CEO hunter: Business uncertainty the new normal
September 4, 2015
By Cesar Illiano
If you had to meet a dozen mining and energy CEOs in Chilean capital Santiago these days, you would probably think it would be about pessimism and complaints. The country's economy is almost frozen, its major client China is rapidly slowing down and copper, Chile's top export, is now trading at half the price it was in 2011. BNamericas interviewed Jay Millen, vice chairman and global practice leader at DHR International, a company that every year helps hire around 200 CEOs in 71 countries.
But, to our surprise, he not only said the mining and energy CEOs he met in Santiago were confident about the future. He even said that, if his children asked him now what career path to follow, his answer would be mining or energy engineer.
BNamericas: Chile's economy is going through hard times and most of the businessmen say they still do not see the light at the end of the tunnel. You met a dozen of CEOs here in Santiago. What are they saying?
Millen: There was a "can do" spirit, and an attitude of "we'll get through this." But particularly in mining and energy I was surprised by the positive reaction, and I think the reason is that the last time I was here problems were viewed like episodic: "We have a crisis, the crisis will be over, we have to go on and we will be fine." And that culture existed in lots of places, but I think since 2008-09 a lot of leadership began to understand that the global situation is like this. Even if you anticipate problems you do not see things like Ebola in Africa, or avian flu, or a natural disaster like an earthquake or a hurricane. But you can now think about that volatility differently, and say, something like that is going to occur on a regular basis.
So the new normal is uncertain and complex. And leaders have to deal with that uncertainty and complexity. I think adjusting to that is the difference now. It is not the skills, being a great CFO, financial planner, or strategist. It is can they adapt to uncertain and complex environments and continue to perform.
BNamericas: Are companies in LatAm prepared for a game changer like China's "new normal"?
Millen: [China's slowdown] will have a significant impact on understanding the cost structure of how businesses operate. It will have implications for labor in terms of the demand, but it is not as much a consumption as a price issue, and I think businesses are going to have to look at how they consume capital very differently, in capital-intensive industries like steel manufacturing, energy production, mining, to see what they can do to lower their costs on an structural basis. And that means things like not buying new equipment all the time. And that has an implication for the equipment manufacturers, the service providers. So I think it is a very significant issue. But this is not episodic. China's demand is not slowing down to get back up. It is a cooling off that is going to be structural for some time.
BNamericas: Slowing down the capex cycle is enough? What about innovation?
Millen: Innovation is under-managed, dramatically. And most senior leaders' perception of innovation is the product. How do I make the product different as opposed to the process different? Chile has had a long history of having those innovation processes in mining. The question is, can the political and social structure stand up to that and allow that? If you look at the companies that are dramatically successful, regardless of the market, what are they doing? They are innovating when there isn't a crisis. When you look at hydro fracking, which is very controversial now in the US, it was created not in a time of need.
BNamericas: Well, a technology genius can born anywhere, but does LatAm have the amount of qualified workers to run huge high-end tech companies?
Millen: Well I think they can. But you have to decide and be intentional that is what you want to do. And does the education system support that? Not really. But they do not support it in the US or Europe either. You have to have a passion for it and you have a few schools like Carnegie Melon and MIT and a Berkeley, which represent 90% of that. A very small handful of people influence a very vast economy. Are there enough interested, sufficiently educated people that would take the risk of not being in mining and go work for a software company, or take the risk of not being in energy and go to a software services companies? I do not know the answer.
BNamericas: Latin American is well-known for its commodity-export model, and the need to add more value to its resources before exporting. Is that debate a valid one?
Millen: People fail to understand that the implication is a logistic cost. When you export a tonne of pulp, or a barrel of oil, or a tonne of copper, the efficiency of the delivery system is very high. When you start talking about delivering refrigerators, or advanced manufactured process equipment, that becomes a question of can you do that from a logistic cost-efficient point of view given your geographic position.
BNamericas: What are the hottest markets now for CEO hunting?
Commercial leaders and revenue producers that have an innovational mindset. That is the number one demand now. In any company, retail, hospitality, mining. It is people that can generate revenue, either with new products, new services or with an approach to the market that innovative.
Millen: The second is (...) data analytics, understanding what customer preferences are. Understanding the true demand based on data at point of purchase in acquisition, a point of purchase in retail, or in the CRM capability of a wholesale or industrial business. And using that data predictably to decide how to launch new products, to scale demand or scale down demand. There are not enough people that know how to do that. Not even close.
The third is the whole area of innovation around engineering and product development. Process and technical innovation capability and being able to look at problems differently. It is the whole idea about not thinking about this as it is today...
BNamericas: How does that talk with the "old" industries in LatAm?
Millen: Let's talk about those old industries! What do you make phones out of? It may be fashionable to do the cool new stuff. But at the end of the day people are going to buy toilet paper and they are going to put gas in their cars, unless there is a radical change in how we move around as a society. By 2050, we have to double the amount of food we produce from 30% of the land we are using today to feed the world. That is about process innovation, that is about product innovation (...). There is a huge opportunity there.
If my son or daughter were going to go to college today anywhere in the world and they asked me what I would do, it would be an engineer in oil and gas, metals or mining. People would look at me funny and say wait, you advise CEOs, you do all these industries that are pretty cool and my answer is well, that is where the gap is.
About Jay Millen
Jay Millen serves as vice chairman, North America and is the global practice leader of the board and CEO practice group. He assists clients in senior level recruitment, and in the development of board and CEO succession plans. He works with publicly traded and privately held companies headquartered in the region in a range of talent acquisition and recruitment efforts, as well as with companies that have a major presence in the region, and has an extensive not-for-profit background at the board and senior executive level.
Prior to joining DHR, Millen was a senior client partner at Korn Ferry International. During his tenure there, he also served as the global sector leader of basic materials and as managing director of strategic client partnerships in the Americas. From 2001 to 2006, Millen was a partner with Accenture, a worldwide consultant firm, where he led the firm's natural resources practice based in London.
About the company
Established in 1989, DHR International is an executive search firm with more than 60 offices across the world. It carries out search assignments at the board of directors, C-level and functional vice president levels. It has a role in the hiring process of around 200 CEOs or board members every year.