Looking for a new breed of CEO

Anita Hoffmann of Heidrick & Struggles’ Alternative and Renewable Energy Practice says a new kind of hybrid leader is needed for the cleantech sector to reach its potential in combating climate change.

“This longer-term approach doesn't preclude taking action now for companies yet to find their extreme corporate entrepreneur”
-Anita Hoffmann

The emergence and rapid growth of the cleantech sector has been referred to by some commentators as the sixth technology revolution. The recent credit-crunch related investment dip aside, growth by way of increased European venture capital has been staggering - compound annual growth rate of almost 40 percent between 2004 and 2008. In fact, the cleantech sector is pulling in a quarter of all investments made. But it's a fast-moving revolution that's running short of leaders; more specifically, the right kind of leaders with the seemingly incongruous mix of entrepreneurial athleticism, company-building skills and organizational know-how.

Choosing a leader

Sourcing leaders is a crucial issue in the development of this relatively nascent sector because to make a meaningful impact on climate change we need cleantech to hit its mark and achieve world scale sooner and not later. Investment will also flow back into the sector soon as the credit crunch eases. It's important for investors that cleantech companies start positioning the right kind of leaders now.

Clean technology is a broad industry. Its sweep includes renewable energy generation, biofuels, energy efficiency, carbon reduction, and all their supporting technologies, components and services. CEOs coming into cleantech companies naturally look at how their skills from other sectors translate to cleantech, rather than relying on direct experience in these markets. The cleantech CEO often faces the trifecta challenge of raising capital, building teams and even plants - and going up against traditional energy all at the same time. This unique collusion of demands on the CEO is considerable and unlikely to have been similarly faced in other sectors.

The pressing issue for cleantech as a new sector is this: technologies and companies go through critical transition points from both a technical and leadership point of view during their growth. The need for different leadership changes radically at the stages of 10, 100, 1000 and 10,000 employees. A company's character and complexity also changes radically at these points. Failure to recognize the need for different leadership can cause companies to flounder and prevent them from reaching their full potential. Rarely will the same leaders take the company from 10 to 100 people or from 100 to 1000 or beyond. This is the context against which cleantech companies poised for growth need to think when choosing a leader.

One of the key themes to emerge from the 2009 New Energy Finance Summit - and supported by further research by Heidrick & Struggles - is that a new leadership profile is needed for these unique challenges and demands, the 'extreme corporate entrepreneur CEO'. This is someone who is uniquely entrepreneurial and operational at the same time; someone who is an 'ultra-visionary' and an 'ultra-operator'.

This corporate entrepreneur blends the skills and competencies of the visionary entrepreneur and the professional manager. This hybrid CEO has the foresight and energy to take a company through rapid growth while, at the same time, giving enough structure and process to deliver results. In addition, this leader needs to be extremely attuned to, and able to influence regulatory issues in their industry, driven as it is by regulatory incentives and frameworks. Few, if any, executives are strong visionary entrepreneurs and company builders, and effective operators at the same time.

Where do we find them?

There will be gifted and talented individuals who are the exception, but the reality is the sector will probably struggle in the short-term to find enough extreme corporate entrepreneurs needed for the sector to take off and achieve scale. Strategies can be put in place to develop and phase in talent, but the longer-term solution would be for the sector to work with governments and educators to ensure leaders of tomorrow are given a solid grounding in both traditional and new management skills.

Ideally, these new skills would include dealing with much more complexity, managing in different contexts, and communicating effectively to an ever-increasing and varied stakeholder group. The creation of post-graduate and mid-career education programs to help executives already in this sector acquire the right mix of skills to grow companies to real scale would also make a significant difference.

This longer-term approach doesn't preclude taking action now for companies yet to find their extreme corporate entrepreneur. Investors and boards should be looking at the competencies and composition of their executive team as a key strategic imperative. They should be investing the same time and effort in understanding and reviewing their talent and planning as they are in developing financing and operational excellence.

For example, instead of expecting one person to take the business from start-up to scale, there are two options worth considering: pair up one corporate entrepreneur CEO with an excellent COO; or put in place an operational CEO for the next one to two years while planning and setting about the hire of the corporate growth entrepreneur for when the credit crunch eases.

Chairmen spend a lot of time thinking about how companies can be the best at what they do, and getting the best possible management team in order to deliver this. There are questions that can be posed now that help them do this, such as: looking at the short as well as the medium and long term, are you confident your executive team can deliver the required growth and profitability? If not, what can you do to develop them, could you complement their skills with advisors or interim executives who bring the missing strengths?

Other relevant questions include: can your current executive team step up and generate serious growth if and when the market allows? Do you know their strengths and weaknesses and do you have an external benchmark for how good they really are? Do you have a strategy in place for replacing key leaders at critical points in the company's growth?

Similarly, investors can also ask questions now that allow them to better develop an evolving leadership strategy and plan for the companies they invest in. The following questions help pin down the talent management challenges inherent in these fast-growing cleantech companies: is your management team still the right one to deliver the operational efficiencies needed now, and for future growth? If not, how do you plan to grow the business from where it is today, to where you want it to be in five to seven years, to real scale? What could you deliver if you had a CEO or a team with very different skills and capabilities, in the next two years, years three to five and years five to eight?

Investors typically back a competent management team from the start of an investment to exit and construct executive packages accordingly. There is often little flexibility to change management. Going forward, investors in the cleantech sector need to think through both at the point of investing, and at other investment milestones.

While these are questions investors, boards and chairmen should be asking now, the answers will, nonetheless, point to a problem for which there is no instant cure: there are just not enough extreme corporate entrepreneur CEOs to go around. The long-term solution will be to work with government and educators to ensure executive education and training is complemented with new management programs to develop the hybrid leaders needed in the cleantech sector. These skills will not only ensure that the solutions for climate change grow to scale, but will also help traditional sectors renew and expand. The future of both our environment and the returns for investors in cleantech are at stake.

BIO

Anita Hoffmann is Partner, EMEA Alternative and Renewable Energy/Climate Change and O&G for Heidrick & Struggles.