‘No substitute for experience’

‘No substitute for experience’

Mumbai: David Kimbell, who co-leads the European board services practice at privately held global executive search firm Spencer Stuart, calls himself an India enthusiast. His involvement with assessment includes a large number of board evaluations and key roles in major post-merger projects.

With a number of India’s corporate chief executives due to retire in two years, Spencer Stuart may be again in the thick of action, but Kimbell, who was in India in October, did not reveal names of clients.

Kimbell, who specializes in senior-level recruitments for financial services and private equity firms, said companies should start looking for people with experience in facing tough situations, especially for positions such as chief executive officers (CEOs) and chief financial officers (CFOs.

He said that when CEOs retire, they should become chairman of a different company rather than hold the post in the same company. Spencer Stuart helps companies such as Merrill Lynch and Co. Inc.and Citigroup Inc.fill their top seats. Edited excerpts:

The global recession is hurting India’s economic growth. Some Indian projects are delayed or shelved and a slowdown seems inevitable. How does it affect your industry?

The question everybody is asking is how long this (slowdown) will last. I don’t have the answer, but it’s a new experience for all of us. I don’t know what the consequences are, but we have confidence. I don’t see any material turndown in demand for what we do yet.

We are counter cyclical... because people are leaving and some are retiring and management always wants to look outside for better people... except during the dotcom bubble burst, (when) our business went down by 30% (and) took about two or three years to recover. So, we are very bad people to talk to on recessions because we love recessions.

So, you actually sense an opportunity?

We believe in different thoughts of management in different economic climates. People are highly entrepreneurial in a positive environment and people love to take risks. In an environment where cost pressures are increasing, the financial controls and financial management are different and stronger.

What sort of CEO, CFO and finance director do you need to sail through this period? You need people with experience, that’s the important thing. Young people don’t have the experience and (you) can’t teach somebody that sort of thing—on how to manage a recession.

What companies can do is to change the board members who come for appointment on rotation... In the board room, there’s no substitute for experience.

Are you suggesting an arrangement like what Tata Steel Ltdhas—with Ishaat Hussain on the board and CFO Koushik Chatterjee taking care of day-to-day operations? Is this the team you would recommend for Tata Steel to manage its Corus group integration?

The Tata Corus management team is led by Corus group CEO Phillipe Varin. The Corus chief executive is an experienced operator. He has worked in different economic cycles. (Varin, who was hired by the Corus group in 2003 from French aluminium producer Pechiney SAafter the company was acquired by Canada’s Alcan Corp., led the turnaround at the Anglo-Dutch steelmaker.)

What Tatas have done is, they have retained the best talent from what they have got, and provided him with Indian support, which he didn’t have earlier.

Is that an effective strategy and good for seamless integration?

If you think of about how many of the (Corus) management team is good, you’ll find that outside India there is 75% of the Corus management team. They have this big Dutch operation and the British operation. From my limited experience with the Tatas, they have been very clever.

But most Indian companies prefer to maintain status quo by retaining the existing management of companies they acquire.

Everybody will have a different philosophy about acquisitions. Some companies put in their own people immediately. More and more companies who make cross-border acquisitions have to ensure that there is no hegemonistic attitude where the parent company doesn’t dominate the culture of the acquired company.

The best-run companies are those that may change the name on the board, but retain the best talent in the companies they acquire.

Indian companies have followed this model. The Tata, Mahindra and Essar groups haven’t really flown in and scooped down and changed managements. I think they have gained reputation as fairly good acquirers who have added value culturally.

What role did you play when Tata Motors Ltdwas considering buying Jaguar and Land Rover from Ford Motor Co.?

We offered to evaluate the management teams before or after acquisitions. Before a company is acquired, the evaluation would be by referencing. It is very valuable information. (Spencer Stuart worked for one of the bidders for JLR, not the Tatas).

In India, several corporate captains are due for retirement. Do you think age should still be a factor for retirement, even if someone’s doing a good job?

Twenty-five years ago, men retired at 65 and women at 60. That was the rule... because it was driven by pensions. The whole pension game has changed. Everything is now built around personalized schemes. The French centralized the pension funds, whereas in the UK, the government gave a small contribution. And they were tax efficient.

So now, when people retire at 55 years, (it is) because they can manage with the pension kitty. Now people don’t want to retire, because they are healthier, as standard of living improved due to better healthcare facilities and also because they take more holidays.

In India, Mahindra and Mahindra Ltd’s chairman Keshub Mahindra is 82 (but) looks 60. As long as experience is used and (you) allow the young people to use their entrepreneurial flair to grow the business. That’s why the role of the chairman is important. That’s the best combination you can ever have.

What is your opinion on a single person holding both the chairman and CEO posts? In challenging times as this, wouldn’t it be better to have one person hold the two posts?

In America, there is an argument that the chairman and chief executive shouldn’t be the same person. They are trying to separate it. What they are doing is they are allowing the chief executive to retire and become the chairman. But that’s a bad thing to do. He should retire and become chairman of some other company, unless the company is facing a crisis. Then he should stay.

Do you think Indian companies should look abroad to fill up senior positions?

In a way, we should stop looking at it as a nationality issue. But you should look at talent. There is a global pool of talent. There could be an American, a Dutch, a Chinese to fill up these vacancies. We have a global database of talent, where we track and measure the talent.

(And) Why would they do that? They don’t want the best Indian, they want the best.