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Taking credit

IN 2012 I was approached by Egon Zehnder, the world’s most successful privately owned executive-search firm, to write a history of the organisation that bore its founder’s name. Egon Zehnder was a Swiss–German Harvard graduate and former military officer who had set up shop in Zurich in 1964 to find senior executives for mainly American corporations that were attempting to conquer new markets following the devastation of World War II.

Over nearly half a century Zehnder’s business had grown from one office in one country to sixty-eight offices in forty-one countries, and in 2014 the firm was going to be celebrating its fiftieth anniversary on the shores of Lake Lucerne. ‘Would I like to write the corporate history to commemorate the occasion?’

I was intrigued by the offer because, first, I’d never been headhunted by a firm of headhunters before; second, I was not a business writer; and, third, I knew nothing about executive search.

After more than three decades as a journalist I also tended to look at the business world through a rather dark and narrow lens. Business was driven by the need to maximise profits, whereas journalism was driven by the need to inform and, at best, educate and enlighten. Business sought to protect its trade secrets while journalism strived, wherever possible, for transparency. Big business was all about satisfying shareholder value, while serious journalism was all about the public trust.

Never mind that journalism had relied for nearly one hundred and fifty years on the business of classified advertising – not to mention the goodwill of rich proprietors – for its very existence. As far as we in the Fourth Estate were concerned, our only ‘business’ was reporting, not thinking about the growth and profits of the company we worked for.

This uneasy relationship – born from seeing the world through these opposite lenses – was never more palpable whenever white-collar crimes were revealed, or when the financial Darwinism of the late 1980s saw men like US junk bond king Mike Milken ‘earning’ – if that’s the word – US$1 billion over a four-year period just prior to being indicted on ninety-eight counts of racketeering and fraud. Or when the biggest Wall Street firms sent the financial world careering over the cliff face in 2007–08 by creating up to US$400 billion in complex assets known as subprime-backed collateralised debt obligations.

THE NEW CAPITALISM – which began to supersede an older, more paternalistic version of capitalism during the 1980s and ’90s – often seemed like an epic sideshow of greed, antithetical to the common good. How else to view it when, in the words of American sociologist Richard Sennett in his 1998 book The Corrosion of Character (Norton), ‘perfectly viable businesses (were) gutted or abandoned, capable employees set adrift rather than rewarded’, simply because organisations needed to prove to the market they were capable of change.

The most tangible manifestation of this change was what Sennett called ‘no long term’. No long-term employment, institutional loyalty, credible lifespan for ‘business concepts, product designs, capital equipment and knowledge’. All the emphasis was on flexibility, with workers expected to behave nimbly, take risks continually and be open to change at short notice.

This was the very opposite of what ‘character’ was meant to imply because character was about loyalty and mutual commitment. It was about the pursuit of long-term goals and, when transposed to the family realm, it was what made families function well. It was also – as I was soon to learn – what made Egon Zehnder, the firm, endure.

‘Short-term capitalism,’ Sennett continued, ‘threatens to corrode character, particularly those qualities of character which bind human beings to one another and furnishes each with a sense of sustainable self.’

Notwithstanding all my reservations, I agreed to write the book. The business model for print journalism had well and truly collapsed by 2012 and, like many journalists, I was looking for other ways of making a living. Plus my own father, founder of Australian Vogue and former president of Condé Nast (publishers of magazines such as Vogue, Vanity Fair and The New Yorker), had actually employed the services of Egon Zehnder in the 1970s and ’80s to find senior executives for his company’s expanding global operations.

I’d remembered his glowing endorsement of Egon Zehnder more than thirty years earlier when he’d told me: ‘This man Egon Zehnder is one of the warmest, most charming and intelligent men I’ve ever met.’

My father and Egon Zehnder shared much in common. Both had been born in Europe between the Great War and the rise of Adolf Hitler. Both continued to revere Winston Churchill and great military figures like Montgomery of Alamein and the legendary General George S Patton.

Both were gentleman possessed of old European values who started out in business during a time when permanent careers and institutional loyalty counted for something; indeed both men inspired fierce loyalty themselves.

Both had inhabited a world where people visited each other in their offices rather than sent emails; where handwritten notes of thanks were not considered quaint; where men stood up for women as they walked into a room; where mutual commitment bound people together; and where organisations were informed by shared principles and beliefs.

THIS MIGHT SOUND charming and utterly irrelevant to today’s world but, in the case of Egon Zehnder, these sensibilities would come to inform an organisational culture that is now the envy of its competitors, making it the preferred search firm for many of the world’s leading organisations in financial services, health care and pharmaceuticals, information technology and telecommunications, consumer goods, the automotive industry, chemicals, insurance, luxury goods and fashion.

Egon Zehnder consultants refuse to publicly discuss their clients – but think of many of the leading global corporations and chances are their chief executives were evaluated by the firm before being hired: Who was the best person for this particular company? What were his personality traits and behavioural characteristics? Were her past behaviours predictive of future leadership ability? Was he or she motivated by a deep desire to have a positive impact on others? Was he resilient and curious? Was she able to engage with others? What about successfully navigating the speed, complexity, uncertainty and radical transparency of today’s world?

Over half a century Egon Zehnder turned itself into the gold standard for executive search through its intellectual capital and unrivalled global network of talent spotting. At its heart, however, was the philosophy of one man whose value system was as radical as it was old-fashioned. In 2001, Jim Collins published Good to Great (Random House Business, 2001) where he explored the characteristics that transformed a good company into a great one. Principle among them was having a leader who was both ‘humble and ferocious’ and who possessed a deeply held set of core values.

As an officer in the Swiss Army Egon Zehnder was known for his toughness, courage and discipline. As a father of five children, Zehnder tempered this strictness with kindness. He made up stories for his children every Sunday morning in bed. He called the family to prayer in the evenings and read the Bible to them every Easter and Christmas. On family vacations he woke his children in the mornings with ditties and rhyming couplets and, in the evenings, read them stories from Greek mythology. My father was more absent, more besieged by unnamed ghosts than Zehnder – after all, he had fled Nazi Germany on the eve of World War II – and he certainly never made up stories for his children, nor read from the Good Book. But he took us on family vacations and forever showered us with love in his own quiet Teutonic way.

Like Zehnder, he knew the first names of his children’s best friends, their teachers at school, their sports trainers, but unlike Zehnder he engaged us more politically than morally. Zehnder was forever posing ethical dilemmas to his children, asking them to imagine how they would react in certain circumstances: You are in forest with a friend and he breaks his leg and cannot walk anymore. What would you do? He would then discuss their judgements with them, their analysis, their possible solutions. Where are the disagreements? Where is the consensus?

He sponsored the second prize at the biggest Zurich gun-shooting contest so that the loser of the final shoot out could be adequately rewarded. After his father died he invited his mother to brunch every Sunday and, to this day, his sister too. The friends of his children were always welcome to spend their vacation in the family chalet in the Swiss Alps. His tips to waiters, maids, doormen and the Boy Scouts who washed his car were generous in the extreme, and he was forever joking with them, disarming them with his easy style.

‘He was the guy who connected and had empathy with all sorts of people, whether they were important or not,’ his son Peter Zehnder told me. ‘To him, they were all important and he had a natural curiosity to find out who they were and make them feel good.’

IN 1964, AFTER five years working out of Zurich for American headhunters Spencer Stuart, recruiting European executives for American subsidiaries, Egon Zehnder fell out with Stuart over the concept of headhunting. Zehnder was opposed to the industry practice of charging fees based on a percentage (usually a third) of a successful candidate’s compensation. He saw these contingencies as degrading the industry in the eyes of business. They made executive search look more like a brokerage, thus justifying the term ‘headhunter’. He believed in a fixed-fee system.

From the beginning Zehnder made English the language of the firm and set about hiring consultants who were not just intellectually brilliant (each had at least two major degrees) and free-spirited, but possessed of integrity, character and a cognitive disposition towards collaboration.

As Damien O’Brien, the current chairman of the firm told me: ‘Our culture is aligned with who we want to be as people, at home, with our friends, with our colleagues and with clients and candidates. In a sense our profession is a calling to be authentic and consistent. I think if you are an investment banker, you leave home in the morning and you actually have to leave part of yourself at home. The same with lawyers. Whereas when we leave home in the morning, we actually have to bring ourselves to work.’

O’Brien worked as a trainee Columban missionary priest during the Philippines civil war in the late 1970s before entering the business world. In 2010 he became the fourth chairman of the firm following Zehnder’s retirement in 2000. Zehnder’s immediate successor in 2000 had been Dan Meiland, a former Danish intelligence officer whom Zehnder had anointed as his natural replacement nearly two decades earlier.

Meiland had, in turn, been succeeded in 2006 by John Grumbar, a former stockbroker with a love of acting who was born in a seven-hundred-year-old French abbey that had once been a monastery for cloistered nuns. Grumbar was succeeded by O’Brien, the son of working-class Irish stock.

Each man, all with irregular twists in their curriculum vitae, possessed what author Charles Handy described in The Age of Unreason (Business Books Ltd, 1989) as the ‘three faces of intelligence’ necessary in an era of ‘discontinuous change’. This was an era where changes wrought by the information revolution were no longer part of a pre-established pattern, but rather confusing and disturbing, and required new ways of thinking to deal with it.

‘The job of the leader,’ Handy wrote, ‘is a mixture between those of a teacher, a consultant and a troubleshooter. Technical, human and conceptual skills, the three faces of intelligence, are all required.’

Meiland (as chief executive in 1992), together with Gumbar and O’Brien, were all destined to lead Egon Zehnder through the so-called ‘Roaring Nineties’ and beyond, where the revolution of the World Wide Web would collide with the fall of the USSR, the bursting of the dot.com bubble, the rise of China, the spread of Islamic terrorism, the global financial crisis, the bailout of European economies and the growing mutual interdependence between flows of finance and commodities.

From the Swiss–German Major (Zehnder) to the Danish intelligence officer (Meiland) to the half-French, half-English would-be actor (Grumbar) to the Irish–Australian seminarian (O’Brien), all would be required to show the capacity for leadership and for articulating the faith that lay at the heart of the firm.

As Egon Zehnder spread from Europe to Japan to Australia to South America, onto the Middle East and India and the old Eastern Bloc countries, through South-East Asia and China, then over to Africa, prospective consultants found themselves being interviewed in up to five or six different cities by as many as twenty-five to thirty other consultants. This was to make sure the fit was right.

Before his retirement as chairman in 2000, Egon Zehnder interviewed every person seeking to join the firm. ‘I used to ask people bluntly: “Do you know that even if you have the highest billings in the firm and are responsible for 60 per cent of the profits of your office, you won’t get an extra penny for it? Picture yourself in that situation. Are you comfortable with it? If you aren’t, don’t join us. You’ll be unhappy.”’

When starting out in 1964 Zehnder had borrowed much of his organisational philosophy from Marvin Bower, the high priest of McKinsey & Company. He had instituted a ‘one firm’ policy where, as the firm grew, the values encountered in, say, the New York office would be no different from the values found in Mexico City or Munich.

Although differences in approach and philosophy would emerge over the years, Bower’s belief system would become a guideline for Zehnder’s own extraordinary trajectory. Given the huge challenges chief executives were beginning to face in an increasingly globalised postwar world, Bower’s commitment to values and integrity were impossible to ignore, especially for clients needing assistance from outsiders. ‘He believed that, as with doctors and lawyers, McKinsey & Co’s reputation and its clients would come from putting clients’ interests first, conducting themselves ethically at all times, only taking on work where they knew they could provide true value and maintaining their independence by always telling clients the truth,’ his biographer Elizabeth Haas Edersheim wrote in her book, McKinsey’s Marvin Bower (Wiley, 2004).

Bower believed in people. He called them by their first names and expected the same in return. He wanted only those most highly talented and committed to join his firm. He wanted robust debate, but also the highest levels of teamwork; those empowered to be leaders to have permanent careers, to be proud of their work, their professional standards, their culture. How else, in the growing war for talent, could corporations attract the best and the brightest? Young careerists needed to know, not only that they would be committing themselves to furious work demands, but also to a culture that made those demands acceptable.

Egon Zehnder adjusted his sights similarly. He didn’t want a federation of offices or collection of individuals; rather he wanted people who performed as a group, who placed long-term goals ahead of short-term profits. Profits, he said, were only a derivative, not an objective, of success.

THE FIRM, IN fact, operated as a single profit centre. Profits were shared equally among partners because in 1976 Zehnder instituted a revolutionary remuneration and ownership structure whereby the partners became equal shareholders and owners. This system was to be refined over the next forty years, but essentially the amount received by partners depends to this day on their tenure – thus rewarding seniority – while individual performance played little or no part. ‘Our compensation system,’ Zehnder told Harvard Business Review, ‘often prompts people to ask me how we manage to hire “stars”, let alone keep them. They are shocked to learn that not only do we attract outstanding consultants year after year, but our annual turnover among partners is only 2 per cent. (The industry average is 30 per cent.)

‘The reasons are simple. First, our approach to compensation forces us to hire consultants who have little interest in self-aggrandisement. We must hire people who are true team players, people who get more pleasure from the group’s success than their own advancement. These individuals by nature tend to be highly collaborative. They eagerly share information and ideas about existing and potential clients. Similarly, they pass around information about the executives who might best meet a client’s need. After all, if a consultant in Hamburg is paid according to overall firm performance, not her own billings, she will happily pick up the phone and call a colleague in New York to say, “I just met a candidate who isn’t ideal for my client here. But he might be just perfect for your client’s open position there.”

‘Second, our seniority-based system requires us to find people who want to stay with a company for the long haul. Believe it or not, even in the new economy, these men and women still exist. And thank goodness for that.’

Zehnder could have been describing a socialist organisation in the service of a liberal business model.

In 1992 Egon Zehnder stepped down as chief executive because he recognised he was no longer the best person to lead the firm on a day-to-day basis. He understood the myth of the ‘complete leader’. Eight years later in Berlin he delivered his final speech as chairman, suffusing his words with wise quotes from Jefferson, Goethe, Gandhi and Disraeli. He warned against smugness and arrogance, and talked less about business and more about the moral and spiritual dimensions of life. ‘In seeking balance in our lives and in our careers,’ he said, ‘it is well to identify the big rocks in our lives. Are they wealth, are they titles, are they positions (or) are they time with your spouse, with your children, with your clients, with your firm members, with your church or faith, with some other worthy cause or helping, teaching or mentoring others?’

At that time Egon Zehnder’s reputation was such that not only were the firm’s billings up by 31 per cent on the previous year, but it had also become the subject of several case studies by the prestigious Harvard Business School. It was also regarded as an exemplar for how emotional intelligence operated in the workplace, at least according to the world’s leading authority on the subject, Daniel Goleman, author of the international bestseller Emotional Intelligence (Bloomsbury, 1996). In the process Egon Zehnder, the man and the firm, has come to influence countless CEOs in the most formative stages of their development.

Nearly every speech Zehnder has delivered over thirty-six years has been a variation on the theme of values, alliances, teamwork and relationship building, themes that his successors have all emulated. That’s because it is personal relationships that have always fired Zehnder the most.

Anyone who has ever shared his company – family, friends, colleagues or even acquaintances like this writer – have felt that, even in the briefest of interludes, they were the centre of his universe.

THE YEAR BEFORE his retirement he addressed a partners’ meeting in San Francisco where he had reinforced the values and spirit of a true partnership by drawing on nature’s grand design: ‘Our working relationship and interdependence mirrors in a small way the great redwood sequoia national forests that dominate the skyline in San Francisco,’ he said. ‘There you will find the largest, longest-living entities known to man. One of these great trees, called the General Sherman tree, has a trunk some twelve metres across, rising almost thirty storeys high. It was a small sapling fifteen-hundred years ago. That same vital living tree that we can see today still grows, though with only one tiny additional ring accumulating in four decades.

‘Yet surprisingly enough, these giant trees have very shallow roots. The secret of their great strength is that these roots reach out aggressively to other roots all around them. They become heavily entangled with the root structures of other giant trees in this forest for reinforced strength that extends for acres. So their base is a shallow, wide but powerful set of interconnects spreading constantly well beyond their individual beings. Such is our aim for this partnership. May we have the wisdom to emulate these great trees, become intertwined in substance and purpose with our partners, and grow stronger with the conviction that this firm can become a continuing institution, outliving by generations all of our competitors who lack our tightly woven one-firm partnership roots.’

In 2012 Zehnder returned to his family of colleagues to perform one last act. Since his retirement twelve years earlier he had not stepped inside the Zurich office, despite occupying his own office just two-hundred-and-fifity metres away. Sensitive to the last, he had not wanted to cast a shadow on his colleagues, nor leave the impression of a man unable to let go.

The reason for his attendance at this final Zurich partners’ meeting was to announce the surrendering of his controlling A-class shares that he had held in trust since 1964. The voting rights associated with these shares had – in theory – given him the power to confirm, review or change partner-shareholder decisions. In other words they had vested him with final authority in the event of major disagreements. Not once in forty-eight years had he ever exercised that right. ‘Our spirit of partnership seeks what is the greatest good for all,’ he said. ‘The cornerstone of our partnership spirit is the goodwill we hold for each other.’

And then with a final flourish he declared: ‘There is no limit to what our firm can accomplish if no one cares who gets the credit.’

This is the model that has prevailed since Zehnder’s departure. It has naturally evolved as changing circumstances have required, but the essence of the story remains intact: a story of how one man’s character managed to shape the character of a pre-eminent global organisation that has stood the test of time.

That might well be a useful old model for the future.


From Griffith Review Edition 51: Fixing the System © Copyright Griffith University & the author.

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