Care and Feeding of CEOs Part Six: What Do You Get in the Package? Bonus Items.
Next, let's look at what I call the "bonus items" of hiring a Japanese CEO. These are the assets or value brought to the table by virtue of the candidate's position within the Japanese business culture. As I have mentioned in previous articles, Japanese business reflects a village and tribe mentality, wrapped into an autocratic work structure, and thus trust and dependency define the quality of a personal relationship - and thus the quality of work provided. The stronger the leader and his/her influence, the better the performance as a team.
The key word to these CEO candidate bonuses is "network", and includes potential employees, customers, vendors, and supporters (regulatory and media). Let's look closer.
1. Potential employees. Compared with CEO compensation packages internationally, hiring a CEO in Japan is quite reasonable in my opinion. But the compensation does occur in a fairly tight band, with the low end starting at a fairly high JPY20m a year plus bonuses. For a smaller firm, or a company wanting to dip a toe in the water, this starting point can be off-putting. Then of course there is the whopping 30% surcharge of Japanese recruiter fees.
The good news, though, is that you can amortize the purchase price of a CEO by taking advantage of one of the key bonus items of the Japanese - their personal network. Most Japanese CEOs (other than entrepreneurs, who are the exact opposite) do not get things done by themselves. They almost always have a tight team consisting of a right-hand person, usually a sales manager, a personal assistant who is telepathic, a dependable technology or manufacturing person, and an accounting manager who can negotiate great commercial terms. I call these people "employee-followers," implying that the CEO holds a lot of emotional power of such people. With luck, many of these followers will be competent (easily measured by the success record of the candidate CEO) and thus desirable.
So when you get your candidate, it is normal for them to want to bring along at least part of their support team with them. By taking advantage of this fact, for your 30% recruiting commission, you're often getting 4-10 recruits for the price of one.
2. Willing customers. The foundation for most Japanese senior sales people is their old-boy network; people they went to school with, joined clubs with, and graduated into a company with. Take a look at where your candidate went to school and who the first employer was, then ask them for specific examples of who they know and to what level. Most quality candidates don't like being leveraged too hard on their personal relationships, so do it with sensitivity. With a little encouragement you should be able to get some idea of their connectedness. Look for relationships that are right at the top of your target customers, or with friends who are in finance and general administration in larger companies. Usually, these are the people with purchasing power.
3. Trusted vendors. Most foreign firms in Japan are relatively small and thus depend on outsourcing work to reliable suppliers to make the work product commercially competitive. Such vendors range from logistics and law providers, to IT infrastructure and marketing. The level of price, quality of service, innovation, and flexibility all define how much extra you can earn on your bottom line, as well as ensuring that you even stay in the Japanese market to begin with. A good CEO not only knows good vendors, but can squeeze better-than-usual terms out of them. As an example of the benefits to gain, does your logistics vendor provide work process flexibility so that you can differentiate from your competitors? By this I mean better packaging, integration with your software system, a call center, etc. Alternatively, do your current major vendors offer your firm a 6-month accounts payable arrangement? If you're being offered a "standard" 30 days, you probably need a better connected CEO.
4. Intangibles such as supporters. One of the true tests of a CEO is their ability to meet and deal with a crisis. Product and supply problems, delinquent staff, errant code, leaks of customer data, media attacks by competitors - the list of things that can go wrong in a business is endless. Thus, strong media and regulatory connections are important. It is hard to know where to draw the line in terms of allowing a CEO to pursue the building of a strategic safety buffer building - because it can get expensive. But a good starting point is to at least have them draw up a contingency plan and schedule a list of things that need to be prepared so as to deal with the fall-out of such issues.