Australian Financial Review
October 8, 2018

In a fast-changing world, companies are increasingly in search of fresh thinking and fresh approaches to give them the edge over competitors. In a duopolistic market such as Australia, a key way to achieve this can be recruiting executives from different industries. Anecdotal evidence from executive search firms suggests that more and more companies are doing just that.

“Companies are trying to give themselves the edge with people who look at a problem from a different angle,” says Robert Webster, a senior client partner at executive search firm Korn Ferry. “It has really taken off over the past 10 years with the digital revolution. People are more inclined to look for new thinking.”

Guy Farrow, managing partner of search firm Heidrick & Struggles in Sydney, adds: “There’s a recognition that you’re better off thinking more laterally. If you look globally, one of the things that has changed dramatically over the past 10 or 20 years has been the portability of talent. That is across countries, but it’s also between industries.”

Gregory Robinson, managing partner at executive search and board advisory firm Blenheim Partners, says: “Some organisations have come to the conclusion [that employing] everyone from the same industry is not an answer against new entrants or offshore players and have deliberately avoided their sector as an executive hunting ground.”

Webster notes that the banks have been successful in recruiting executives from other industries, partly because they have a huge appetite for IT and digital skills. One of the most high-profile shifts was Maile Carnegie, who in early 2016 quit as managing director of Google in Australia to become group executive of digital banking at ANZ Banking Group.

Innovation culture

“Part of Maile’s role will also be to shift our thinking and champion a group-wide innovation culture at ANZ based on developing and attracting service-focused, technology-literate, innovative and experimental people and teams,” chief executive Shayne Elliott said at the time.

Robinson points to other notable examples: Greg Barnes, who in 2016 moved from chief financial officer at building products company CSR to Nine Entertainment; Andy Penn, who switched from insurance group AXA to Telstra, where he is now chief executive; Christine Holgate, who went from health supplements company Blackmores to Australia Post; and Gordon Ballantyne, CEO of Healthscope who was previously at Telstra.

Changing industries at the CEO level is the exception rather than the rule. Analysis of the 50 biggest companies in Australia by Heidrick & Struggles shows only one chief executive, Sydney Airports boss Geoff Culbert, moved industries. Culbert was formerly CEO of GE Australia, an industrial solutions company.

Outside the ASX 50, other notable exceptions include Alison Watkins, who took up the reins at Coca-Cola Amatil from GrainCorp, and Jayne Hrdlicka, who moved from running discount airline Jetstar to head A2 Milk.

But further down the corporate tree, it is far more common. Of the 34 chief executives of ASX 50 companies who were internal appointments, 30 per cent changed industry when they originally joined the company, analysis by Heidrick & Struggles shows.

Financial services is a popular hunting ground, with the chiefs of telecoms behemoth Telstra (Andy Penn), property group Scentre (Peter Allen), conglomerate Wesfarmers (Rob Scott) and property developer Lendlease (Steve McCann) all switching out of that sector.

Farrow says the opportunity to inject external talent is in the senior leadership team, or “CEO minus one” level.

The quid pro quo is that the new employer invests appropriately in the outsider. As another senior executive recruitment expert says: “There has to be an investment of time by both the company and its clients.”

Potential minefield

There is reason to be sceptical that bringing in talent from a different industry will solve a company’s problems. More than one expert in the field points to Andy Hornby, a British food retailer who went on to run HBOS, one of Britain’s biggest banks, which nearly collapsed during the financial crisis.

“It can be a very positive experience to have a fresh set of eyes,” says Carol Lewis, director of global executive search firm Stanton Chase. “But it can be a minefield. The question is whether an organisation’s culture allows it to be successful.”

She says management needs to back the new recruit into the role, and the appointment needs to be explained to team members, because it can lead to resentment. The executive needs to have a solid 90-day and 180-day plan to track his or her performance and measure success.

“Until they have earned their stripes, there is often scepticism about what they can do and what they can deliver.”

Article by Sally Patten, BOSS Editor

Source: https://www.afr.com/work-and-careers/management/why-australian-companies-are-recruiting-executives-from-different-industries-20180720-h12xsl

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