“So, how should they go about recruiting a new CEO?”
There has been so much discussion recently about the performance and remuneration of CEO’s that I thought that it would be interesting to contemplate how Aviva, now in need of a new boss following the ignominy of a company general meeting, of all things, telling the last one that he didn’t deserve a pay rise. The content message was bad enough, no more money, but the way it was done sent him a pretty negative ego message too. I’m not surprised he left, ego bruised, but £1.75M richer – who wouldn’t?
Well, my simple take on Aviva is it is just another financial institution that believed the hype that “bigger was better” when Norwich Union merged with CGU in 2000; CGU itself a result of the union of Commercial Union and General Accident just two years earlier. They were all doing it. Consolidation was in vogue then and various interested parties went along with it without getting an adequate answer to the simple question, why? Why did no one ask why? Simple, because too many people were incentivised to play the lucrative mergers and acquisitions game that a dissenting voice would just not be heard. Small shareholders have, until recently perhaps, had almost no voice at all.
All businesses have a minimum efficient scale size, which is certainly a sensible thing to aim for, but beyond that product and service differentiation, branding and several other pretty fundamental things are much more important. A strategy that just says we need to be bigger is a rubbish strategy but sadly many of those in the top jobs in the financial sector went along with it. Why wouldn’t they? To some extent the bigger the company the more money they were likely to earn and if you insist on reinforcing the egos of the folk we appoint as CEOs, with big money and reputation based recruiting, it is a self-fulfilling prophecy to find out they love that sort of thing.
So, blank sheet of paper then for Aviva, what to do? Well, to start with it needs to think of doing something differently, just going along with the same old list of reputations and looking for people reputed to be “the best in the world available to them”, which I have seen Aviva quoted as saying that it is looking for, is just going to lead them down a very familiar road. If it wants more of the behaviour we have seen so far, just go on recruiting them in the same way and recruit the same people from the same rather limited gene pool. If you want change you need a very different approach.
First Aviva should start by defining the problem it is trying to solve. From what I can see of the business it needs a much clearer, focussed and more differentiated strategy. So, do we need someone who can come up with one of them? Well, not really, but we need someone who will recognise one and someone who actually understands what a sector beating business strategy looks like. To do that they will need: to get at the facts, never that easy in a big company; take a view on what the competition is up to and what the future looks like; and take a position in the market most likely to make the most of what strengths Aviva has. The new CEO doesn’t have to do this herself, but she needs to lead the process that gets the company to this level of clarity about its future. It will then find that to achieve this new strategy it shouldn’t have started from “here” and a lot of change will be needed, along with the rest of the industry to be fair, so we need someone to start that process too.
I’ll stop there with my list, which is a lot longer but it does at least, I hope, make the point that no one woman can do all this. Rather than a traditional heroic CEO, we need a new breed of leader to emerge that can build a strong collaborative leadership team and begin to help the company evolve and release latent shareholder value. The leader on a par with the rest of the team, just doing a different job, rather than floating above them all. The sort of characteristics that are not normally associated with your average CEO, or a man for that matter. What Aviva needs is some new blood, a different sort of CEO, younger, hungrier, possibly female and one who is more driven by wanting to lead a truly great business than just play the old CEO game.
I am certain that somewhere within Aviva there is just such a person, several levels below the board, who not only has the right qualities and commercial nous but who, with the right support and encouragement, would rise to the challenge. I think you could get them for a fraction of the money too. In fact, I’d pay the CEO the same as other members of the team. Too big a risk? Well, during the last five years, when Mark Zuckerberg has created something like $100 bn of shareholder value, the Aviva share price has fallen by 60%. Could my slightly idealised tyro CEO do much worse?
That’s what I would do. I’m not holding my breath though.