HBR Case Study BY BRONWYN FRYER COMMENTARY BY VANESSA ROBINSON, RICHARD HERMON-TAYLOR, AND CHARU G. RAHEJA Time for an End Run? How far can the HR director go to influence a high-stakes appointment? ARLYN JAMES AND Geoff Simon "Thank goodness the press hounds watched grimly as two security CEO are occupied elsewhere," said Geoff. guards frog-marched Peter Cruik- "At least he can leave quietly." shank, CEO of Scotia Assurance, Arlyn glanced at the COO but through the glass doors of the head- kept mum. She had been suspicious quarters' palatial lobby. It was a bit- of Cruikshank for quite some time ter Sunday morning - thanks not and was privately relieved to see only to the cold November rain fall- the back of him. Her concern now ing but also to the fact that Cruik- was that other employees - possibly shank was about to be investigated even the man standing next to her - for securities fraud. might well have been involved in It was nearing the end of a very the scandal. bad year at the 150-year-old firm, "I'm glad we put that succession- where Arlyn had served for a decade planning system in place before all as group human resources director. The Manchester, UK-based hell broke loose," she offered. "But I'm disappointed that this global insurance company sold life, pension, and general insur- has happened so soon. I'm not sure we have anyone in the ance, as well as reinsurance. It had already suffered financial pipeline who can fill the CEO role." setbacks as a result of exposure in the U.S. subprime-housing "True," Geoff agreed, "but in any case you certainly deserve market when Scotia's internal auditors began looking into the kudos, Arlyn. You've handled this situation very well, and you company's finances. They found that roughly f500 million in now have enormous credibility." liabilities had been either recorded incorrectly or not properly She pondered the comment as she watched Cruikshank released in earlier reporting periods. The company would have bend into a black town car. As the car pulled away, Arlyn to restate results for the current fiscal year, as well as those for wondered how she might use her credibility to influence the Daniel Vasconcellos 2006, 2007, and 2008. Cruikshank and his chosen successor, the CFO, had been forced to resign, and the Financial Services HBR's cases, which are fictional, present common managerial Authority had launched an investigation. dilemmas and offer concrete solutions from experts. hbr.org | November 2009 | Harvard Business Review 33senior team in making the changes the rm so desperately needed. Wanted: A New Kind of Leader Arlyn sat at her desk, waiting nervously for David Millet, the chairman of the board. As a respected CEO of a suc cessful retail clothing chain, David had served on Scotia's board as a highly ob? jective outsider. Now as chairman, he was deeply invested in restoring Scotia's reputation. Banking on her standing as Scotia's ethical voice, Arlyn had decided that David would be her rst stop on the sense,\" she said. \"Someone who can do the necessary housecleaning to make sure Scotia fully regains its ethical and cultural health.A person with fresh and unbiased ideas.\" David listened quietly, his ngers touching his chin. \"That sounds won- derful, Arlyn, but it's a very tall order.\" He smiled. "Perhaps we also should add 'Must be a Hogwartsecertied wizard' to the job description.\" Arlyn pressed her lips together and then forged ahead. \"I think we should fr} cus on recruiting an experienced change Arlyn regretted approaching David. They didn't see eye to eye, and she worried he would marginalize her. drive for change. She kept going over her lines in her head, working out what she would say and how she would phrase it. She heard footsteps approaching in the hall. It was showtime. \"Thanks so much for meetingwith me,\" said Arlyn as she offered David a seat, a cup of tea, and a chocolate biscuit. Appreciating that he was pressed for time, she explained that the purpose of the meeting was to talk about the skills and characteristics Scotia would need in a new CEO. She also wanted to discuss the impact of the scandal on the organization's culture, circum stances, and goals. \"David," she contine ued,\"| am sure you can see that we're at a critical turning point. We don't know how entrenched the unethical prace tices have become. This appointment should be a real statement of a new be ginning to both internal and external stakeholders.\" David nodded. "I could not agree more.\" Arlyn relaxed a little. "I'm imagine ing a person of emotional intelligence, honesty, and humility, but of course someone with exceptional business agent. Scotia might greatly benet from an outsider who can see the company objectively,\" she ventured. \"Someone who can take the company in a bold, new direction , make it culturally and nancially t for future generations.\" \"Of course we want someone with many talents,\" he said. "But I'm not certain we really want to rock the boat more than it's already been, do we?After all, we responded quickly to the situa- tion, and the worst is now behind us. We will be delivering squeakyeclean nane cials when we restate earnings. Then we should get back to business. The under- lying fundamentals have not changed at all. What we need is a topnotch execue tive with sound industry experience and a head for the numbers.\" "Allow me to show you something,\" Arlyn said, trying a different tack. She clicked open her laptop and tapped on the keyboard, turning so that David could see the screen. \"These are the re sults of the anonymous online employee survey we conducted right after the re ing. Take a look at these pie charts. \" The charts showed that 52% of em- ployees disagreed or strongly disagreed with the statement \"The Scotia brand remains strong,\" and 74% rated morale in their departments as "low\" or \"very low.\" \"It gets worse,\" Arlyn added, point ing to a tab on the screen."Read some of the comments.\" David scrolled down. \"I used to be proud to be part of this institution,\" one person had noted, "but after all the bad headlines I'm reluctant to tell people who I work for.\" Someone else wrote, "We need a CEO who really cares about this place.\" Still another person oered a simple, "I'm thoroughly disgruntled.\" \"Very few people are 'gruntled,' it seems,\"Arlyn said lightly. \"I'm not surprised by any of this,\" said David, standing up and taking a few steps around the room. \"We've been hearing as much from anyone and everyone. Still, it's useful to have some numbers to show the recruiting committee." David didn't seem to be getting the point. "To me,\" Arlyn insisted, "the sur vey absolutely underscores our need for a new kind of leader.\" After a long silence, David sighed. "I'm not convinced,\" he said. "There's no question that we need someone of very strong character and ethics. At the same time, I think we need a CEO who we know can put a steady hand on the tiller. That would be more reassuring to employees and customers than a CEO who turns everything upside down.\" Arlyn said nothing, straining to keep from betraying the disappointment she felt. Even so, David must have in tuited her thoughts. \"I'll tell you what,\" he conceded. "Work with me on the nominations and appointments com mittee to help dene the type of person we need, and we'll try to nd the best match we can.\" He paused. "But you must understand that at the end of the day it will be my and the committee's decision.\" As David left her ofce, Arlyn began to regret her strategy of approaching him rst. They didn't see eye to eye, and she now worried that he would try to marginalize her. 34 Harvard Business Heyiew | November 2009 l hororg The Candidate \"I refuse most calls from recruiters, but I must say, when I received your call, I was intrigued," said Martha Leigh, powerful looking in her sharp navy suit. \"Since I was coming over the pond anyway, I thought I'd take advantage of the upper? tunity to meet with you.\" Arlyn quietly took stock, already impressed by Martha's demeanor. The Britishborn CEO of a large US. life in surance rm had a hearty, familiar hand shake and a brisk, takeenoeprisoners affect. Investors and analysts had been pleased with her performance after she took the helm at her company follow ing the abrupt resignation of her philan dering boss. Earnings had doubled alter her smart acquisition of a competing insurer. But the thought of returning to her native country had niggled at her for a few years, Martha explained. The conversation revealed that Mar tha, a mother of three, had a refreshing perspective about work/life balance.\"lt's not a nicetohave, it's a business essen tial,\" she told Arlyn. "You can't get the best out of people if you treat them like slaves and bury them in a hierarchical bureaucracy. I've found that if you give people latitude and good, challenging work, they reward you with productivity. And when employees are happy, custom ers are happy.\" Score one for you, Arlyn thought. It was time to probe deeper. "0f course,you know the story of the recent crisis with our former CEO," she began. "And I know that you had to deal with an analogous situation yourself. Tell me, if you were offered the post here, what would you do to right the ship?\" hbrorg | November 2009 l Harvard Busmess Revrew 35 Martha embarked on a recitation of the immediate actions she would take. "The most important thing is to air all the dirty laundry right away,\" she began. \"I would make sure everything, but ev- erything, is out in the open.\" She stated rmly that management should be doing all that it could to aid the ongoing inves- tigation. Meanwhile, she would actively communicate with employees. Walk Perhaps she's been in America too long. Just my instinct.\" Arlyn could feel her color rise, but she didn't want to get into an argument. There was something in his attitude that hadn't been apparent in their con versations about the other candidates, all ofwhom were male and more than a little straightforward in their opinions about what Scotia should do to right \"You know all the board members. Could you have a confidential chat with one of them?\" the halls. Talk to people. Assure them that matters were improving but also let them know that she expected their full cooperation. As Arlyn learned more about Mare tha's background and philosophy of management, she became more and more convinced that the woman before her was a strong candidate who could shake people out of their funk and set a positive new course. The conversation ended on an upbeat note, after which Arlyn called David. \"I think we have a good one, here,\" she said. \"I'll be interested to see what you think of her.\" She's Not His Type A few days later, David was back in Arlyn's oice. His expression was diicult to read. "50, what did you think of Mare tha Leigh?\" she asked him in the most neutral tone she could muster. "Well,she's obviously a very intelligent woman,\" he replied. "Fine credentials. Appears to be a good communicator. It helps that she has a degree in law. But I think we should keep looking.\" Arlyn steeled herself. "Somehow she seems very , I don't know. I can't put my nger on it.Awfully abrupt. Lacking a certain grace. More ag- gressive than one would expect, really. itself. They were looking for a CEO, not a charmeschool teacher. Perhaps he was simply too much of a traditionalist. "As you know, the board has already scratched several candidates,\" Arlyn coun tered evenly, reminding him that they had both agreed that none of the others were on the mark. Either they lacked the in dustry or management experience Scotia was looking for or their references were spotty. "In my opinion, Martha Leigh is the strongest candidate we've seen.\" David waved his hand almost dis missively, Arlyn thought. \"Yes, yes, I appreciate your input,\" he replied, \"but I'm not sure this woman is the kind of person we really need. Still, I promise to think it over.\" Arlyn and David agreed to meet again soon. When she retumed to her ofce, she shut the door and growled loudly. Preocc up ied That night, Arlyn's husband insisted that she take a break. He had kidnapped her for dinner and a concert of Brahms de spite her protests that she was too tired to go out. As a French professor, he didn't understand his wife's corporate conundrums. All he knew was that the past weeks had taken a toll on her. Over dinner at their favorite Chinese restaurant, Arlyn had vented her frustra tions. \"I don't understand why David is so...lukewarm, to say the least,\" she told him. \"Martha Leigh is terribly imprese sive. She is simply an excellent candidate. She's just the kind of change agent Sco tia needs.\" \"I don't envy you,\" her husband had replied. He waited a beat. Arlyn could practically hear the wheels turning in his head. \"I wonder," he said. \"You know all the board members. Could you have a condential chat with one of them over lunch, just to pick another brain?\" Later on, Arlyn sat, eyes closed, lost in the rst movement of the Brahms second piano concerto. Aside from her own bed, Manchester's beautie ful Bridgewater Hall was her favorite place to be. Just as the music built to a climax, her husband coughed, and she opened her eyes, irritated. He glanced at her apologetically, but her reverie was shattered. Unable to refocus on the music, Are lyn found herself obsessing over how to phrase her arguments to her board member friend and how to ask for his honest advice. She knew that such a move was not without risk. What if he'd rather not get in the middle of it? She knew that she had a lot of credibility with the board, but what if she pushed things too far? And even if she won and Scotia hired Martha Leigh, could Arlyn be sure that the board and her new CEO would re ally embrace a change agenda? She kept envisioning David shaking his head and saying, condescendingly, "I hear you, Are lyn, but I don't think radical change is what we need.\" Suddenly the music was over, and people were on their feet, applauding. Lost in her thoughts, Arlyn had com pletely missed the nale. How far can Arlyn go in pushing her agenda Ior change? Three commentators oIler expert advice. Bronwyn Fryer is a contributing editor at HER. 3B Harvard Business Review l Novemberzooe l hbrorg