direct reports who chose which competencies were “most important” for 344 managers, directors, and executives they worked with.

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You can see below (Figure 3) which competencies rose into the top ten for the first time in 2012 (highlighted in blue), and those that dropped out (highlighted in orange). Before the crisis, companies looked to their leaders to execute: drive results from existing customers and offerings/products, plan and set priorities, then motivate and direct their teams.

That picture gets muddier in 2012. All those needs are still evident—Customer Focus, Strategic Agility, Drive for Results—though farther down in priority. But in the mix, especially at the top of the list, are new competencies.

Shooting to the top is Dealing with Ambiguity. While leader-ship always demands the ability to make decisions based on incomplete information, it is likely that no Western business leader in the post-World War II era has tried to operate a company when it could be that a multi-nation currency or one

of the biggest united trading blocs would crumble. Everything is an unknown now: where the economy is going, where markets are moving, what new gauntlet the politics of the EU will require companies to run.

The lists also reveal a difference in how leadership is approached. For instance, Command Skills drops out of the top ten, but Managing Vision and Purpose emerges as the third-most important competency. It is no longer sufficient to set the priorities and issue commands. Rather, one must have a vision of what success looks like in a flat economy, and he or she must lead with a steady central sense of purpose that is a guiding force for team members.

Likewise, leaders must have the stomach—Managerial Courage—for uncertain times and a sense of Perspective to get them through. They must command less and spend more time and energy Listening.

Rank

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Figure 2











Strategy


Finance

Customer

Skills

Product

Figure 4










Leading Style


Thinking Style



Figure 3


Pre-crisis (2007-2008)

Customer FocusDrive for resultsMotivating OthersPriority SettingProblem SolvingTimely Decision MakingStrategic AgilityOrgansingCommand SkillsBusiness Acumen

Rank

12345678910

Post-crisis (2012)

Dealing with AmbiguityCustomer FocusManage Vision and PurposeStrategic AgilityManagerial CouragePerspectivePriority SettingMotivating OthersDrive for ResultsListening

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A new style of leading

To flesh out this portrait of the New European Leader, Korn/Ferry’s study asked executives to choose traits that reflect the leadership and thinking styles, emotional competencies, values, and motivations they most require today. They selected options in four categories, and we compared the results against those from 2007-2008 (see Figure 4).

The pre-crisis traits show a leader equipped to extract the most from the opportunities of a prosperous economy: a confident competitor who focuses on thinking through what needs to happen and getting it done by leading with a relationship driven style. It’s a profile that dovetails with the pre-crisis view that the ability to execute the strategy was a leader’s most valued skill. In a climate of stability, buoy-ant demand, and easy access to funding, corporate cultures in which a “can-do attitude,” and winning were currency—understandably flourished.

However when stability is elusive, resources of every variety are at a premium, and teams are strained, successful leaders must draw on different modes of decision making. Post-crisis, the emphasis on an analytical thinking style shifts slightly to one which places higher value on quickness, efficiency, and a bottom-line orientation. Analysis is still important but action in a fast paced market is key.

The post-crisis executive—scrambling constantly, in the words of one leader, to “respond to new questions with new answers”—needs a personal leadership style anchored in intellectual argument, compe-tence, and expertise rather than one focused solely on approachability or relationships. Again the emphasis shifts slightly. Social orientated leadership style is still important but is second place to the force of intellectual persuasion. Humility—which is reflected in a willingness to adapt to changing circumstances—replaces confidence, and leadership decisions are driven by data, yet must pivot as the information changes. These styles are directly responsive to the highly pressurised, uncertain economic conditions that prevail across Europe today.

Figure 2











Strategy


Finance

Customer

Skills

Product

Figure 4










Leading Style


Thinking Style



Figure 3


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Finding and developing a new breed of talent

Senior executives with the traits and competencies of the New European Leader will be in high demand—and limited supply—as companies across the EU seek leaders with ability to flex between the known and unknown, shift frames of reference, and make the crucial decisions that will sustain a business into the future.

The most valued competencies in this new profile, however, are exceed-ingly challenging to develop. Korn/Ferry’s research on leadership compe-tencies puts Managerial Courage in the top tier of a 5-point difficulty scale.2 It requires leaders to believe passionately in the course they’re charting and then have the resolve to hold fast, despite unpopularity or opposition. Generally, such courage is built up by experiences such as managing through a significant crisis or learning from a failed project, which imbue leaders with emotional intelligence and maturity as well as personal resilience.

Dealing with Ambiguity, with a difficulty level of 4 on the 5-point scale, is a competency that is similarly developed through experience in challenging, often emotionally charged situations. The question is not so much job title or functional experience, as the “developmental heat”—the intensity, the pressure, the complexity—that bakes in these attributes. Managing Vision and Purpose, Perspective and Strategic Agility generally emerge in any move from line manager to managing director, but those who have been through more fire will be the execu-tives ready for the crucible of the post-crisis economy.

There are several implications for companies:

Audit talent. Companies need to know whether they have the necessary New European Executive profiles within their ranks and put in place plans to keep and develop these individuals.

Assess candidates. Once skill gaps are recognised, companies must put in place talent acquisition strategies that attract and “test for” these competencies and create experience-focused development strategies which will deliver the best return.

Humility: Adapting to changing circumstancesTop-down imposition of agendas has been replaced by humility, an openness to new information and ways of doing business. An executive with a multinational electronics firm described the necessity of develop-ing a global staff that can translate the company’s values to local cultures. “We have a smaller group at our headquarters and are building more tools and technical skills at the country sites, closer to the customers. We are sharing the same vision and mission with local delivery variations. We’ve seen that slow-moving countries are not a sign of weakness. There is not just one way; we have to be wise enough to adapt to country-specific challenges. The world is getting smaller, not more homogenous.”

2 Lominger Leadership Architect LibraryTM www.lominger.com

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Recruit globally. Candidate pools need to be global to access the widest range of high-potential candidates.

Value agility. Hiring and promotion decisions should place greater emphasis on an executive’s demonstrated agility, along with specific experience.

Rethinking talent strategies. The leaders we surveyed stressed the importance of rethinking talent assets on every level, both to motivate and to make the best use of them to meet today’s challenges:

• One executive described moving people into different roles to fill information gaps and gain new perspective. The move also lets people find and use latent talents, resulting in teams that were overall more competent.

• A second leader discussed how his company is strategising to “get the right talent at the right spot.” He’s infused his organisation with a drive toward “unleashing talent or bringing in talent” that gets the business closer to the customer. While attracting the right kind of talent has always been on the agenda, it’s moved up the list of importance.

• A third said that even as other organisations are tightening belts, his is considering expanding via acquistions, “seizing the opportunity that comes with times like now.”

Whether stretching talent, attracting new hires, or importing talent in bulk via acquisition, organisations will want to keep the portrait of the New European Leader as a model for the competencies they want in their ranks. Even in bad financial times, for-ward-looking companies still prioritise leadership assess-ment and development programmes focusing on this most precious asset. Indeed, the most astute can tap the “developmental heat” of today’s uncertain environment to test and build new ranks of leaders with the proven ability to roll confidently with ambiguity.

Developing talent with an eye to cultivating the New European Leader profile, starting early in careers, will help ensure that organisations have access to the innovative, change-fluent leadership they need. Companies that don’t will struggle to secure such leaders in an ever more competitive talent landscape.

Even in bad financial times, forward-looking companies still prioritise leadership assessment and development programmes.

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Methodology

This research utilised a combination of leadership profile data from Korn/Ferry databases and surveys of European business leaders. For our research on pre-crisis comparison, we used European executive norm data from 360-degree job performance appraisals collected between February 2007 and March 2008. The 26 competencies were ranked by mean “importance level” as scored by the peers, boss and direct reports of 344 leaders (executives, directors and mangers). Pre-crisis Decision Dynamics norms came from C-suite executive assessments collected from 1998 to 2005.

In addition, Korn/Ferry International surveyed and interviewed 109 individuals in mid-2012, primarily current business leaders working at European and UK companies who held titles at least as senior as managing director or senior vice president, as well as board chairmen and directors. We also included survey results from a limited number of senior executive search and leadership and talent partners at our Firm who specialise in this region, and 3 European business school management professors.

The survey asked respondents to rate the importance of economic and political factors, rank 26 competencies from Korn/Ferry’s proprietary Leadership Architect suite, and select from 18 characteristics drawn from Korn/Ferry’s Decision Dynamics assessment.

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Authors Jim Tapper Managing Partner, Leadership and Talent Consulting UK, Nordics, and Middle East [email protected]

Iain Manson Head of Energy Practice, EMEA [email protected]

About The Korn/Ferry InstituteThe Korn/Ferry Institute generates forward-thinking research and viewpoints that illuminate how talent advances business strategy. Since its founding in 2008, the institute has published scores of articles, studies, and books that explore global best practices in organisational leadership and human capital development.

About Korn/Ferry International Korn/Ferry International is a premier global provider of talent management solutions, with a presence throughout the Americas, Asia Pacific, Europe, the Middle East, and Africa. The Firm delivers services and solutions that help clients cultivate greatness through the attraction, engagement, development, and retention of their talent.

Visit www.kornferry.com for more information on Korn/Ferry International, and www.kornferryinstitute.com for thought leadership, intellectual property, and research.

© 2013 The Korn/Ferry Institute

Sponsors Ana Dutra CEO, Leadership and Talent Consulting [email protected]

Bernard Zen-Ruffinen President, EMEA [email protected]

Acknowledgments Guangrong Dai Senior Director, Intellectual Property Research [email protected]

Amy Sammler Project and Research Manager

George Hallenbeck Vice President, Lominger Intellectual Property [email protected]

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