Hager has recently launched their new Board Services division. Why is this business unit particularly interesting? Was it the next logical step from Executive Search?
For many years, I had my own executive search firm that served financial investors. In that capacity I also filled advisory boards and boards of directors. After joining Hager as a Senior Advisor, it was a logical next step to strategically build up their Board Services division. There are many advantages for us. It strengthens our ties to the company, and, in cases of doubt, we can find out about changes earlier, for example if acquisitions are planned, or personnel changes are imminent. And you mustn't forget: Our work is always focused on people and is built on our good contacts. From this point of view, it is a valuable extra service to be able to offer advisory board positions to decision-makers.
Our work is always focused on people and is built on our good contacts. From this point of view, it is a valuable extra service to be able to offer advisory board positions to decision-makers.
There is a lot of competition in this area. What’s your USP here?
It's the same as in other areas of HR consulting: If you want to be really good, you have to specialize, i.e., have a deep understanding of the market and the issues surrounding it. In Hager's case, this has always been IT and tech, and this is echoed by the Board Services division.
You focus primarily on private equity, family offices and investment companies – as well as family businesses. How do individual boards differ?
First of all, let’s put aside boards of directors and supervisory boards for public limited companies – AGs in Germany – because these positions are strongly restricted by stock corporation law and, especially in Germany, they purely have a control function. Coincidentally, this is in sharp contrast to Switzerland, where boards of director are far more active in shaping the company.
Advisory boards set up by private equity investors are de facto an additional management level because the investor may not be allowed to manage and intervene directly themselves due to their position under property law, but also because they provide additional know-how of markets, products, structures, etc. to the board. When it comes to investment, you are dealing with a highly professional team, so you don't have to explain much. On the other hand, the expectations of the advisory board are very high and there is a clear goal: It is about increasing value in a limited time period, usually between four and seven years. The situation is completely different for family businesses, where the strategy is more long-term. Here you need a different type of advisory board.
In what way?
With family businesses, you are often dealing with a founder who has built the company from the ground up, and therefore he may act in a self-confident and sometimes patriarchal way. Thus, many issues that affect his company are emotional. Business decisions are not taken lightly, so you need a great deal of diplomatic skill and tact, as well as good arguments. That's why advisory boards in family businesses have a strong moderating function. In some cases, several families are involved in the companies, and then it becomes highly political. Filling these positions, i.e., finding someone who can provide advice on an equal footing and is accepted by all the company owners is a bit of a feat.
What is the biggest mistake that can happen when filling a position?
That companies put their lawyer or tax advisor in these positions just because they have known them for a long time, and they just agree to everything without adding any real value or contributing new ideas to move the company forward. It becomes difficult when they first and foremost pursue their own economic interests. You need people with in-depth expertise who are familiar with the subject matter, but of course they also cost a bit of money, and family entrepreneurs in particular are sometimes a bit stingy.
Have the requirements changed over the last few years?
Yes, specifically there are two areas of requirements that have changed. The first is personality. Board members must be capable of making unconventional decisions. They must be extremely skilled, able to deal with alphas and - this is important - not take themselves too seriously. On the other hand, it's about technical expertise. For example, if they are planning to sell a company, they should bring in someone who has done a similar corporate transaction before, someone who knows the industry and knows the valuation multiples. Or, if you plan to enter the Asian market for example, it's an advantage to have an advisory board that knows about how that works. If you have financial issues, you might need a former CFO on your advisory board. In other words, these positions must be filled with a perfect fit. With private equity, on the other hand, the pace is different, and you must keep up with the speed of the investor. Remuneration is also often different, as there are usually not huge attendance allowances, but rather shares in the company. You then profit accordingly in the event of an exit.
Is money an important factor for an advisory board position at all? Sometimes you see former board members of large corporations joining the advisory boards of start-ups or scale-ups... Compensation is probably not the decisive factor, is it?
That's an interesting point. In my opinion, it's about other things. Many of these former board members have manoeuvred large tankers – companies – for years. This comes with an incredible amount of political coordination and corresponding friction losses. That's why it's extremely attractive to them to invest the knowledge they’ve gained in a small speedboat that's agile and nimble, where they can make decisions boldly and also revise them quickly if necessary. In other words, doing everything that is not possible in a large corporation is a lot of fun.
In recent years, quotas have been adopted to get more women onto supervisory boards. What do you think of that?
Fortunately, I don't have a political mandate (laughs), so I can speak freely. Of course, I'm in favor of having more women everywhere, and the same goes for other types of diversity, such as culture or skin color, because it makes things more colorful, particularly in the type and form of decisions, approaches, strategies and ultimately their implementation. That’s what moves companies and the economy forward. Especially when it comes to financial investors, this is a huge issue. The pressure from their investors, in turn, has increased accordingly. The difficult thing is finding these women. Our work builds on decades of employment history when not enough women were considered for supervisory board mandates or other such functions, and therefore do not have the right experience. Ultimately, it should still be the appropriate qualifications that speak for the person, rather than skin color or gender. It must not become a dogma, or it will lead in the complete wrong direction and have a counterproductive effect.
This is an argument that we hear time and again, but what other solutions are there?
I know that people like to interpret this as an excuse. Personally, I would really like to place a lot more women, because I prefer women ten times more than men. Women are more focused on the cause than their ego. We still have a long way to go though, it's a process. And in my opinion, that can't be fixed by law.
Developments take time, and mindset cannot be changed with a crowbar. I would like to see more openness and entrepreneurial mindsets.
It’s difficult to look at this issue in isolation; you also have to look at the culture as a whole. In your opinion, has anything changed in recent years?
When I look back on my career, I think a lot has changed. When I started out in a corporate structure, management was still done in the manner of the lord of the manor. And we've also caught up a lot in terms of internationality. That has to be acknowledged, even if it's often viewed very critically. But developments take time, and mindset cannot be changed with a crowbar. I would like to see more openness and entrepreneurial mindsets. In Germany, you often can't please anyone: If you're successful, people like to say: “What a show-off.” If you fail, people complain: "Of course he can't do anything, we've always known that.” I wish we could make it easier for founders and show them more appreciation and not discuss good ideas to death in this country.
What are the most sought-after fields or areas of expertise at the moment?
The goals of investors have completely shifted from focusing on the classic old economy, mechanical and plant engineering, to software, technology, and service. Naturally, this has had an impact on advisory boards. They need completely different profiles. They are also becoming younger and younger. In the past, the positions were often filled by former entrepreneurs who were retiring. Today, they are increasingly CEOs of private equity-led companies who have made so much money after one or two exits that they are happy to join advisory boards. It's often more about the fun factor and their motivation to have a positive impact. Many years ago, a position on a supervisory board was a waiting room at the end of your career to slowly wean yourself off the loss of prestige. Today, many CEOs are actively leaving their permanent positions at the peak of their careers. This way, they still have the ideas, strength and energy to advise investors successfully and extremely flexibly, and be available as an advisory board.
This article is part of a content cooperation between FemaleOneZero (F10) and HAGER Executive Consulting. The company, which specializes in executive search, has repeatedly been named one of the best personnel consultancies in Germany by the magazines WirtschaftsWoche and Focus. HAGER Executive Consulting employs around 110 people and, in addition to its extensive know-how in the field of digitalization, is also considered a specialist in issues relating to diversity and innovation.
