Thought Leadership

Based on an interview with the Egon Zehnder consultants Daniel Meiland and Justus O’Brien, Suzanne C. Lowe’s case study Egon Zehnder - Aligning Marketing Strategies with Culture points out how the firm integrates its marketing strategy with its collaboration culture. In the following you will find an abstract of the case study, the full version can be downloaded as PDFfile.

The “Collaboration” Culture

This case study makes clear how deeply EZI integrates its marketing strategy with its collaboration culture -- and vice versa. One could even argue they are one and the same.

“Collaboration” is increasingly important in the business world. As we’ve entered our remorse phase after witnessing professional ethics breaches from all too many supposedly world-class companies, we’ve been subjected to an increasing din: Proclamations about new ethics guidelines. Fanfares about professional standards. Crescendos about trust. In the midst of all this noise, more and more businesses are touting their effective team work and their seamless collaboration. Yet, in many cases these words simply add to the cacophony. Most likely, these words are part of the promotional programs that many firms employ to reassure clients, or persuade them to return to the fold.

In fact, most of us in the professional service world have only a dim notion of what true collaboration is. We say we “get it.” But beneath our all-too-quick nods of comprehension, most of us still expect professionals to behave like they did before. Egon Zehnder International, with its heartfelt belief in the selfless goodness of people, and its insistence on conducting itself accordingly, “gets” genuine collaboration. Collaboration is reflected in the way partners and associates behave. It is reflected in the way the firm is organized, in the way work flows, and in the way people are compensated. And it is reflected in the firm’s unique approach to its marketplace.

The road not taken

From the earliest days since it was founded in Zurich, Switzerland in 1964 by Egon P. S. Zehnder, the firm began building the fundamentals of today’s true collaboration: equality, collegiality, non-competitive internal sharing and non-hierarchical organizational structures. In many ways, Zehnder’s initial philosophy set the firm on a road not taken by its executive search consulting brethren. This philosophy, born forty years ago but continually renewed, serves as the firm’s de facto marketing strategy, and has enabled EZI’s achievement of its leadership position in the global marketplace. To understand how the promulgation of EZI’s culture so deeply embodies its go-to- market approaches, let’s look at five behaviors and practices that bring Zehnder’s viewpoints to life:

1. Operating with a single, firm-wide, profit center, rather than a matrix of separate profit and loss centers.
By operating with a single profit center, EZI reduces the potentially negative effect of revenue and profit competition between practices or offices.

2. Selecting and retaining employees whose interests dovetail with those of the firm.

Among its practices, the firm:

• Hires only those consultants who have significant business or consulting careers prior to joining the firm. This ensures a level of professional experience and maturity that true collaboration requires.
• Hires only those with postgraduate degrees. EZI believes that intellectual collaboration, between its own consultants and with its clients, is of paramount importance.
• Seeks multilingual or multicultural candidates who are comfortable working collegially across a host of invisible boundaries, with businesses that operate in the global economy.
• Screens its candidates for an indication of certain behaviors, notably “evidence of a collaborative attitude.” “We use a systematic interviewing approach to get beyond a candidate’s ‘resume-speak,’” said O’Brien.
• Pays EZI partners less in tough times in order to keep the firm’s prepartners feeling secure and content. “We have a strategy to grow organically,” declared O’Brien. “We have historically tended NOT to lay people off; we don’t believe it makes strategic sense.”

3. Training to foster deep collaboration.
EZI pegs its current investment in training as the highest among any of the global executive search firms. Presently pegged at more than five million US dollars per year, EZI’s training program is geared to inculcate new associates into its collaborative culture.

4. Enacting open-book compensation.
Every EZI partner knows every other EZI partner’s compensation. For that matter, anyone who cares to ask will be told about EZI’s open approach to compensation.

5. Evaluating potential partners for their collaboration effectiveness.
Everyone who gets hired to be an EZI consultant is assumed to be partner material. These “pre-partners,” in order to have been hired by Egon Zehnder International in the first place, have already been pre-screened as excellent collaborators. Nevertheless, EZI’s evaluation process further underscores the importance of collaboration. Each pre-partner is evaluated (annually and at the time they are considered for election to partner) on three fundamental criteria: execution excellence, generating clients, and collaboration with EZI peers and clients. After five years of tenure, potential partners may be considered for partnership.

6. Supporting collaborative effectiveness.
A review process works well as long as everyone understands clearly what to evaluate. EZI has established multiple mechanisms to support collaboration effectiveness:

• A collaboration timetable.
• Technology that supports collaboration. EZI uses a proprietary relational database (called ADAPT) that was developed in 1998. Every contact and every search is on this database.
• Executive search “back-ups”. EZI assigns two people to every search – a lead and a back-up consultant. This mechanism is derived from the firm’s collaboration philosophy that a team is more effective than a single person.
• Research collaboration. Each office has a research capability and each practice has a practice specialist (researchers who have deep knowledge of a particular sector)
• Bonding opportunities. EZI fosters layers of opportunities for its consultants to develop collaborative bonds. These meetings help EZI’s consultants to build familiarity and trust together.

“. . . and that has made all the difference”

Many professional service firm leaders could assume that the most effective way to align their marketing strategies with their culture would be to use external awareness building vehicles. “We’ll talk about our unique culture on our web site.” Let’s develop relationships with selected media that will reflect and further support our cultural theme.” They wouldn't be all wrong in making this decision; these are effective steps to take. After all, there’s nothing like telling the world something to make you first “get it right” internally. Arguably, though, promotion is the “outer ring” of other marketing strategies that must precede it. Egon Zehnder, already thinking globally about EZI’s marketplace from the day he formed the firm in 1964, made three critical and deeply strategic decisions that serve as the ultimate alignment force behind EZI’s culture. The net effect was to further sharpen the firm’s cultural difference from its executive search rivals, and to more obviously attract the kind of talent that would embody the collaboration model that Zehnder had envisioned.

• Fixed-fee pricing.
  The vast majority of executive search firms invoice their clients a percentage of the successfully placed candidate’s annual salary. Zehnder rejected the percentage approach. No commissions. No bonuses. No matter at what the level of the candidate’s salary was pegged. This practice was immediately more acceptable to EZI’s European clients, skeptical as they were about the professionalism of search consultants who commission-priced their services. Their embrace of EZI’s fixed-fee pricing helped it build a significant European-Asian base of business that remains a strong point for the firm.
  
  
• No individual “selling” bonuses.
  Instead, every professional would be paid a pro-rated slice of the firm’s total profit. At first, this principle was followed for reasons of professionalism. Zehnder didn’t want his consultants to be motivated by the wrong incentive; he felt business developers too often “sinned” in their pursuit of a sale. The only emphasis, he felt, should be on organizing to solve the client’s problem. “Most firms pay a bonus of 30 to 40 percent of the fee for a project that individuals generate,” confirmed Meiland. “But we don’t want people pursuing the wrong goals.” As time passed, it became clear that this model was also reinforcement for the firm’s collaboration culture. A culture of individual rainmakers, EZI believes, builds internal competitiveness – and eventually a kind of psychological fire wall - - between peers. This is a detriment to a firm’s overall business health, and dampens the deep trust and collegiality that EZI seeks from its professionals. When the technique of awarding individual selling bonuses is not an option for anyone, however, people tend to share information more willingly. They can work together in a more team-oriented way. The potential for geographic or practice area business development vagaries is negated.
  
  
• No hiring from competitors.
  EZI finds that its global executive search competitors employ this “individual selling bonus” approach. Once search professionals have been exposed to this method, however, EZI believes, they are unlikely to be truly comfortable in EZI’s uniquely egalitarian culture. The firm is so certain of this notion that it will not hire any consultant from other executive search firms who has participated in a commission- or percentage-based compensation model of selling. There are still more examples. Zehnder, even though he is the firm’s founder, made a deliberate choice from the beginning to pay some of his managers more money than he paid himself. Moreover, EZI has chosen to remain a privately held firm; it has also avoided a practice that until recently was pervasive throughout the executive search sector: giddy-up, instant-growth acquisitions.

Collaboration: Trouble free?

One wonders, “How can these guys be so harmonious, so generous? Doesn’t human nature drive us all to try to advance over others?” Indeed, EZI leaders acknowledge, a commitment to collaboration requires a strong will – and even a big wallet. There were times in the past when EZI partners had to finance the salaries of their global peers whose regional or country-specific economies had stumbled, making their ability to add to the firm’s profits impossible. “Yes, we have had to remind ourselves about our values,” acknowledged Meiland.

The results

For the executive search sector, the last decade of the twentieth century saw unprecedented revenue gains. EZI, like others, grew steadily. It has been consistently ranked among the largest global retained executive search firms in the world.* But the beginning of the new millennium did not smile with favor upon the executive search arena, especially in the United States. After ten consecutive years of uninterrupted growth, the retained executive search industry in the U.S. posted one of its worst years ever as combined revenues for the 25 largest U.S. firms declined 30 percent or more than half a billion dollars ($523.5 million) in 2001. Egon Zehnder International was among those firms experiencing a revenue downturn. But, in a surprise to everyone but EZI professionals, its 2001 annual worldwide revenues were down only seven percent. This kind of financial performance demonstrates EZI’s global strength and its ability to maintain a balanced revenue stream even in the midst of dizzying sector growth rates or precipitous sector downturns.

EZI’s worldwide stature is the envy of many professional service firms, regardless of field. Its consultants are published in leading publications like the Harvard Business Review. Industry observers talk about EZI’s competitive resilience with admiration.* Its research is respected worldwide. Its consultants are sought out by leading academics and governments for their insights and new methodologies. And its global clients return again and again.