World-class leadership: Spencer Stuart’s Thomas Daniels on discovering and developing top talent

06/02/2022

On an exciting episode of the Walker Webcast, Willy spoke with long-time friend Thomas (Tom) Daniels, an executive at one of the world's preeminent leadership advisory services firms, Spencer Stuart. A graduate of Dartmouth College (Bachelor's Degree) and the University of Chicago (MSB), Tom sits on the Global Board of Directors at Spencer Stuart, the firm's audit and risk and cybersecurity committees, and chairs the M&A committee. In addition to his roles at Spencer Stuart, Tom formerly served on the Executive Committee of the Dartmouth Alumni Council, earning the Dartmouth Alumni Award, and acted as the Global Chair for the Association of Executive Search Consultants (ESC). When he is not working, he enjoys running, having completed 22 marathons, including all six World Marathon Majors.

Tom and Willy's conversation explores the importance of a company's willingness to adapt, particularly amidst the great resignation, to promote employee retention and engagement. In exploring this topic, Tom and Willy investigate methods of employee retention, cultural alignment enhancement, identifying ideal traits in C-suite and board candidates, return to office trends, and much more!

At the start of the webcast, Willy asks Tom to elaborate on how Spencer Stuart has addressed difficulties caused by the great resignation, given that there is more liquidity than ever in the human capital markets. In a post-covid world, the increased popularity of remote and hybrid work has dramatically shifted employee values, emphasizing a greater desire for relationships and work-life balance. Trends have demonstrated that the most crucial components of employee retention are culture, purpose, career advancement, recognition, mobility, and pride. The top-performing companies in this area are proactive and forward-thinking corporations with desirable flexibility and hybrid work models. 

Throughout Tom's 17 years of experience, the landscape for discovering top talent has changed drastically, particularly regarding the introduction of digital and social media. To help clients adjust to this change, Spencer Stuart, whose primary mission is to discover and develop talent, stresses that explicit experience should not be the main factor in determining C-suite candidates. Tom reveals that 70% of S&P 500 CEOs have not previously held a CEO title. To guide clients in identifying ideal candidates, Tom reveals Stuart Spencer's top three methods for CEO assessment: skills and experience, self-awareness, and learning agility.

Tom next distinguishes cultural fit and compatibility. A company's culture emerges from the interactions between, and combinations of, all the individual style profiles present among employees. Because a company's culture is such a layered and fluctuating image, Spencer Stuart has developed a model that allows companies to assess their culture and progress. 

Compatibility explores how particular individuals interact with a company's culture and values and the ease with which a company's culture can adjust. For a company to ensure maximum success regarding culture and compatibility, a CEO must bring together the company vision. To ensure this, CEOs must lead by example and take time to actively and regularly work with all different types of employees, which in turn will develop a collaborative environment. Tom reveals that the best CEOs have an average tenure of 15 years, two times that of the average CEO in America.

While a CEO can certainly be invaluable for any organization, Tom recognizes that other C-suite executives are crucial to a company's success. Considering this, Tom discloses the skills and traits critical for CFOs, including the ability to and experience of responding to unexpected or adverse situations. Adaptability is also vital for this role, with top performers in this area often having had varied careers and personal experiences. The ideal CFO's skill set is vast; however, they should be technologically savvy, understand the power of technology as an enabler, know how to mine data, and actively consider the future of AI. 

For webcast listeners in the finance world looking to round out their resumes, Tom offers various pieces of advice:
One must emphasize what they do well and what they can do better than anyone else.
Seek stretch assignments to demonstrate one is comfortable leaving their comfort zone. Individuals can accomplish this by joining committees for broader enterprise roles, getting involved in external groups, and pursuing continued education.
Locate good mentors. 

In forward-thinking workplaces, it is important to establish developed and well-run ESGs. However, doing so is a significant issue C-suite executives, board members, and employees have faced. With that in mind, it is imperative to properly vet new hires to determine whether their objectives and morals align with the hiring company. For a company to guarantee this, Tom's team recommends conducting extensive background checks, and social media account reviews.

Considering the importance of progressive environments, Willy stresses that corporations have become more cognizant of board revamping, diversifying, and succession over the years. Willy informs listeners that 30% of S&P board members today are women, a significant step towards attaining board gender equality. From a diversity standpoint, 33% of new independent directors in 2021 were Black or of African American descent, an increase of 11% from 2020.

As the episode wraps up, Tom shares his upcoming marathon plans.

Key ideas:

0:50 - Willy introduces today's guest, Tom Daniels. 
2:35 - The effects of the great resignation. 
5:38 - How are top companies retaining talent? 
15:26 - CEOs and leadership
18:12 - How do companies assess a CEO's skills? 
25:36 - Cultural adaptability vs. cultural fits. 
33:57 - What keeps a team united? 
36:26 - Skills for successful CFOs
39:40 - Advice for individuals concerning their skills
42:02 - The focus on ESG
46:10 - Corporate board diversity 
52:49 - Thanks to Tom for joining us 

Webcast transcript: 

Willy Walker: Welcome everyone to another Walker Webcast. It's a real pleasure for me to have my old friend Tom Daniels on today to talk about the labor markets at a time when all of us are sort of scratching our heads about how to make any kind of sense of the talent retention, talent recruiting process. And I very much look forward to hearing Tom's thoughts on all of that. I took last week off from the webcast. It's nice to be back, and we have a great, great group of people kicking off with Tom today for the next couple of months and very appreciative everyone joining us today. So, let me do a quick bio on Tom and then we'll dive into our discussion. 

Tom Daniels serves on the global board of directors of Spencer Stuart, one of the preeminent leadership advisory services firms in the world. He is also a member of the firm’s Audit and Board Risk & Cybersecurity committees and chairs the M&A Committee. As a senior member of the firm’s Board, CEO, Financial Services, Financial Officer and Private Equity practices and also a certified coach, he has been involved in more than 500 executive search, succession planning, executive assessment, and board assignments for public and private multinational institutions.

Tom is former global chair of the Association of Executive Search Consultants (AESC), Executive Committee of the Dartmouth Alumni Council and received the Dartmouth Alumni Award. He is an avid runner, completing 22 marathons, including all six World Marathon majors, and has led the Spencer Stuart teams running in the New York City, Berlin, Chicago, and London marathons that have included more than 125 colleagues from around the globe and raised collectively more than $600,000 for charity. Tom is a graduate of Dartmouth College and has an MBA from the University of Chicago. 

So, Tom, let's start here. We're in the midst of the great resignation where talent is moving around the market at breakneck speed. Is this all good for a company like Spencer Stuart, or is there a degree of transition or fluidity of the market that actually isn't good? 

Tom Daniels: So, one thing before we get into this. Thank you for having me. And I would say a longtime friend, not an old friend.

Willy Walker: (Laughs.) That is for sure. 

Tom Daniels: It's interesting you start off with the Great Resignation, because the way that we think about it is it could be the great reshuffle, the great rethink, the great reckoning, or the great reshaping. I mean, it is good for Spencer Stuart. I mean, we're coming off the best year in the firm's history and we're ahead of that this year. It's bad for the firm from the standpoint that we, like others, are getting some of our people picked off to private equity firms or to firms like Google or Facebook or places like that. But just in terms of like in general, the way that we think about what's going on in the job market right now, because as you know, the unemployment rate is at a 50-year low. There are two times as many jobs out there and there's still 11, 12 million jobs. I think a lot of that is happening because there's a backlog of resignations. There's been an acceleration of retirements because of COVID. 

I think there's burnout. I think 40% of the people in a lot of surveys are saying they're working longer hours or they're starting earlier than working later. They're skipping lunch. They're just like no end. And I think that could continue. You know, I think PwC came out with a survey for Davos a couple of weeks ago that said one in five people are likely to switch jobs in the next 12 months. So, there is more liquidity than ever in the human capital markets, as we would describe it. Some of it is the math because there's a mismatch in terms of the baby boomers retiring, exceeding the Gen Z starting out. There is a tight labor market. I think there's lower switching costs because there's less friction in the people interviewing because it's easier just to kind of jump on a zoom. And you know, people aren't relocating. So, it really is very much of a buyer's market. 

And then the other thing I would say is and it's interesting because both of us have kids that are kind of in the Gen Z millennial world, if you think about it, a lot of them entered into the workforce in the last 20 years and they were hired into recessions in the Great Recession and the Great Pandemic. So, they entered into a tougher job market, and this is really the opportunity for them to take advantage and upgrade. So, those tend to be the most mobile right now. So, I think and then lastly, I would say, what's causing a lot of this is there's a bundle, there's a fundamental reevaluation of how people are thinking about work life balance and relationships. And we've had this great experiment of remote working, and it's really demonstrated that companies can function well, but there's a number of other implications that we can get into later when we get into things like back to the office and what companies are doing about it. 

Willy Walker: So, let's dive into a number of the numbers that you just put forth because I think it's important for all of us to kind of keep in mind, what do we mean by the Great Resignation and whether this is something completely new or whether it's the continuation of a trend that actually began a decade ago? So, if you look at the resignations per month since the great financial crisis, as you just mentioned back then when we were coming out of the crisis, the monthly resignation number was about 1% of the workforce. And over the last decade, that has gone from 1% up to 1.5% to 2% to 2.5% pre-pandemic. And then it dropped down dramatically during the pandemic because so many people were laid off and people weren't voluntarily giving up their job in the midst of the pandemic. And then we come out of the pandemic and boom, it goes from less than 1% on a monthly basis, up to 3% on a monthly basis. And when you think about 3% of the workforce churning on a monthly basis out of voluntary resignations, 3% doesn't sound like that big a number, but then you annualize it, and you get yourself to 36% and then you sit there and say there are about 160 million workers in the workforce. So, 30 to 36% of that number is somewhere between 50 and 60 million people a year voluntarily resigning from their job to go find a new job. 

That puts it in the real context as it relates to back in 2010, that number was sort of 10 to 15 million and now we're up at 50 to 60 million. That to me seems like something that is very, very much more than just a continuation of a trend, but something that all of us who run companies really need to deal with. What are you seeing really good companies do as it relates to how they're retaining talent? Are they matching offers? Are they just basically accepting the fact that people are going to churn and doing more on the recruiting side, is there anything you've seen as a good way to combat this? 

Tom Daniels: So first of all, everything you say is true. There's danger with analyzing because you know that that's always kind of fraught with danger, I would say that. But the number you're saying are really true, because last month, I think there was a four and a half million person quit rate, and that's annualized. That's 54 million. So that plays exactly to your number, I would say the most enlightened companies are playing more offense. I mean, culture at the end of the day is a differentiator. And I think the best companies are being more proactive in figuring out ways to get people more engaged. It's not just about compensation. And, you know, arguably some people say compensation is one, two, three and four, but it's you know, my theory is that people probably underestimate how much they really do think about comp. So, let's just say it's one of the top two. But I think culture, purpose, career advancement, recognition, having pride, having mobility, having mentoring programs, the opportunity for promotion and I just think that that's really important and that's becoming more critical than ever. 

I think the best companies are being much more proactive. They're spending much more time on engagement. I know that you recently kind of had your first all hands-on meeting in Denver, and you and I talked about that recently in terms of how much that just brought everybody together and we are probably not unlike you. We're probably 25 to 30% of our workforce was hired during the pandemic. And, you know, we're a partnership that has been around for 65 years. And part of who we are is an apprenticeship culture. And just being here every day and working with each other and being collaborative is like part of the glue that holds us together.

So, I think the best companies are really kind of coming to the fore with kind of defining who they are and engaging their people in creating more inclusive environments. But at some point, there's always going to be outliers. You know, there's other surveys out there. I think Randstad did something in the last couple of months that said, 55% of Gen Zs and millennials would consider quitting if their personal lives interfered with work. So, there's always going to be those crazy situations that you can't change. But I think the biggest thing that you can do is focus on your culture. And then the other thing is you've got to be more flexible and really think about hybrid work models. 

You mentioned Elon Musk earlier, the big story over the last couple of days is if you don't show up for work, we're assuming that you're quitting, which is kind of ironic because he's trying to buy Twitter, which is the company that said that you can be remote for life. So, we don't know how that's going to play out. And, you know, I'm a University of Chicago person and I believe in the efficient market. And I think, there will be equilibrium somewhere. 

Willy Walker: So, a couple of things on this and then I want to move on to some issues on leadership, CEOs, and things of that. As I was doing research for this discussion, there were a couple of things that jumped out to me. The first one was, as you mentioned previously, there's this concept out there that there's a lot of mobility right now, that people are moving from California to move to Boise, Idaho, in that they've moved and they're not going back to California. And it was very clear in an article that I read from Pew Research that said that mobility for work is at a 70-year low and that people actually aren't moving for new jobs nearly as much as people think they are. And that kind of makes sense because we're still in a Zoom economy and a lot of people are making big accommodations to people to say you want to live wherever, wherever you happen to be, that's fine, but you don't have to move here for your new job. The second thing is that on COVID, in Pew's research, exactly back to what you just said, Tom, people are moving jobs for pay, but they're also moving for opportunity. They're also moving for companies that they really want to work for. But you had to go to the bottom of 15 different characteristics of why they're leaving to get to COVID and back to work policies. And I think a lot of people, a lot of leaders have sat around and said, oh, I've got to be really careful about what happens on my COVID back to work policy because I might lose a lot of workers. That is nowhere near to the top of the list as it relates to drivers of behavior today. 

Anything else that you have seen from misnomers or misinformation out there that that people are kind of lobbying on to, that might be a red herring as it relates to how to retain people or what to focus on? 

Tom Daniels: So, you raise a really interesting point on mobility and tying that to COVID. So COVID is not a reason for someone to leave, but I think COVID pulled off the band-aid in terms of showing the workforces the types of company that they really were. And I think what it also did is it accelerated what a lot of boards and management teams have been thinking about doing over the next five years into literally 6 to 12 months. Just think about board meetings, because board meetings used to be in-person and if they weren't there, they were telephonic. Now it's all Zoom. And now, as people start going back, it's like, okay, we're not going to have telephonic calls. We're going to have Zoom calls and maybe we don't need to get together as many times. That same thing is happening in the workforce as well. 

If we look at Manhattan, for example, you've got hotel rates that are up to like 70 to 80% in terms of occupancy. I mean, they're not where they were before the pandemic, but the workforce, people coming in, it's less than 40% and that's and that's at least three days a week. And, you know, I was in your office last week and you could see it was less than half full. If it's five days a week, that's less than 10%. Now, those numbers may rise after Labor Day to like maybe 50%. But I just think that there's a whole new norm there. And that includes a much more flexible workforce. I think the days of requiring people to be in there, notwithstanding what Elon Musk is saying five days a week, are just gone, because I just think people will vote with their feet and unless you're in a role that requires you to be like there every day like in retail or hospitality, which is where a lot of the wages are rising because there's inelasticity because they have to be there. You know, they can't have that flexibility in other areas like professional services or financial services, you're just going to see a much more flexible policy. We're also seeing that in recruitments, where I think for the first time in my 17 years in this sector, I think people are more accepting of the fact that they will take people that they don't necessarily live in the city, but they've got to be there four or five days a week and they've got to be on call. But where they are on the weekends, I think people are being much more open to candidate flexibility. 

Willy Walker: So, you talk about board meetings, and I want to skip ahead and then I'm going to come back. But in some Spencer Stuart research on boards and governance, one of the stats that was in there was that the average S&P 500 board met 7.9 times in 2020 and 9.4 times in 2021. And so, my question to you is, is that increase in board meetings because it's easier for them to get together or they have many more issues to deal with in 2021? 

Tom Daniels: I think it's a combination of both. I think there was the need, but there was also different math. If you think about it, management was dealing with so many unprecedented issues that boards became really important sounding boards to the management teams. So, there were much more meetings that were scheduled on the fly. They were virtual. So, you basically grabbed time when you could. So rather than maybe one four-hour block, you might have two-hour blocks over two days. So that is like two board meetings. So that's kind of fake math. And I would say it's Spencer Stuart, though. 

Willy Walker: It’s Spencer Stuart's math. What are you talking about? It's fake math, it's your math. It’s not fake math.

Tom Daniels: At Spencer Stuart, I can tell you, we normally meet four times a year, over two and a half days each. So that's 10 to 12 days equivalent. We met over 40 times over the last two years. So, we lived and breathed that as well. But I think what's happened is, the implications of that are it does change how boards think about meetings in the future. So, I think there's going to be more of a hybrid model of in-person and virtual. But as a result, that also expands the pool of potential directors, because that means if you're on the East Coast, you have a better chance of recruiting someone from the West Coast and vice versa. Or if you want to recruit someone from Europe because you're not going to be requiring people to fly across the country 8 to 10 times a year. It may only be four times a year because the other four or five times a year may be virtual. So, I think that that's actually a good thing. 

Willy Walker: So, let's shift for a moment to CEOs and leadership. Spencer Stuart does a ton of CEO searches and studied a large cohort of CEOs over a 40-year period, 747 S&P 500 CEOs. And one of the conclusions that the report said, Tom, that fascinated me was they found no discernible link between CEO experience and shareholder returns. So, as I read that, I sort of said to myself, so when you're going out and doing a search and you say, this person has 15 years of incredible experience in your industry, but don't pay attention to that because it has absolutely no bearing on how they're going to be a CEO and the shareholder returns. How do your foot that? Because every time that we come to you and say, hey, we need you to do a search on X, typically we say and they typically in the spec need to have X number of financial services or commercial real estate in their background. So, we come to you with a spec that says show us the experience. But in your study of CEO performance, there is no discernible link between CEO's experience prior to the job and shareholder returns. 

Tom Daniels: So, that's an extreme comment that could be taken out of context. Experience still is important. It's really I think what that article was saying is you can't make assumptions that just because people have the experience that they're going to be more successful than those that maybe haven't done it. Because the fact is that 70% of CEOs in the S&P 500 were not CEOs beforehand. So, I think what we've tried to do in our projects is get clients to realize it's not necessarily have they checked that box before, but do they have the capabilities and competencies to be able to step up to the role? So, when we look at people, we look at three things when we're evaluating CEOs. One is kind of, do they have the skills, do they have the experience, but secondly, do they also have the self-awareness to recognize and to know what they don't know? And then thirdly, do they have the learning agility? Because that's really, really critical. So, it's not just someone who's been in that role before, who's going to use the same playbook, but it's someone who goes in there and knows how to read a situation, recalibrate, refine. But also, someone who can build trust and communicate with key stakeholders. Because the challenge is if you just get someone in there who's had the experience, but they're not going to listen because they think that they've done this before, they're going to miss out on clues. 

And then the other thing is generally we found that first time CEOs generally tend to seek more constantly constructive feedback. And those are the ones that are most successful. And that's why when we do CEO and CFO and all the other work, we also encourage onboarding plans and not just for the first 100 days, but for the first 1,000 days, because it's so critical that they continue to get feedback and they're thinking longer term, not just in that first year. 

Willy Walker: So, I want to talk about those skills because that piece on the skills was very insightful. And I think the pandemic has accelerated a lot of what you're talking about agility in leadership skills. And the article, the Spencer Stuart Research piece, basically says that the old way of command and control is completely gone with the pandemic, basically threw that out the window, even if you could operate in a command-and-control format pre-pandemic and that today successful CEOs create conditions for success, such as relationships, empathy, trust, culture, collaboration, and information sharing. I got to tell you, Tom, it sounds a lot like Brené Brown. 

Tom Daniels: Yeah. The only thing we're not saying is vulnerability... 

Willy Walker: (Laughs) Which you're going to get to. But hang on a second, because I mean, like so you will also talk about it in the sense of above the surface skills and below the surface skills. So above the surface is Willy Walker ran Walker Dunlop for X number of years, and he went to X, Y, Z, business school, all that kind of resumé stuff. And then below the surface are all those types of skills we just talked about. And what Spencer Stuart is saying is those below the surface skills are the really important ones today. How do you assess those skills? How do you work for your clients to say this CEO is expert on X, Y and Z? Because most of us, when we start a search with you, we get a really nice bio, we get a really nice profile. I did a call yesterday with someone who you're working with on a search that we're doing, and I have to tell you, in a half hour Zoom call, it was really hard to figure out whether the person I was talking to has those skills of team building, vulnerability and all the other things that you all point out. How do you do it? 

Tom Daniels: There's no single panacea, but it's I'd say probably two or three ways. One is you do deep dive assessments. You go into examples, and you go five layers deep. When you're trying to figure out the examples, like what was their role in that situation? What was the context? What did they do? What was the output? What was the end result? So, one of them is just kind of going deep dive when you're doing the capabilities and basically you can compare them against other people who have been in those situations. 

I'd say, secondly, you do references and not just kind that someone gives you, but kind of the off channel or off the record ones. I mean, we have a database with 4 million people in it and it's updated 40,000 times a week. And part of that is when we talk to someone, it may be about an opportunity, but it also may be in that conversation. We talk about 20 different people, if we have a thousand people talking to people every single day and everyone does that five times a day, that's a lot of data that's getting loaded in our system. So, I think by the time we actually may call someone on a project, we've got multiple data points and they're independent sources that can corroborate certain types of behaviors. When we get deeper in, when that person may actually surface someday as a candidate, we've got, we think, better data points. And if they're not fresh, we know who we can call to kind of get independent views in that person. 

And then the third thing we do is the kind of executive intelligence interviews, and they're four and a half hours. They're a series of real time case studies. And they go through kind of interactive live situations where we're testing for not only how someone thinks, but then beyond that, how they respond. Because no matter how good someone's answers are, we have better answers. So, we give them those better answers and then we see how they respond. And what's interesting is some people, they just ignore those, other people incorporate them, and that's and that's like how it works in the real world, because you don't have all the answers when you step up in one of those roles. And it's really seeing how people respond. And that gets to that agility in terms of how people think. And these are really interesting case studies, and we've been doing this probably for about 15 years now, and we published in the Harvard Business Review article, and we think that it's a far more accurate way of predicting. And again, no single way you're going to get perfection. But the more decision variables you can add in making the hiring decision, the better. So, it just enables you to make a more informed opinion. 

Willy Walker: So that database fascinates me, and it makes me think about this Tom, even 20 years ago, certainly when I was getting out of business school 26 years ago, that database was probably populated with a bunch of GE executives to try and use kind of a standard. Jeff Immelt was prominently inside of there with a number of other GE executives who moved up through the ranks, who you all are sitting there saying, okay, has done this, has done that, and that's our database. How much has that database changed as technology and the growth of technology companies has created so much value in the marketplace. And the reason I ask that is because we see all of these technological entrepreneurs and leaders who are so much younger than typically Jeff Immelt, when he gets the top job at GE, or Nardelli, who doesn't get the top job and goes somewhere else at that moment in 2001 or 2002, when they pick the new successor behind Jack Welch, that's a known quantity. And they were all in their mid-fifties at that time and perfectly set up to then if they didn't get the top job, go on to Home Depot as Nardelli did or other places. Now, all of a sudden, you're dealing with management teams that are much, much younger and don't have that sort of tenure of moving up and doing all sorts of different things. How does that change, what you need to classify for if you will, inside that database?

Tom Daniels: It's changed significantly. I've only been in this business for 17 years. 17 years ago, we didn't have anyone that had anything in there about digital, about social media, about chief information security officers, chief commercial officers, about ESG, about crypto. There's just new skill sets evolving every day. And I think part of what we do is we mine a lot of databases, but when you think about who we are as a firm, we're constantly hiring new people to bring into the firm, to start new practices, to develop new white spaces. And that's part of what we do. And just think about last year in the boardroom, for example, 42% of the people who were elected to executive boards last year were never directors before. And so that's what we do for a living. Our job is to not only identify who's there now, and part of our purpose is discovering and developing talent for a better future. And part of what we do is kind of not only figuring out who are the stars now, but who are the future stars. 

Willy Walker: And is there a ranking in that system? So, in other words, if we put Willy Walker into your database, does it come back and say on a CEO rank he’s an X out of X and on a board capability, he's a Y out of Y. And that score is sort of informed by cross-referencing and hearing various things. 

Tom Daniels: If I gave you that answer, I'd have to kill you. 

Willy Walker: (Laughs.) I just want to know my score. I think my shareholder returns are done really well. And I think my role as chairman of the board's been okay. But I just want to know my score at some point. I'll leave that. 

One of the things that also came out of that article, Tom, was that cultural adaptability is more important than cultural fit. Help me sort through what that's saying as it relates to the type of people companies should be hiring as CEO. Because as I think about culture, I think about, you know, if someone were to replace me as CEO of Walker & Dunlop, I'd love to have someone who I would see and say, this person is a cultural fit. But what I guess I'm reading from the article from Spencer Stuart is, it's actually the person's ability to adapt to cultural change rather than actually fitting what you believe the culture is today. Is that a proper read? 

Tom Daniels: Yeah. I wouldn't say adaptability. I'd say cultural alignment and cultural compatibility. The way that we think about it now is you want someone to be who they are, and you want to create an environment that's inclusive. And everyone can bring their whole self to work every day. And that includes bringing all sorts of people there. They need to be aligned with you. That's the most important. But your culture is an amalgamation of all the different individual style profiles of the people you have. And some of them may be more results oriented, some of them may be more purpose driven, others may be more command and control. Others may be authority. And it's all about that aggregation that kind of creates your culture. And we've got a culture model that also looks at where people are. And it's another one of those decision variables that when we do work with clients, we try and kind of measure where people are on that quadrant they're in. And then we show that to the company and many times the company wants someone who's a disruptor. So, they want someone who's a little bit different from the culture, which will create a little bit more edge. And other companies want people that will just refine in the culture. So not someone who's so far out of the box that they're not even on the model. So, it's really about being aligned with the values and then being compatible with the culture and then letting the culture kind of adjust. Because culture really is the most important thing, there's people that say that culture eats strategy for breakfast. So, it really is kind of a driver of value. 

Willy Walker: So, I want to for a moment talk about CEO pay. So, the average CEO to the average CEO pay of S&P 500 companies to the average worker was at a ratio of 61 to 1 in 1989. It was at 307 to 1 in 2019 and it was up to 351 to 1 in 2020. Do we pay CEOs too much? 

Tom Daniels: The market needs to decide that. I don't think you have extreme tales in any other country but the United States. I think shareholders have the final say in that and it's not our it's not our job to determine it. And I think there are enormous wealth creation opportunities in this country. But fortunately, not everyone is driven by pay because a lot of the work we do is also from mission-oriented work, and it doesn't pay anywhere near that. So, I think I'd rather think about that in the context of letting the market decide that, not us. 

Willy Walker: So, on a market-based compensation plan, in 2018, the Tesla board announced that Elon Musk was going to have a compensation plan, that if he took the market cap of Tesla to $650 billion, that he had the opportunity to make $55 billion off of the stock that they were granting him at I think, $70 a share. And it was a ten-year plan. And everyone said, maybe ever, don't think so, really? And three years later, it's not even three years in January of 2020, he blew through that. He doesn't make a base salary. Do you see this kind of all or nothing, market-based performance metrics, sort of something that more and more boards are reviewing for the star CEOs out there? Or do you see more people going to the kind of the base bonus stock-based compensation and kind of really just doing comp tests on where this person would be in the industry versus other CEOs and staying with that. By the way, my comp committee better be listening to this if you come in with big, outsized performance ones. I joke. 

Tom Daniels: I think that the move toward aligning CEO remuneration with performance is a good thing because everyone needs to be aligned. But I'm also a proponent of broader shareholder ownership for all employees because I think it aligns everyone the same. I think ultimately if you're a publicly traded company, that's for the shareholders to decide how they want to do it. But there's a competitive market out there for talent. And as long as people are driven by compensation and as long as you have some outsized performers like Amazon or Tesla or some of these other companies, you're going to have these extreme situations. While it's easy to demonize that sort of value creation at the same time, the shareholders' benefit multiplies more than what Elon Musk did, but that's up to the Tesla shareholders to decide whether they did the right or wrong thing. 

Willy Walker: Yeah, it's an interesting one because you know hindsight's 2020 vision. W&D for five years from 2016 to 2021, if you put W&D against the FAANG stocks, the only one that you would have been better investing in was Apple. So, we crushed all of them over a five-year period. And I think a five-year hold is probably a reasonable period of time. It's not one quarter. It's not one year. Five years is a pretty good period of time to understand overall performance. The issue with it is, is just that, that's a look back. You look back at the performance, you can say that it was a really spectacular performance, that period of time. The other piece to it, Tom, that I find to be very interesting, is that the average tenure of a publicly traded company CEO is 7.2 years. I've been in this seat now for 13 years. I'm well beyond the average tenure. But what your data also says is people who get beyond that average of 7.2, typically the shareholder return, if they’ve lasted that long, the shareholder returns actually get better. So, someone who's been in a seat for a long period of time, Jamie Dimon being a perfect example of someone at JPMorgan where the world has massive confidence that Jamie Dimon is going to continue to generate outperformance for JPMorgan shareholders, given that he's been in the seat for as long as he has and endured the test of time. 

Tom Daniels: That gets to Warren Buffett's comment that he looks at market performance over 100-year periods, one month or ten years. It's true because you are in what we call the golden years and that's because if you take a long-term shareholder view, you now have had the benefit of a lot of the upfront investing that you went through. And a lot of the peaks and valleys are starting to pay off because you've probably made some tough decisions. And what you probably did was you kept constantly communicating with your board. You were transparent. You told them you know what they needed to hear, and they stuck with you. And I think that that's really, really critical. And that's the average. I think HBR came out with an article which was part of the impetus for us doing this, saying that I think around 2019, the best CEOs in the world will have an average tenure of 15 years. And that's two times, as you said, the 7.2 average of CEOs in this country. And there's a reason for that. And if you have the resilience to stick around and the board has the confidence to stick with you and you're making the right decisions, then, there is a payoff at the end. And there's that honeymoon period in year one. You've got a year five kind of peak as well. And then, you're just going to have rough edges in between. But anyway, I mean, that's also aggregate data. It's over 750 companies, but it's really interesting to look at. But every story is unique kind of within those. 

Willy Walker: So final piece on the CEO one, which is leadership qualities and styles coming out of the pandemic. One of the things that I read in there was that people can't think about management teams staying in their lanes, that given what's happened in the pandemic and that the need for teams to be fluid, that if you think that the CFO has to stay here and the CTO has to stay there, that you're not going to have a corporation that can adapt quickly enough and be agile enough to deal with the markets. And as I think about that, Tom, I wonder about what holds a team together that has people crossing across lanes, if you will. Is it that there's a really, really clear vision of where the company is going and everyone's kind of locked into that vision? Or is it more based on compensation and the fact that the senior management team is all wrapped together into a similar type of compensation structure? Does one strike you as being more prevalent than the other? 

Tom Daniels: I don't want to say which one is more important. I think you need both. I think you need the CEO at the top, someone like yourself, driving that vision, bringing people together. And then if you and your comp committee have thought about this the right way, you've also aligned people. But the most important thing right now, when we think about CEO leadership is having those strategic skills, but also creating an environment where everyone is collaboratively working together. Part of being a leader is leading by example and showing that you can play well in the sandbox with others, and you can work and develop. Because the other thing is the motivation for your people to work across these different verticals in collaborative partnerships is because that's the way the world works. You know the world doesn't work in silos anymore and most everything you do, any sort of project involves legal, it could involve compliance, it could involve marketing. It can involve subject matter domain expertise. So, it's bringing those people together in a cohesive way and aligning their success together so that everyone works together as one team. But you at the top need to be really driving that as well. 

Willy Walker: Obviously all of these conversations as far as CEOs go down to any manager inside the company as it relates to how they work with their teams and how they manage their portfolio of responsibilities. And so, I do find it to be interesting. We talk a lot about all this in the context of a CEO and at the same time, all of these leadership skills as far as getting teams aligned, being agile, having people move across lanes can be applied to a CEO and a smaller, large organization and all the way down to a manager of a given group or division inside of a company. 

Tom Daniels: It's not just the CEO, it's the division head, it's the chief operating officer, it's the CMO. You know, it's just it's just all about leadership. And it's kind of creating that cohesive unit and it's being transparent in terms of how you communicate. And it's really kind of getting everyone involved and making people feel that they're in this together. I think that's really critical. 

Willy Walker: So, let's shift gears to CFO, because you all also wrote a really interesting piece on CFOs and the skills that are needed to be a successful CFO going forward. And the headline on it, Tom, that caught me, was it says, “your major economic disruption will be the norm in the foreseeable future.” And I read that and said, oh, joy, exactly what somebody who wants to be a CFO wants is major economic disruptions will be the norm in the foreseeable future. How do you find somebody who's talented enough to deal with major economic disruptions in a CFO role? 

Tom Daniels: What we look for is people that have encountered adverse situations in the unexpected and then how they address them. I think we look for people that have multiple varied experiences, either within the same firm or at other firms, because it shows that you can adapt quickly. What's interesting is there's a lot of companies out there and they want someone who's come from a failed company, there’s a lot of those out there coming out of Silicon Valley and there's a lot of lessons learned with those companies. I hate to use a golf analogy, but it's like, you don't want to be the first to putt because you've had someone that's read the putt before who can guide you in there. And we do a lot of searches for startup companies or earlier stage companies, and a lot of times what they want are those seasoned states people, someone who's been in the room and seen it. Not just the overwhelming success, but failure. I mean, if you talk to someone like Ray Dalio or you read his book, he loves failure because the assumption is that people learn from it. 

Willy Walker: I was fascinated by the piece on CFOs about how much technology is becoming kind of a differentiator for talented CFOs and that the old era of finance majors, you're an accountant, you really understand the numbers side of things has obviously you have to have those core skills, but the ability to invest in technology to make data driven decisions from a CFO perspective. And then also the need for CFOs to understand how to both invest in and cultivate technological innovation has become something that is a very, very important skill for CFOs. 

Tom Daniels: There's a few things that have kind of changed the profile of the ideal CFO now, but someone who is technology savvy, who understands the power of technology as an enabler, who knows how to mine data, who knows how to think about RPA and A.I. and things like that. And just who figures out ways to leverage data in ways that had never been used before. I mean, that's the way of the future. The next generation CFO is much more strategic. That's why there are as many MBAs as there are CPAs who are CFOs. And that's nothing going against the CPAs, but it's just a much more strategic environment. The next generation CFO also has to be really smart about stakeholder engagement and management and being able to deal with activism, being proactive and being an articulate communicator. They've also got to be able to lead and inspire people, not unlike a CEO, which is kind of like that next generation of talent. 

Willy Walker: So, if you're somebody who's in a finance department and listening to this and you're trying to figure out what you as an individual ought to do from a skills standpoint. So, you're 32 years old, you're 35 years old, and you're at whatever level inside of a big company's finance department. What should he or she do, Tom, to round out their resume? Should they go to another company that's failed and try and help pull it back out of the rut? Should they spend some time over in the technology department? What, as you look at it, are really good resumes of people who are in your candidate pool to be CFO of a company. What would be a kind of a recommendation for someone who is at that stage of their career as it relates to what to do to build a resume that would get on your radar screen? 

Tom Daniels: I'd say, assuming that you're with a good company now, it provides upside. Seek stretch assignments. Get out of your comfort zone. I mean, first of all, do what you do well and do it better than anyone out there. I'd say beyond that, get out of your comfort zone, try and do more, and don't necessarily do things entirely out of left field. That may be kind of one iteration away. Get on committees to do a broader sort of enterprise roles, like get exposure to other areas of the company that are outside of finance. Get involved in outside groups like if you're an FP&A person, a treasury person, or a controller or in audit. Get involved in local organizations and then get the continuing education from your accounting firms or from your local schools. And if you don't have your MBA, get your MBA. There are all kinds of things to continue learning. 

I don't think you need to go out and scour the job market, because if you're at a good firm right now and if you're a good talent and you're a rising star. The last thing is made sure you're getting good mentoring and you've got people at the company looking out for you. And if you don't feel that and when you don't feel aligned with values of the firm and you don't feel like you've got that mobility or that upside, or if it's not a company that you feel you can bring your whole self to, then you can start considering outside things. But there's a lot of things you can be doing in the meantime to build up. But that said, what is the average person who's 30 years old has had four jobs with four different companies? So, I come from a slightly different world on that standpoint. 

Willy Walker: As do I. So, in that piece on CFOs, there was a quote from one CFO that said that in 2020, meeting with investors, ESG would come up about 10% of the time, and in 2022, it's 80% of the time. So ESG is front and center and understanding how to manage ESG has become a very significant issue for CFOs, CEOs, boards of directors, what have you. What are you seeing the really good companies do as it relates to ESG? And is it more in response to the BlackRock’s of the world that are driving the bus or are there actually companies that are ahead of BlackRock? 

Tom Daniels: I think Europe in general is way ahead of the United States. I don't want to get specific into BlackRock, but because they have an $11 trillion voice or whatever size they are now, they have an outsized voice. But I think everybody's involved. But I think Europe is probably at least five years ahead. What's interesting is in this country, depending on what sector you're in — the “E”, the “S” and the “G” get different emphasis. And then the same thing in Europe. I think in general; most companies out there now have some sort of ESG or sustainability component in there. We've probably done 50 searches where we've helped people hire ESG advisors or heads of sustainability. 

On the DE&I front, we've done all kinds of work helping companies hire heads of diversity, which is something that was barely in existence two or three years ago. I think it's something that's not going to go away. Even in private equity, there's been a lot of investment in that, not just at the corporate level, but at the portfolio level as well. It's something that I think investors are really focused on.

Willy Walker: Before we move on to boards and where you all have been on your helping companies put together their boards, given the demands on ESG and a bunch of other stuff. There was a question that just came in from Douglas Callantine that asked whether you all searched social media profiles before you hire people. In other words, how important, particularly when you get to the kind of CFO, CEO role, is that social media profile? And to the degree of it both being an asset versus also potentially a liability, I'm assuming you go out and do a search on someone who has been a very provocative slash across the line on Twitter. That's a knock against them. But at the same time, if someone isn't out there with a LinkedIn profile or being active in social media and also to some degree think that that might actually be a ding for them. How does Spencer Stuart look at social media and the role that managers becoming executives play as it relates to their social media profile? 

Tom Daniels: It's something I've told my kids. It's like when you post on social media, you post forever. Don't ever think it's going away, and you just have to think long term. I tend to be more conservative on that. I think if you're a marketing person, it's okay. But I think you have to be really thoughtful about unintended consequences. Willy, you've lived in Washington for a number of years. You know how anything you say can be taken out of context and you just have to be really careful. So, the answer is yes. We search extensively before we present a candidate. We know that most of our clients are doing that. And then at the end, when we do background checks, the background check people go even deeper. And there have been, I think, on more than one hand, the number of cases of people that have had very uncomfortable conversations with people that they thought that they had gotten scrubbed from their social media profile. And you just have to be careful, and you need to be who you are. And if you're an advocate and you feel passionate about something, that's fine. But just be prepared that you could enter a world where some of that may come back to bite you. And it may not matter if you're going to be pursuing roles where people that have those opinions, where they're offended care, but it could happen. So just you've got to be really thoughtful. 

Willy Walker: So, let's move the boards before we close out here. I noted in your piece on boards that today 30% of S&P boards are now women, which is great progress as it relates to getting some type of balance on corporate boards as it relates to gender. On the diversity side of things, 33% of new independent directors in 2021 were black or African American, up from 11% in 2020. So fair to say that there has been since George Floyd and subsequent issues that have cropped up a real focus on getting increased diversity, particularly as it relates to race on corporate boards. 

Tom Daniels: Yes, I would say and one of the things that we're proudest of is, even before George Floyd, and we've been focused on this, over the last two years, we put over 3,000 women and over a thousand people from underrepresented communities on boards. So, it's always been a focus of ours. I will tell you that I got to give a shout out to corporate boards over the last couple of years, though, because I think there is a heightened enlightenment of boards non-Gov chairs that you can't just look at past experience because generally a lot of people have said, well, the most important thing is someone had previous board experience. And when you're trying to get more women and more people of color from underrepresented communities on boards, they just haven't had that chance. What's interesting is I think there was a wakeup call in corporate America, and last year was actually the first time in probably a couple of decades where the average number of directors on boards actually went up. That's because people realized that they couldn't wait around for two and a half years or three and a half years until that next opening happened and if they really wanted to get someone who was from an underrepresented community on their board, they had to act now and they had to make their board bigger. So that was really interesting. 

The other thing I would say is thinking about board refreshment and succession is something that corporations have become a lot more thoughtful over the last couple of years. And one of the one of the things we do in our annual survey, when we do the Spencer Stuart Board Index, and we survey a bunch of Gov chairs we found that 75% of companies that are looking to fill more new openings are starting a year in advance, which is a lot earlier, because there's a lot more competition for talent and people don't want to miss a window of opportunity. So, they're opening that window even wider and they're ready to move more quickly. 

Willy Walker: I find it to be really interesting about your comment about expanding board size because I have always been a stickler as it relates to board size in the boards that I serve on. I've served on 22 and 36 person boards, and I find it to be a complete waste of time as, as have you. And it's interesting that they've expanded out because, so few boards have term limits. And so, one of the other things that came out of the piece was that most boards use a mandatory retirement age. 70% of corporate boards use a mandatory retirement age of 75 years old as their way to manage their board. And only 6% have term limits. And I mean, that is a staggering number that only 6% of publicly traded boards have term limits for how long their directors should serve on the board. And we don't have explicit term limits. But I started at ten years with my board when we went public, doing a rotation every year, of having one go off and one come on. And I'm right now going through that cycle. And I will tell you, it's painful because I'm having to ask really good directors to step down. But at the same time, after you've served on a board for a ten-year period or an 11 or 12 or 13 or 14, which will be the end of that cohort who came on in 2010, it hurts to say goodbye. And at the same time, I also know what we must do. I was shocked by that statistic that 70% control their boards by mandatory retirement age. And the mandatory retirement age is 75. 

Tom Daniels: Yeah. So, I'll tell you one more thing that'll just get your dander up even more. I mean, it used to be 72 and it got raised to 75. So, the over-under has shifted. 

Willy Walker: Sounds like our federal government. We got 78 and 93-year-olds running our federal government or running corporate America. I mean, I'm not trying to bash older people, but I mean, seriously, this economy is driven by younger people.

Tom Daniels: Yeah, but don't be confused by the statutory limits, because the reality is boards have gotten younger and that's a good thing. And I think they will continue to get younger with this next generation of talent coming on. I think the other thing that will drive Board refreshment is not necessarily the statutory rules, but it's the Vanguard’s, State Street's, it's the BlackRock's who are going to insist because they are spending a lot more time, not only looking at ages and how many years of people have been on boards, but also skill sets. And you've got activist investors. I mean, just think about it, you had an activist at ExxonMobil with less than one half of 1%. They basically got two of their dissident board members elected on ExxonMobil because the big institutional shareholders followed them kind of in their lead. So, I think the market will kind of adjust and continue to kind of monitor that sort of disturbing trend, as you describe it, at least, at least in terms from a statutory standpoint. 

Willy Walker: So final thing, today is Global Running Day. How far are you going to run and when's your next marathon?

Tom Daniels: So, first of all, I ran this morning. Thank you, happy running day! I was out there with my teammates this morning, Tavern on the Green at 6:15 am. And my wife was out there. We did four miles in the park. The next marathon will be Boston. I'm trying to do New York every year, but we've got a board meeting. But the exciting thing about Boston is you alluded to a little bit earlier, we have this kind of crazy Spencer Stuart Chase for the World Marathon majors. And we created this thing at the New York City Marathon probably in 2015, where we thought we would just get a few bids and we wound up having 40 people sign up from 22 offices in 15 countries. It was a lot of fun and 40% of the team was first time marathoners. And the beauty about it, and you'll appreciate this as a CEO, is it was across all cohorts, it was partners, it was associates, analysts, EA's, corporate marketing, legal, finance, and everyone was an equal. And everyone that day kind of became part of something bigger. And it was amazing. And so, we want to continue doing that in Boston. So, we're probably going to have 50 people run that. And the initial view is that about 30% of those are going to be first timers again. So, it's a lot of fun and I'll probably be hitting you up for money at some point. 

Willy Walker: It sounds great. Hit me up for a run in Central Park as well when I'm back in New York. Tom, thank you. Thank you so much. 

Tom Daniels: But I can’t do a 2:36 marathon.

Willy Walker: You know, that's ancient history these days. Great to see you. 
Thank you for all your insights and thanks for all your partnership with W&D and thank you to everyone for joining us today. We'll be back next week. Have a great one. 

Tom Daniels: Enjoyed it. Thanks Willy.

Willy Walker: See yah.

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