This case study, based on one of Kathy Freeman Company’s successful search engagements, is intended to illustrate our unique approach to providing strategic advisory and executive search services to investment firms across the U.S.
A $5 billion independent wealth advisory firm that has served institutional fiduciaries and high net worth families for over three decades.
The Founder & CEO was looking to hire the firm’s first Chief Operating Officer to streamline operations and eventually become the CEO’s successor. There were several fundamental challenges within this assignment:
- The CEO had never partnered with an executive search firm and was a bit skeptical about the process and path to success.
- Since the CEO wasn’t handing off any of his current responsibilities, the job description and mandate, along with the day-to-day role of the COO position, had to be carefully crafted from scratch.
- The skillsets and experience for a typical COO role were insufficient in this instance because this COO would be eventually elevated to CEO. As a result, we needed to factor in the competencies and intangibles required to become a CEO. Many operational executives don’t possess the leadership qualities and client-focused sensibility to become a CEO.
- The compensation package was at market for the COO role, but it didn’t include enough incentives for an executive being groomed for the CEO role.
Developing A Solution:
To properly define the position and support the CEO’s goal of identifying his succession plan, we did the following:
- Solidified the CEO’s succession timeline and determined which tasks he’d like to gradually hand off
- Identified the skills and experience required for this role as well as the areas the current CEO would develop
- Discussed the benefits of building a broad and inclusive slate of talent
- Confirmed the desired outcomes of the CEO and the Board of Directors in this new hire
- Conducted a cultural audit of the senior leadership team
- Benchmarked the role with the competitive landscape to ensure that the job description would be attractive
- Defined a compensation structure that made the opportunity compelling, given the competitive landscape for talent
- Discussed the benefit of leveraging a psychometric assessment tool for finalist candidates
Our approach in a consulting engagement like this is to help educate a CEO about the market for talent. Since he had never hired a COO, he wasn’t sure what he was looking for in a potential successor. One of our goals was to present a broad slate of qualified candidates with operational skills and experience as well as leadership potential.
Next, we gathered input from the senior leadership team. We sought to identify operational deficiencies at the firm and potential areas of improvement. We then translated these insights into a position description.
During the process, it became clear that this particular search was more challenging than the standard COO search – many of the operational executives we interviewed didn’t have the DNA to become a CEO. Leadership dynamism is an intangible that isn’t apparent in someone’s resume. It requires engagement and dialogue. Many COO candidates were lacking the client-facing skills and experience required to become CEO. As a result, we reconvened with the CEO to determine his willingness to coach a potential successor.
We ultimately presented candidates from FinTech, the U.S. Military, Wealth Management, and Investment Management. Some were less experienced but within our client’s preferred compensation range. Others had the operational expertise but came from outside of the wealth management industry. Still, others had the experience and skillsets but needed a compensation package that was more than our client was inclined to consider.
Initially, the CEO was attracted to a highly polished COO candidate from outside the industry who was within the compensation budget. Ultimately, this candidate decided against working in an entrepreneurial environment and dropped out of consideration. The next candidate our client became interested in was outside of the compensation budget. Our client stepped up to meet the candidate’s compensation needs, but for personal reasons, this individual had to withdraw from consideration. Other candidates were within the compensation parameters but didn’t possess the CEO capabilities our client desired.
At that point, we recommended that the CEO increase the total compensation to attract stronger candidates. He consented which gave us the latitude to engage new candidates and re-engage with those who originally told us they needed more compensation.
Now armed with a more competitive compensation package, the finalist candidates during the second stage of the search were exceptionally strong operationally and possessed the right DNA to be the CEO’s successor. Our client ultimately hired an operations executive who worked locally within the industry. She brought extensive experience with the front office, back office, products, building and leading teams, and working directly with clients.
After the search was completed, our client realized he was unaware of the numerous facets that needed to be addressed during this succession planning search. He recognized he didn’t understand the competitive landscape for talent and the compensation level required for this type of role. He also acknowledged that he underestimated the challenge of finding a COO with the skillsets necessary to step in as his successor.
Using our consultative approach, we conducted a complete assessment of the market and analyzed the talent pool by backgrounds, skills, and compensation requirements. To make sure this succession hire would be successful, it was crucial that our client had a deep understanding of the inherent trade-offs in identifying the perfect fit.