Transcript | PULSE Episode 03
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R. Adam Smith:
I'm R. Adam Smith and I'm pleased as the founder of Wisdom Board to host this episode of the Pulse podcast series, which is a new collection of personal conversations with leading experts throughout the leadership and governance and board communities. Wisdom Board is a unique and trusted community of thousands offering a global leadership network, very thoughtful digital insights and robust human capital assets. And we're really focused on dedicating, enabling those board of directors and those members and their CEOs to enhance their success. We're here with Matt Norquist, a partner at the leading recruiting and human capital firm in the world. Very inspiring organization. Good morning, Matt, how are you doing today?
Matt Norquist:
Doing well, thanks Adam. Matt Norquist, doing well.
R. Adam Smith:
Good. Well, we're excited to support you and involve you as we all are committed to bringing essential resources to owners and directors and management of companies. It's such a huge industry and such a challenging time. Why don't you share a bit about your view on the markets and the firm and go from there.
Matt Norquist:
Sure. We'll make maybe a second about Korn Ferry. I think a lot of people know us as an executive search firm, which of course where we got our roots, but the search businesses is only about half, actually a little bit less than half of the business now. So, I think of Korn Ferry is the world's premier end-to-end end human capital consultancy or talent strategy consultancy. In the most basic level, it's really looking organizationally both at the macro and the micro level of what talent do we have. So, what do we have right now? Or maybe even before that, what talent do we want and need in the future? Then, what do we have right now?
Matt Norquist:
And looking at this, not just qualitatively, but quantitatively, statistically, what are the numbers we have? What is the pay we have? What are the characteristics we need of the leaders and the workers of the future? And then how do you bridge that divide. Is it developing new skill sets? Is it learning new ways to lead? Is it bringing in new talent from the outside? Is it acquiring new organizations that have capabilities we don't have? But that's really where we excel is helping organizations understand and then bridge that gap between what they need talent-wise and what they currently have.
R. Adam Smith:
Okay. And I see that you work on succession management and leadership development in addition to really the design of the organization and how to curate and craft and design the board leadership and the employee engagement. That's really a holistic approach. You pursue those activities, mostly in the financial services sector. Tell us about your involvement and your view of the financial services sector. And then also it's interesting with your background from Gallup, you have a passion in the data analytics and behavioral economics area as well.
Matt Norquist:
Yeah, I mean, so for me, falling into financial services kind of happened, I'd say, I want to say coincidentally, but that's probably the best way of saying it is I happened to do a lot of work with financial services clients early on in my career with retail banks and consumer banks and mortgage lenders back in the early 2000s. And then a lot with family owned and private equity offices back in 2006 through 2010 in the Middle East. So I kind of happened in the financial services over the years. And then currently here at Korn Ferry, got asked to run this practice. So the financial services, I was never banker, I was never worked for financial services institution although I have worked for private equity investors for a number of years and have been a private equity investor, am a private equity investor in a number of funds.
Matt Norquist:
However, the leading financial services practice was something I was asked to do in and do with great humility with colleagues who know much more about the sectors than I do personally. The art or craft of digging into the behavioral economics of a firm is something that I do perhaps with a little bit less humility. It's something that I've spent probably more time than most people I know pouring over data on how people react to the world around them. What makes them respond certain ways. What differentiates great performers from mediocre or poor performers and how do we harness that information to either find or develop more people who are superstars inside of a firm.
Matt Norquist:
And other kids when they're growing up and read novels, I read the novels, but I also was fascinated by reading biographies. I would sit for hours and hours staying up at night reading biographies. I was fascinated by what distinguished the people who were the best of what they did for everybody else. And this meant everything from Winston Churchill, to Jim Thorpe, to you Babe Didrikson Zaharias to you name it. From athletes to politicians, to movie stars, wanting to figure out what made the great ones great. And so that's kind of the behavioral economics that I study is what characteristics make great people and organizations different.
R. Adam Smith:
That's great. One of my favorite biographies is on Teddy Roosevelt, one of my heroes. The Rise of Teddy Roosevelt by Edmund Morris is a great book. I'm sure you've read that one before.
Matt Norquist:
I used to have Teddy Roosevelt quote on my desk that the front of it said, "The buck stops here," one of his favorite sayings which is actually about a buck knife and playing poker, which means like the buck knife means you're the dealer. So the quote was around the buck stops here, the deal stops here where I am. And then on the backside it said, "Watch your step," and that was on the White House desk in the Oval Office. So the idea is if you're holding the buck, if you're the dealer, you better watch your step when you're walking away from the table, too. So you're going to take on the responsibility of dealing the cards you better watch your back when you're walking away because it's a lot of responsibility.
R. Adam Smith:
Yeah. And he certainly took on a lot of responsibility. But that's a good segue to your CEO Gary Burnison is really such a rockstar in the industry, admired by many and has a very unique business and philosophical approach to his communications now leading the firm. And I think it's interesting that the firm was actually started way back in '69 by two accountants at the old KPMG [inaudible 00:06:52] Mitchell in LA, which is where you were at one time. Then it went public and then I went private again and then it went public again. That's quite a journey.
R. Adam Smith:
Tell us a bit about Gary and his leadership style and what he has brought to the firm. I find his newsletters to be fascinating. And I also think that his identification of learning agility, which he kind of redefines as having curiosity, is an important predictor of success. And you guys are really leaders in that emotional quotient way before people were talking about emotional intelligence.
Matt Norquist:
Yeah. I think it sounds like you should answer the question for me. Sounds like you've studied about as much as I have, but in seriousness, I think that the info he shares and the thoughts he shares are inspiring. They are also inspired. I think that coming from a finance background is interesting for a human capital firm because most will have come from a PhD in psychology or come up being leaders in development experts or executive coaches. That would be more the norm. Gary not having come from that background I think lends a unique perspective on how to run a firm and how to look at the human side of business from a 360 degree lens both quantitatively qualitatively. And I think that perspective is what allows us to be uniquely helpful to our clients.
Matt Norquist:
I also think that it allows us to run our business better, allowed us to take smart measures economically with our own business during this time of crisis. In 2020, we were able to cut back on expenses and people earlier than most of our peers and rivals and are now hopefully being able to recover faster than many of our peers and rivals as, knock on wood, things recover.
Matt Norquist:
But I do think the agility bit and curiosity, I think is interesting because agility is not just around being nimble. It's also really about being able to be developed and able to grow. And I think that to me is the heart of agility is being able and willing to grow. So it's not just being quick on your feet, but you have to be willing to be developed and that means you have to be humble, you have to listen, you have to be coached. And that also means you need a boss and an organization that allows and even enables that, which is again, that's what we do. That's what Gary does well in our organization. That's what we try and help our clients do exceptionally well.
R. Adam Smith:
That's great. Yeah, it's a fascinating topic and there's endless learning in the EQ area. And it's interesting how there is such a tremendous amount of data that you guys collect to create predictors of success way beyond the pedigrees or IQ or the promotional ramp up of someone's career. It's like you're saying it's about their demonstrated ability to be nimble but also to grow and face challenges.
R. Adam Smith:
So moving on to your board experience, Wisdom Board, we have several hundred in our community that are at the C levels in private companies. And as you know the middle market in private companies, they tend to have a bit less resources than the public company clients, but yet they have the same challenges in leadership and culture and staffing and expertise best practices. Tell us a bit about your views on the board for private companies and what is their real duty to the company. And what do you think are the couple of key leading, guiding lights and tenets for the board of organizations that you've experienced over the years?
Matt Norquist:
I hate to give the answers that say it depends, but it really does. It depends to me on a number of things. One is, what are the owners willing to make the purpose of the board? I mean, to me, that's really the core question is what is the point of the board? If the owners, shareholder structure only has the purpose of the board to be to sign off minutes and to serve as functionaries and to allow a vote when, if board votes are necessary, then that's all the boards going to do. If the ownership structure of the company wants again, whether it's private, whether it's the emergence of SPACs, or whether it's a small public firm wants the board have a real role besides a functionary role, then I think it becomes about defining what is the purpose, what is the point of the board.
Matt Norquist:
Because you still have to do all the functionary things. You still have to sign the papers. You still have to sign the minutes. You still have to enter in a vote when the votes necessary. So those things don't go away. Those are still table stakes, but then it becomes part of the ownership structure decide what is the role for it. And so to me, I think it gets back to what is the purpose of that individual board? What is needed to serve that purpose so that could be a skill set standpoint. So, that gets to go board composition. So, who do you need on that board? So that's capabilities and who do you need.
Matt Norquist:
And also gets into, in today's environment, how do you make sure you have diversity in your board? And I don't just mean diversity from a D&I standpoint. I also mean diversity of thought. Diversity in background. Diversity in perspective. Because from that, in that diversity, does come effective conflict, which will lead to effective teamwork in the long run. When I think about purpose of the board also, it will shift on a momentary basis as well based on who your most important stakeholder is at a given time. And if I'm rambling a little bit, we can cut this section out, but I do think so there might be times in which the most important stakeholder is overwhelmingly the shareholder. There always going to be times, and that's probably mostly true, there are going to be times when [crosstalk 00:13:34] it's going to be-
R. Adam Smith:
On that front, there's such a tremendous movement towards a broader sense of company's engagement with their stakeholders, stakeholder capitalism, conscious capitalism, social capitalism, especially during COVID. And especially during our session where the organization has to make that even Korn Ferry being a large global company has to make a choice between growth and also running lean and protecting the organization itself. What are some of the challenges that you've had to deal with leaders and CEOs and hiring and firing people during this timeframe and how do you guide them, hold their hands during the processes of these challenging times?
Matt Norquist:
Well, I think again to me, it first gets back to deciding who your most important stakeholder is at a given time. And that's with boards, that's with advising clients. So if the shareholder is priority one, two, three, four, and five, that tells you what you have to do at a given time. If we have the, and I say we using the royal we, have the capital or the time horizon to not pay dividends, not worry about this quarter's TSR, and we can say, "You know what, it's the customer that's our number one priority. And we can take our time on paying shareholders." And that changes what you're able to do.
Matt Norquist:
Same thing being, okay, employees the number one priority. Or hell, it might be the SEC or the government depending on any given momentary issues or it might be the press. So I do think being clear on the order of stakeholders and their importance at any given time is really a big part of how we advise clients on what they do internally with talent and they have to be very clear on the order of priorities from a stakeholder standpoint.
Matt Norquist:
The better run companies are, the more elbow room they have to take a longer term view on things. And I do think, the SEC actually even just put out, I'm not sure if you've seen it, but put out a guidance on human capital reporting as part of a series of requirements that they didn't give specificity on what those requirements would have to be. But there's a recent, they have given guidance that there must be human capital reporting in annual reports going forward starting in 2021, which is a pretty strong signal to the marketplace. This is going to be important in the long run.
R. Adam Smith:
Yeah, it is. Yeah. That came out on August 26. Apparently fascinating. And I think it's great that they're going down that road. In terms of the firm being run well, I think Korn Ferry is navigating the storm well with revenues down only 12% and probably rebounding as we speak. But it's also impressive that EBITDA is remaining around 50%. It's a very solid number. So it must be a comforting to work at such a strong firm. It looks like there's around 9,000 people in the organization now and a hundred offices. What is that like to be working in such a broad-based global organization? And how do you communicate with your colleagues on a global basis? Do you have monthly calls or strategic breakout sessions or do you have a Slack platform? How's it work?
Matt Norquist:
Yes, yes to all. So it's very different than being a CEO of a a hundred person organization I'll tell you that, which was my last job. So this is yes, 6:00 AM calls with Asia. And yes, late night emails and texts to figure out what happened on the global town halls that you weren't able to be a part of because you were on another client call in the middle of the day. Yes to weekly huddles with core teams and weekly business management calls with various groups. So, that means sector call on one hand. It means geo calls on another hand. It means client calls another hand. It means make sure we all fit in time for what's called unstructured socialization that doesn't happen at the water cooler anymore. So make sure we still build in water cooler time with each other.
Matt Norquist:
Large group get-togethers tend to be mostly one way that we try and make as much, two way as is realistic. But you're not going to keep people on the phone for, or Zoom for three hours. So realizing that you've got 60 or 90 minutes at most has to be pretty carefully coordinated to give it at least a feeling of dialogue. So there'll be breakout groups where you have you might have 150 breakout rooms with individual facilitators or group leaders on each one. So we do our best and it's probably we err on more communication versus less, which means the email volume can get substantial, put it that way.
R. Adam Smith:
That's great. That's very helpful. Very interesting. One last point on the leadership structure is what are your thoughts on the chairman and CEO roles for private companies? And how essential is it that they are a different person or is it more about how they carry the flag and function properly?
Matt Norquist:
I think it's, this is opinion versus research driven. I think it depends on the culture, the ownership structure, the momentary needs, succession plans and timing. Funding, the health of the business. So I think sometimes just take a smaller organization. Imagine you're a $25 million dollar family owned business that generates a million dollars of EBITDA, and it's a hundred percent owned by one family. Are you going to have a chairman who you pay $200,000 and a CEO who you pay $300,0000 and make that work financially. I don't think so. So sometimes it's as simple as it's just not realistic to have both and unless you [inaudible 00:20:07] them into a unpaid position that's simply an ownership stake with a say so in company strategies.
Matt Norquist:
I think my experience is, an ideal world is they can be separate, but I've not seen it matter that much in practice because in practice it ends up being too often a piece of paper difference as opposed to a real practical difference in how the company's run. If it was in practice treated differently, I would be in favor almost always of separating the two-
R. Adam Smith:
Right.
Matt Norquist:
... roles.
R. Adam Smith:
Right. Okay. Well, there's a lot of CEOs and chairmen right now that are just trying to get by and protect their companies and to maintain that inspiration you're talking about. But I think with the final reality coming to our political system, the vaccine, interest rates are low, stock market's at an all time high, hopefully there's the leading indicators will normalize the economy soon. I think also that Korn Ferry is fortunate to have such a great brand leadership. And then just wanted to share a quote that I saw that Gary had mentioned once, which is quite a high bar, but he was quoting, I think, a Confucius saying for inspiration in this market that, " [inaudible 00:21:41] do not worry. The wise are not perplexed. And the courageous have no fear."
R. Adam Smith:
I guess he's saying that it's really, you guys are helping the companies by finding and hiring and placing leaders that have visibility into where the companies need to go. That's super inspiring to me having been on 10 boards and worked with lots of CEOs and not having been a CEO myself of an operating company. It's great to see people like you helping the leadership along the way. What is your favorite part of working at such a firm these days? What really gets you up in the morning and is inspiring to you?
Matt Norquist:
Maybe two answers. So at Korn Ferry the thing I think that's unique for us, everybody always says people, and I think, "Yeah, sure. Of course." But at Korn ferry, I think what's, very special is our platform, which includes our ability to connect our great, almost 10,000 people around the world, to a platform that is able to take data that connects learning and development, organizational strategy to the platform of a company or individual success profile. So again, what makes a company great? What makes an individual CEO or CFO or head of sales great all the way down to what makes an individual call center representative be the best they are at fielding calls and delighting customers in that single call on the phone. We have ability to connect all those dots and that's pretty exciting.
Matt Norquist:
So that's, to me, what's special about Korn Ferry is that platform that connects the people all the way down to, we call it the intelligence cloud, that build it all together. What I enjoy most, and this sounds mundane is stacking up little progressions. I call it practice, but stacking up the practice that over time, little gains add up to a lot. You mentioned a friend of mine earlier, a decathlete, Brian Clegg won the Olympic gold medal in 2008. He and I were talking the other day and he and I had known each other about, well, I guess 22, 23 years now because we competed against each other back in high school, about it.
Matt Norquist:
There's a picture I saw of him walking off the track in the Beijing Olympics. It was after the first event and it was pouring down rain and he's all by himself. It's pitch black, it's dark. There's just a light shine down on him and it's dark, pouring down rain. He just won the first event. And I asked him, "I was like, how'd you feel during that event?" He's like, "I felt completely alone, but I knew I was going to win the Olympic gold medal. I just knew it." And I was like, "What do you mean?" It's like, "Well, I felt alone because there was nobody around me and I felt alone, but that was okay because I'd spent the last 15 years, 20, 30, 40 hours a week doing this, practicing for these next two days of being the best in the world at what I do and walking away with a gold medal. I'd put in the practice, I'd put in the practice, I'd done the reps, I'd done the work, and now is the time for that work to pay out."
Matt Norquist:
So, that's what I enjoy most is the practice. It's the quiet stuff that nobody notices. Maybe it's the texts with a client on a Saturday morning saying, "Hey, what do you think I should do about this?" Or the call with the team saying, "You know what guys, realize that this is not going to be our best year in history and realize that, and this is public, that we took pay cuts in the first half of the year but really appreciate the work you're doing. The small things that nobody notices or hears about, I like to practice. So that's my favorite part of the job.
R. Adam Smith:
That's great to hear, Matt. Appreciate it. And I like that we're both involved in empowering our communities to be more agile, to be a Wisdom Board, to be a Korn Ferry. Active, revered, supported client. So hope you have a great couple of weeks and months ahead going into the new year and have a great Thanksgiving. And thank you for joining this, this series of the Wisdom Board Pulse podcast.
Matt Norquist:
Thank you for inviting me, Adam. And I'll talk to you again real soon.