Would you take that job? A look at some CEOs taking on some ugly tasks
Change is in the air in some big South African boardrooms – Mano Moodley will be stepping up as CEO at Ellerines, replacing the outgoing Toni Fourie, and there will soon be a new face at the head of Sappi when Steve Binnie takes the helm from Ralph Boëttger in July. Watching these chaps step up, one can't help but think "I wouldn't much fancy his job." Taking on the challenge of turning things around at the troubled Ellerines seems daunting, as does trying to keep Sappi profitable in a declining industry. So what makes someone go for it? Why do people step up into the role of CEO, even when it seems very likely that the job could end in disaster? Clearly, it's a combination of determination, bravado, and thrill-seeking that I just don't have. – FD
GUGULETHU MFUPHI: Well, companies are experiencing key shifts and changes in leadership for various reasons. However, when is the correct time to step into a position of leadership? Johan Redelinghuys from Heidrick & Struggles joins us now for more. Johan thanks so much for your time today. Touching on leadership changes at a volatile time, we had news today that SAPPI has appointed a new Chief Executive and Ellerines – a business I think is in trouble, and I wouldn't want to be up for the job – also have a new Chief Executive. When is the right time to appoint someone?
JOHAN REDELINGHUYS: The right to appoint somebody is when there's a big challenge in the business, it needs renewal, it needs turnaround, or there's a challenge. The other question is when is the right time for a Chief Executive to accept the challenge of going into a new job? In both the cases you've mentioned, it's the challenge and the excitement of going there, turning it around, and making a contribution.
ALEC HOGG: But you can blow it sometimes. We were talking this morning about Nku – Nkuleleko Nyembezi-Heita – who had a fantastic career at PATH, and then she took over at ArcelorMittal just before the crash…just before things turned sour. Do CEO's do their due diligence before they would go into a position like that? How do you actually do it?
JOHAN REDELINGHUYS: Remember, Nku's career at ArcelorMittal is not a failure by any means. It's not a failure, and she had not been a Managing Director before she went into that job. She had been at Vodacom where she was responsible for quite a big portfolio, but she'd not been a Managing Director before.
ALEC HOGG: Well, she ran Alliance Capital here in South Africa.
JOHAN REDELINGHUYS: It's a seductive thing I think, when someone invites you and says 'come and be the Chief Executive', it looks good, and there's a lot of challenge in the steel industry. Are you saying that she didn't…?
ALEC HOGG: No, I'm asking. She was doing well. Alliance Capital – when she brought it to South Africa – it was a good asset management company – offshore owned. She was then put onto various boards. She had this approach to join ArcelorMittal when they were making 30 percent EBITDA margins. She gets there…they plunge to five percent. She's had Competition Commission enquiry problems. She's had Gupta's taking a run at her business…trying to their mineral rights etcetera. Maybe you believe that she's done great, but there will be many people in the marketplace who'll look at that track record and say 'hang on, good up to this point. Whoops, what happened here'.
JOHAN REDELINGHUYS: Well, could even due diligence have predicted what has happened?
ALEC HOGG: To the field market…
JOHAN REDELINGHUYS: I don't think so. I don't think one could have.
ALEC HOGG: Well, she did say to us that historically, steel has not generated 30 percent EBITDA margins, excepting for that period, and that was right at the end of that period. Let's not personalise it. It's more a question of when do you as a Chief Executive know when to put your pride and your flattery in your back pocket? Actually, instead of that, do proper due diligence, because you might be brought in there to rescue something that you can't rescue.
JOHAN REDELINGHUYS: Yes, if you do due diligence on a share price, you could work at it and still not come up with how it's going to perform in the next years. I doubt whether one could find out how that would pan out.
ALEC HOGG: Well, take Steven Binnie, then. Here he is, Chief Executive of SAPPI. Sasha was saying to us a little earlier that he thinks it's a crazy thing to, as a 46-year old, who has the world at his feet, to take on a job like that – coming from a good industry to an industry perhaps, that's contracting. What would your response to that be?
JOHAN REDELINGHUYS: I would say, what makes people climb mountains, what makes people do these extraordinary things that challenge them? I think it's the challenge, the excitement, and the opportunity. The bottom line is that people who are Chief Executives often have this tremendous drive – and, if I may say so – ego, and if somebody is presented with a big challenge the thought that you're going to be successful and what that will do for you, is just overpowering I think.
GUGULETHU MFUPHI: What do you make of dual-CEO leadership? It started off at Comair where we saw Gidon Novick and the current Chief Executive Erik Venter, as well as Standard Bank where we have Sim Tshabalala.
JOHAN REDELINGHUYS: A book was written 35/40-something years ago, named 'Up the Organisation', where the author advocated – because in those days, American Express had joint Chief Executives and they always advocated it. The model is quite a well-known model in Germany where they also believe in joint Chief Executives. I have reservations about it. I think that the model of Standard Bank is that the decision by the board there, has been challenged, and I'm not sure that they've made the right decision. If they were going to appoint Sim Tshabalala, they should have appointed him. There's nothing wrong with it. The decision was made at the same age that Jaco Marie went in to run the business, and Sim has been in that job for a long time, now. He's been prepared for a long time, Ben Kruger was put in as a kind of 'fall-back' position, and it just doesn't seem right. I would have gone full blast with Sim.
GUGULETHU MFUPHI: Does that perhaps also impact strategic outlooks for the company?
JOHAN REDELINGHUYS: Maybe – yes. A joint Chief Executive, unless it's a very purposefully done thing, sounds tentative. It sounds like you don't have enough faith in the person that you want to give the job to.
ALEC HOGG: So why does the German model work and ours doesn't?
JOHAN REDELINGHUYS: Well, remember that the German boards work in a very different way, as well. Germany's whole governance and management structure is very different, and there's a long tradition of joint Chief Executives, a governing board, and an operating board. It's just a different model.
ALEC HOGG: Maybe it's less ego-driven, less self-absorption, less narcissistic, and perhaps more successful.
JOHAN REDELINGHUYS: That's a very good point. All three are very good points. 'Less narcissistic' is probably a better one. The Germans are onto a good thing sometimes. Yes indeed, the responsibility of a Chief Executive – and if you look at a guy like Sim in Standard Bank – is terrifying. It's a vast business, and people buckle under it. There has been quite a lot written just recently, about the health of Chief Executives; people are just conking in because it's so relentless. Another example that was given was Cell C and there are others, as well.
ALEC HOGG: Well, Ralph Boettger at SAPPI is resigning because of his health.
JOHAN REDELINGHUYS: Exactly, or SAB…
GUGULETHU MFUPHI: The Spar Chief Executive as well, last year…
ALEC HOGG: Well, that was his wife, but I guess it's one and the same.
JOHAN REDELINGHUYS: Yes, indeed.
ALEC HOGG: Johan, just getting back to what Gugu was talking about earlier on Ellerines, now that has to be a poisoned chalice. Why would a guy accept a job like that? If you were advising him, wouldn't you say 'do a bit more due diligence'?
JOHAN REDELINGHUYS: Yes, I think I would have. However, back to my earlier point, it's a business that's in trouble. Why would somebody accept it? I would think that they've given him a very high upside and made it very attractive; otherwise, he wouldn't have accepted it.
ALEC HOGG: So it all depends on the risk/reward ratio, and I suppose on your age, as well. At what age do well qualified executives say 'too rich for me…too difficult for me'?
JOHAN REDELINGHUYS: Well, it would be nice if there was an age, but I'll refer you back. Do you remember – a long time ago – John Marie was 60 years old when he took on the job of Chief Executive of Eskom? Would you not have thought that that would be…? At the time, we talked about Ronald Regan, who became the President of the United States at an age where people should be playing golf or farming. It depends on who they are, it depends on their level of energy, and I don't think there's an age at which you can say you shouldn't do it any longer.
ALEC HOGG: The question has to be surely, in a good company you would be planning for the succession anyway. You wouldn't have to go outside and start looking for somebody else. It only appears that these appointments are in companies, which haven't been well managed in the first place. Well, their succession planning shows it.
JOHAN REDELINGHUYS: Yes – exactly.
GUGULETHU MFUPHI: Surely, it can't be as simple as that.
JOHAN REDELINGHUYS: You know the boards of directors are generally very conscientious about looking at succession. It's a very tricky subject, so what do you do? You bring in somebody alongside the current Chief Executive. What does that person do? Do they tread water? What is this…a Chief Operating Officer? Then there are many examples of where the person who's being groomed to go into the job…when the time comes, the board just has doubts about it. Do you remember ABSA years ago?
ALEC HOGG: Rupert Pardoe and Steve Booysen.
JOHAN REDELINGHUYS: Rupert Pardoe: he was prepared for it and at the death, they just decided 'no'.
ALEC HOGG: They brought an internal candidate above him.
JOHAN REDELINGHUYS: Exactly.
ALEC HOGG: There's just one before we go. Talking about these joint Chief Executives, you would recall that many years ago, Gencor had three joint CEO'S.
JOHAN REDELINGHUYS: Yes, and wasn't that a disaster?
ALEC HOGG: Has it ever worked – to have three?
JOHAN REDELINGHUYS: Do you remember that Nedcor Investment Bank also had three Chief Executives at one point? No, I think – referring back to Germany – that if there's a culture of two Chief Executives, or a split responsibility (very clearly split) where one is commercial and one is technical, then there's no tramping on each other's toes. However, one has to be extremely careful and it requires a long culture of understanding I think, for that to be successful.
ALEC HOGG: Isn't Standard doing that?
JOHAN REDELINGHUYS: We haven't done that.
ALEC HOGG: Isn't Standard doing the one on the retail with Sim, and the wholesale with Ben?
JOHAN REDELINGHUYS: In theory – yes
ALEC HOGG: It's always good talking to you, Johan. I'm sure we could carry on forever.