For many companies in our portfolio, there comes a point in the US growth journey where a new US-based leader is needed to drive further growth. As the US revenues of these companies grow, companies often invest in a US HQ and want a leader who can engage local teams and clients, as well as reinforce the company culture in a new locale.
Given this is such a critical step for the business, we chat with Brett Pentz, ECI’s North America Growth Specialist, about five key considerations to bear in mind for similar businesses taking on this critical step in US growth:
Promoting from within
Usually, prior to appointing a dedicated US CEO, we see companies look to move people over from the ‘mothership’ to make sure that the company culture is instilled and that there’s consistency between the two locations. That might be, in the example of MiQ, the Co-Founder Gurman Hundal moving over himself for three years to set up operations and develop US leadership, or it might be, as was the case with Moneypenny, having a regular commitment to senior teams going over for extended periods (and US teams coming over to the UK headquarters as well).
The reason for doing this is that it is beneficial to successful integration and bringing two cultures together. So, we often see candidates exist internally and given effective coaching and development. However, often this isn’t possible or may not be a long-term solution, which is when an external search becomes necessary.
Launching a search from the UK versus locally in the US
The first decision is whether you use your UK executive search firm or select one with local credentials for your US office. This choice is a trade-off between the trusted relationship you already have versus the local knowledge and networks you might get with a different firm.
If using a UK search firm, it is important to understand their US coverage, networks, and resources. How will those in-market capabilities be deployed? If limited, what will be their approach to ensure all paths are exhausted to building a strong candidate list? It’s important not to just select a known entity if they don’t have access to the same people.
This may be why you choose a US firm, but you should be confident that as an international client, you will be given the same priority as a local client. Your UK leadership team may need to meet them and build a face-to-face relationship, especially as you look to scale US operations.
One thing not to forget is that recruitment contract terms may differ between UK and US firms. It is likely that the US firm may charge more, and payment terms may be based on the passage of time (e.g., billed monthly) rather than deliverables-based (e.g., delivery of long list, final appointment, etc.).
What to look for in a US leader of a UK-headquartered growth business
To a significant extent, what you look for in a US leader will be similar to what you look for in a UK leader. We recently worked on a hiring process that focussed on subsector experience, someone who was commercially astute, a strong communicator, and possessed the strong personality of a leader to inspire confidence and influence others. These qualities are clearly not unique to a US role.
For this role, however, there is a real emphasis on someone who is not only aligned with your company culture but also understands how to reinforce that culture to US norms. It also needs to be someone who can work well within an executive team despite geographical and time differences. Trust is always important, but there needs to be stronger trust than usual as regular monitoring is difficult. It also means they need to be an excellent communicator and willing to travel between the US and UK frequently to build that trust.
Finally, it also helps to find candidates excited for a cross-border role. The candidate needs to like international travel, and they need a good understanding and appreciation for the differences that exist between the US and UK markets – for their employees and for their clients.
Managing a hiring process from overseas
Cross-border recruitment is a good first test for how the UK head office will engage a potential US leader. It is important to define the role of the UK CEO in the hiring process from the outset, who else should be incorporated in the process, and why. The hardest thing can be maintaining momentum during the search, so the frequency of check-ins should be defined, as well as whether to change course if the current approach is not delivering the right candidates.
There are some other tactical recommendations. First, invest in flying the candidate shortlist to the UK headquarters to better immerse them in the corporate culture. Second, do not be afraid to cross-reference candidates; for example, if you are using a multi-national search firm, leverage a local recruiter to gather any local intelligence. Finally, do not be afraid of pushing back on the search firm if the initial cohort of candidates is not making the grade. Difficult conversations may sometimes be needed to better align the needs of the role.
It is also important to define compensation expectations in your local US market early to avoid any surprises and ensure alignment between management and the search firm. There can be large salary differences between the UK and the US, both in quantum and in structure. For example, annual cash compensation expectations may be much higher in the US, but equity expectations may not be as high.
Selling in a UK-based, PE-backed business
Don’t neglect that being PE-backed is valued by candidates that get energised by growth potential and their stake in the future of a company. Many emerging leaders are excited by the possibilities of a role where they are responsible for a leadership role within a fast-growing mid-sized business. Even more exciting is the opportunity to take on accountability for a whole geography with the autonomy to define what it takes to be successful.
Richard Culberson, who was recently appointed CEO of Moneypenny North America comments, “For me, I bought into the mission of growth that comes with being PE-backed. I also recognised that the UK PE model is particularly focused on partnership, which meant I could understand both how I would be able to have an autonomous role in helping to deliver Moneypenny’s proposition in the US, and also have the support I need from ECI, their investor.”
This alignment on the critical importance of growth is seen as a key selling point for candidates on a private equity-backed business. This drives through to leaders’ expectations on compensation, where there is more willingness to bet on themselves in terms of equity-based compensation.
No two recruitment processes will ever truly be the same, but it is important for businesses to be purposeful in their search for a US leader. But with the right approach and patience, your US operations will be set up well in its growth. If you would like to find out more about how we support businesses to expand into the US, please do get in touch.