Hindsight is easier than foresight: Egon Zehnder’s strategic review freed from dust 20 years later
This short essay is based on an Harvard Business School article published 2004 “Strategic Review at Egon Zehnder International (A)” by Morell & Nanda.
I . Identify EM’s mission strategy
Egon Zehnder’s strategy resonates mainly between two poles: “Clients first” and the “One firm partnership concept”. Like the earthly poles, there lies a field in-between and both poles might over the years also shift (if not switch one day). The internal focus clearly impacts the way Egon Zehnder is perceived (from different stakeholders in different ways of course) and the people who now became partner (through a strict selection process) talk to the clients in a way that clients feel “really being first”. Looking at the current partners of Egon Zehnder they all have a solid background and worked for top notch fortune 500 companies, so it seems to be fair to assume that they speak the language of the clients and might often know their customers from previous jobs or business schools they attended.
Egon Zehnder impacts the international head-hunting market by sticking to the “rules” that were laid out in the 1950s and seem to have become so deeply included in the company’s fabric/culture that one is reminded of the 10 commandments.
As stipulated in the case some of their (that time) top managers were even fearful to kick off a strategic review simply because the “seven values” or “Three core pillars” felt sacrosanct. The somewhat antiquated approach is also reflected in the in the “practice group fee breakdown” which shows that some sectors are only poorly represented (take life science 8% or energy with only 9% as an example).
Egon Zehnder’s vision is clearly customer centered and with its fixed fee policy easy to understand and seems to be appreciated by clients. The firms sees itself at the top: looking to improve the performance of its clients by finding the best leaders for them(EGON ZEHNDER REPORTS CONTINUOUS GROWTH FOR 2019 - Egon Zehnder, n.d.).
II. What are EZ’s competitive advantages
To come back to the earlier “pole allegory”: At EZI in the late 1990s approx. 20% of its consultants were McKinsey alumni, which guarantees a certain analytical approach to fixing clients search demands while at the same time only the name “McKinsey” might incite a presumption of quality. The rigorous selection process (which is “accidently” not a secret...) helps to portray Egon Zehnder as a place where people (partners, researchers) understand the clients and speak their language.
The fact that partners are paid equally and not based on their (short term) success only, might also help the partners to feel less stressed and might give them room to go for the best candidate. As always two partners work on one case, so clients can rest assure that even through a holiday period or other interruptions the quest for the best potential candidate remains intact and uninterrupted. Beside that partners are expected to basically stay with Egon Zehnder once they have passed the 20+ interviews etc. forever, this results in a very low turnover rate.
This low turnover rate may be seen as strength, for example clients “know” their counterpart maybe for decades, at the same time the partner staying with Egon Zehnder can become “owner” / master of their field, as they neither need to fight for promotion nor worry about their salary that much.
The other side of a low turnover is little motivation to “fight”, lesser fresh blood (i.e. new ideas / approaches). While one may argue that a turnover of 10% is healthy (Why a Low Employee Turnover Rate Isn’t Necessarily a Good Thing | ITA Group, n.d.) the Egon Zehnder turnover rate being lower than 2% indicates some sort of inbreeding that cannot produce the best results in a fast changing business world.
Another point that might not be overlooked is the “Swissness” (suisitude), that helps to evoke feelings at clients that Egon Zehnder is solid, reliable and stable. Egon Zehnder in terms of culture and simply the regional distribution of offices (in the year 2000) seems to be Euro centric. It was at that time underrepresented in the USA and other regions with revenues still mainly flowing in from western Europe (12 years after the iron curtain came down with almost no presence in the eastern or central part of Europe).
Or to frame it in another way: the competitive advantages (swissness, solid, high end) that helped Egon Zehnder to flourish in the first 36 years of its existence needed an upgrade and a future proof guidance stipulated through a mission that encouraged partners while at the same time paving the way to the future.
At this point it might useful to reflect and not to mix up marketing with strategy as Margretta pointed out (Magretta, 2011). It is easy to get a bit lost in the view of “what a firm is good at” vs solid strategy that would shed light on the whole supply chain and not just sees the organization “from the inside”. As we will see in the last paragraph of this small essay a more holistic approach at the value chain might be useful.
III. What is the purpose of revisiting its strategic mission?
Here an interesting paradoxon unfolds in the eyes of the spectator: While even the founder feels the need for change (as mentioned during a partner gathering in 1999), he still makes clear that certain corner stones of the firm may not be touched. His succeeder as chairman Mr. Meiland even was quoted that strategies are not important for companies in their industries.
So, the need for change meets the wish for stability and security. The general purpose of review / re-calibration of the strategy should start with a health check initiated by questions like “Where do we stand versus our competitors, where do we see ourselves in x years, how is our environment changing. The hopefully objective insights of such check should help to craft strategies that secure the company’s success while not overseeing potential risks and chances of new technologies. Such strategies should -in the best cases- initiate a change process that helps to adjust the course of the organization and removes obstacles in the way to reach that future targets.
IV. What actions would you suggest to consolidate EZ’s mission, secure its positioning in the face of its competitors and sustain its international expansion?
Mentioning another paradoxon: The Egon Zehnder partners who attended the Harvard school felt there was something wrong with the organization because the dissatisfaction was too low. So, in essence because there was no (imminent) problem they believed there is actually one. I think of it as an uncomfortable starter: It is naïve to think that crafting a new strategy will change anything, taking the low turnover rate for example. What would be the motivator for a partner to kick off and be part of a change process if everybody is happy and well fed already?
I think Leberecht is not completely wrong when he suggests that seeing the mission less static and more as a process (“Mission Statements Are Pointless, Unless You Try Something New,” n.d.). Or in other words before talking about strategy itself it might be useful to shake up the team and empower future change agents that will be needed to face the digital world (to mention one of the challenges ahead).
Equally important seems to be a look of the value stream of the recruitment process. Functions like sourcing of candidates, screening might be at least moved more to the digital world, while from a 202x perspective one would even refer to what artificial intelligence might do in order streamline the value stream and fasten process and hence increase the profitability of companies like Egon Zehnder (Heilweil, 2019). But would Egon Zehnder really want that? Replace its high caliber partners by some pieces of silicone? Maybe not, but if certain functions would be automated, the partners could maybe focus more on the selection (through interviews), training and networking.