Tag Archives: Segmentation

The relentless executive churn

Yes, I have lost count of the numbers of executive CVs I have read and the interviews I have conducted as a result but it has given me a very broad insight into some of the issues behind the extremely high executive churn rate that continues to accelerate.   Reading CV after CV, filled with fine qualifications, great training and solid achievements you start to get a feeling that something is very wrong if all these people have been ‘let go’.  Sure, some industries come under attack from the onslaught of new technologies, recessions hit some companies selling discretionary items very hard and, OK, some companies are just, well, average or below.  And there are going to be a few genuine personal failures. But none of this really explains the sheer volume of executives ‘between positions’.  Why is this?

Of course, a percentage of the churn is due to those executives moving on proactively to the next step in their career.  I think that these are a minority, however.  Some years back when you advertised a senior role the vast majority of those who applied were very much still in post although available for the right move.  Gradually things have changed, though and over the last few years the vast majority of the increasing number of applicants for an advertised position is now ‘immediately available’.  This changing dynamic, which became established as a trend long before 2008, is a powerful indicator of the forces affecting executive careers. Why is this happening?  Is this trend going to continue come the much awaited upturn?

The top business schools and the major corporations certainly turn out highly skilled managers.  Numerically though, these executives are in a minority when viewed against the numbers on the job market each year (and this is what you would expect if these good performers at the second and third standard deviation of the average).  However, even these privileged ones can often find life difficult when trying to move into the next role for a number of simple reasons.

Although the initial training may have been broad, the actual roles they have held have often been deep, but narrow, functionally. Outside of the major corporations such narrow functional specialism at a senior level is a disadvantage.  As the age of the conglomerate has waned, the largest corporations have produced relatively fewer general managers with solid P & L experience.  So if you happen to be looking for a general manager, MD or CEO, there are going to be fewer candidates from the major corporations and, of those available, are they going to want, or be able to step down into a top role in a smaller company?  This latter point is critical, as my experience is that, although medium sized businesses cry out for professionally trained executives, few from major companies can actually make a successful transition into a smaller company.

So, what of the candidates from the medium sized firms?  I’d like to say that our smaller universities and business schools can turn out world-class business men and women.  They do, but experience shows that these people are the exceptions.  Unfortunately, business studies and marketing now number amongst the soft A level subjects and don’t seem to attract their rightful share of the brightest students, something that feeds into frequently inadequate university courses. Sad to report but I have interviewed marketing graduates who claim never to have been taught anything of segmentation.  And for many of our medium sized companies comprehensive executive training is something that they have always struggled to achieve (simple economics and the fear of losing the beneficiaries). Please don’t misunderstand my view; they are many excellent men and women who do well in our SME companies but when times get tough many find that they don’t have the breadth of training to guide them through.

The recruitment process should be a whole lot more successful in the 21st century.  Given what has been learned and taught about the management process over the last 100 years, we should be looking at a solid profession, if not a science.  But the reality shows that the process of selection, appointment and induction (now called ‘onboarding’ for those that didn’t know) seems as imprecise as ever.   The courtship ritual between candidate and prospective employer is just that, a ritual that owes as much to its mating counterpart as to science.  The employer writes the job description in glowing terms with emphasis on the wide scope and significant responsibilities the role entails (often without regard to the reality of the role or their own tendency to control freakery).   The candidate writes his finely polished CV full of all the sought after competencies and action verbs and tweaks the personal statement to mirror the demands of the role in question, confident that once they get the job all will be possible.  Certainly we now have the psychometrics to guide us, the intray exercises to study and the consultants to sift and advise but…it’s still a human making the decision.  The square pegs get the round holes (and vice versa) and the churn increases.

Moving firms and industries is difficult and research has found that success in one organisation is no guarantee that continuing success is guaranteed in the next.  Leaving aside the challenges of moving industries, or even just companies, taking up a new post is fraught with difficulties.  The old known and comfortable culture is left behind along with the reliable and competent team you steadily built.  But more worryingly, those carefully nurtured networks you could rely upon are gone, as are the known bad guys clearly identified through many a tussle for resources and patronage.  Instead, valuable time is wasted whilst you scope out the strengths and weaknesses of your new team and learn (often the hard way) who can be relied upon amongst your new colleagues for honest or objective opinion and support.

One of the saddest aspects of this churn is that executives aged 50 and over find it extremely difficult to gain a new role at their old level (if at all).  Despite excellent qualifications, extensive training and relevant experience, companies seem to turn their back on these executive elders.  Why?  The accepted wisdom is that older people are less committed, have less energy, take more time off sick, find it harder to change and are not team players.  The truth?  A substantial research project carried out in theUS some years back (and published in the HBR) looked at this issue in depth and found the received wisdom diametrically opposed to the reality.  The real reason that restricted older people from getting back into employment was simply that younger managers and executives just hated the idea of employing someone who knew more than them.  A consequence is that youth and inexperience is favoured over experience.

The good news is that many executives go on to build their own businesses, frequently as consultants, non-executive directors and business coaches, passing on their valuable experience and knowledge to others.  But it’s still a waste.

Corporate life is more demanding than ever, but I recommend that the generation moving forward in the corporate ranks take time out to prepare for the day when the churn hits.  Our Chancellor is constantly being urged for a plan ‘B’ to meet changing circumstances; my advice to younger executives is to do likewise and prepare for self-sufficiency.

Marketing’s most powerful tool?

It never ceases to amaze me how many marketing people are hazy on the benefits and techniques of segmentation.  I have interviewed a very large number of marketing graduates over the years including one young hopeful who claimed it had never even merited a mention during his 3 years of study.  Perhaps this is one of the inevitable results of dumbing-down subjects (certainly marketing and business studies are viewed as ‘soft’ subjects here in theUK).  Sadly, this lack of knowledge is also true of many of the UK MBAs I have encountered.

Image courtesy of ResMarkConsulting.com

So what’s so special about segmentation?  Why is it such a valuable tool in businesses large and small?  Markets come in all sizes from the truly global ones e.g. soft drinks, trainers, smartphones, to the micro ones such as the local health food store, garage repair shop or life-coach.  In the national and global markets product development, brand building and advertising costs are simply huge but you succeed by targeting certain key groups of consumers with common characteristics (e.g. Blackberry targeted corporate users who needed email ease of use on the go).  The canny local businesses use similar scaled down techniques; for example a local garage set up by Mercedes trained mechanics targets owners of Mercedes cars older than 3 years and out of guarantee who are likely to be quality and price conscious.  Some examples of from my own experience:

My first move into industrial marketing was with a global manufacturer of totally non-differentiated mass market products.  We had chosen to reach users solely via the wholesale distribution channel but price competition was severe.  Using the results of a very detailed, multi-level research project I commissioned it was possible to identify precise groupings of purchasers by the national and regional distributors they used.  Armed with this unique information we were able to refine our distribution strategy, targeting only those distributor groups who were not in competition for the end customers we chose to serve.  In this way we were able to maximise price by avoiding direct competition between distributors.

In the specialist engineering group I have just sold we found when we bought the company that in our sector competition fought for a decreasing volume of business for engineered components that had always been produced using the same technique; the result was low or no profitability.  Analysis of our (at the time) very large customer base showed similar low margins on much work (it being fiercely competitive); however there were groups of customers that generated much higher margins for us.  These profitable customer groups shared two characteristics – they were higher up the supply chain (typically tier one or OEM level) and the end product had to have absolute integrity over life.  We researched many global markets for components that we could theoretically produce using our process (which offered certain unique benefits) and that were currently produced using a different technology.  Having identified certain key segments that matched these criteria (and many others), we began the slow process of reaching and influencing the key decision makers in the targets using an entirely new communications approach we developed.  Meanwhile, we made significant investments in new equipment and techniques unique to us.  The business was slow to flow but when it did, the volumes were huge and margins were very high; traditional competition simply couldn’t follow us and we became a very desirable acquisition target.

Whilst all of the above was going on, a colleague and I started a business to provide a coaching and mentoring service to the UK SME business owner segment.  Now, this was a fine example of one of the key criteria for a segment – it has to be cost-effectively reachable.  Problem; small business owners are notoriously difficult to sell to.  Research (free online from the University of Strathclyde) showed that the most trusted advisors to small and medium sized businesses were their accountants – a feasible route to market.  So, we researched, then targeted a national marketing group for accountants and sold them the concept of offering our service via their members.  Result?  We had a route to market.  This was successful and grew to be a national service but the next phase of development I have to admit was pure serendipity; we quickly found that the service was much in demand from the owners of the accounting firms themselves!

So, choose your segments with care, develop an appropriate marketing mix and you should stand a far better chance of success.