Making Room At The Top
ONE FRIDAY EVENING, THE FOUNDers of Gilbert Tweed Associates took a very important person out to dinner. He was their newly found president, due to start work on Monday morning, and it was time to celebrate with a 12-course meal at one of Manhattan's upscale Chinese restaurants. Gilbert Tweed, a more than $2-million-a-year executive-search firm, desperately needed an experienced executive to manage the firm's fast growth. It had taken founders Lynn Tendler Bignell and Janet Tweed almost a year to find the right person.
On Monday morning, when the executive arrived for work, Bignell and Tweed refused to sign his contract.
He hadn't flunked on his table manners. He hadn't slurped his wonton soup or eaten his egg roll with his hands. But after a few hours together over dinner, the founders feared that they had made a big mistake -- that he wasn't the right person to head their company after all.
That executive was but one casualty in a continuing struggle at Gilbert Tweed. The firm set out in 1983 to meet a challenge that most growing professional-service enterprises must eventually face: how to build value into the business that is separate from the individual talent and personality of the founders. Personal-service companies are easy to start: often a typewriter, a telephone, and a spare bedroom are all that are reeded. But most such companies never grow beyond the time and energy that the founder can devote to the business; clients, after all, want to work with the person whose name is on the door. To build equity in the company, so that it can eventually go public or be sold, the founder has to build an organization that can prosper without her.
It isn't an easy task. Gilbert Tweed hired the wrong people, closed down two brand-new offices, and lost at least $250,000. Its experience, at least early on, was a textbook case in how not to build value in a professional-service firm.
From the very start, Gilbert Tweed's main assets have been the energy and skills of its founders, Lynn Bignell (formerly Gilbert) and Janet Tweed. Bignell, a native New Yorker with a degree in mathematics from the University of Florida, first met Tweed in the late 1960s, when they both worked in the Manhattan office of Dunhill Personnel Search, a large employment agency with franchises nationwide.
In 1972, after a couple of years at home raising babies, Bignell decided to start her own company. "Pretty soon, I had so many clients that I needed help," she recalls. "I remembered Jan from Dunhill, so I called her and said, 'How would you like to come and work for me?' Her answer was, 'Well, I won't work for you, but make me a partner and you've got a deal." It was a felicitous match. Bignell's specialty at the time was finding sales and marketing executives, while Tweed had concentrated on recruiting engineering managers. That combination of strengths kept big clients with diverse needs -- like Exxon, Digital Equipment, and Xerox -- coming back.
Gilbert Tweed's main appeal to these clients has been its thorough approach. A widespread practice in the executive-search business is to pull candidates from a vast file of resumes accumulated over the course of many previous searches. Beyond that, research is often limited to a fairly perfunctory round of phone calls to a long-standing network of acquaintances. Relying on last month's or last year's information saves recruiters time and money. But it sometimes yields executives who have been job hunting or job-hopping for years, or who may in some other respect not be exactly what the client has in mind.
Gilbert Tweed, by contrast, starts each search anew. A staff of 10 researchers delves into companies across the country and comes up with candidates who most closely conform to the client's wish list. Usually, these managers aren't even in the market for new jobs, and have to be coaxed to consider moving -- a knack, clients say, that Janet Tweed in particular has honed to a fare-thee-well. Form Physics Corp., a high-technology firm in San Diego, has hired three executives through Gilbert Tweed. President and chief executive officer Stanley Zalkind explains with admiration: "Jan has a way of getting inside people's heads. She knows how to get executives to put their private reservations and second thoughts about changing jobs right out on the table, where they can be dealt with directly."
Once, the company, after a protracted and frustrating search, spotted an executive who seemed ideal for a lofty post with a New York manufacturing company. But he lived in St. Louis, and unfurled a daunting list of personal reasons for turning down the move. He didn't think he could afford the right kind of house in New York's notoriously inflated real-estate market; he and his family were devout Mormons, a faith not widely practiced in the Northeast; and his youngest child, legally blind, had just settled into a suitable school after a couple of false starts. Gilbert Tweed's research department got busy and located a tiny town in suburban Connecticut with relatively sane housing costs, an active community of Mormons, and a reputable school for sight-impaired children. "So the candidate, his wife, and I went up there," recalls Stephanie L. Pinson, a Gilbert Tweed vice-president. "The Mormon elder met us at the realtor's office, and after we had looked at some lovely houses, we all went off together for a tour of the school." The candidate had been prepared to accept the position when his employer in St. Louis countered with a better offer.
Bignell claims that 75% of the managers Gilbert Tweed has placed are still working in the same companies after five years. Of those, 60% were promoted at least once in their first two years, and fully half of that group has since moved up again. If Bignell's estimates are correct, these numbers are among the highest in the business.
In its first decade, that kind of performance helped propel Gilbert Tweed's annual revenues past the $1-million mark. Yet partly because of the meticulous methods it uses to find corporate stars, the firm's costs have always been stellar, too. "We provide more service than profitability really calls for," Bignell concedes with a rueful half smile. "I don't know whether to be proud or embarrassed about that." Since Gilbert Tweed is still privately held, Bignell isn't inclined to say just how pallid its profits are. But, she says, "we're probably not even in the top 20% in profitability in this business."
Paltry profits have not been the only problem. Throughout that first decade, the two founders ran the firm on a shoestring. They had only a fuzzy notion of what and where their costs and earnings were, while revenues grew willy-nilly, without benefit of formal financial controls. Bignell and Tweed thought of their enterprise as a fledgling that might not survive, even after it had clearly taken wing. "We moved five times in seven years," remembers Janet Tweed. "We kept taking short leases -- partly because we were always adding staff and needing more space, but also because I think we couldn't believe our own success. We didn't want to sign a long-term lease, just in case we weren't in business that much longer."
Dogged by that sense of impermanence, Bignell and Tweed did no formal planning for the future and set no long-term goals. Even had they thought of looking far ahead, their breathlessly busy day-to-day pace would have made it tough. Occasionally, they did arrange to get together to compare notes on current business, but one or the other often would cancel the meeting. Although Gilbert Tweed by 1980 had half a dozen vice-presidents hunting heads full-time for clients, the two founders were still bringing in about 80% of all new business. Clients who signed on with the company naturally expected to deal directly with Bignell or Tweed. And they did: while others did the digging for candidates, Bignell and Tweed managed the process from beginning to end, right down to personally interviewing the most promising final candidates. All the while, the partners kept in constant cosseting touch with each and every client, often with 15 or 20 at a time. They also took upon themselves the kind of tasks that most companies consign to office managers: hiring clerical staff, choosing office furniture, and keeping tabs on supplies.
Both women understood that their company would have ground to a halt without them. It's a common plight among personal-service firms. "The hardest thing in the world is to be a professional and a businessperson at the same time," says Achilles Perry, a management consultant. "The two skills very rarely go together. In fact, professionals and businesspeople sometimes even have a kind of secret contempt for each other. Each views the other as being out of touch with reality."
Perry, who has run a couple of small companies of his own, met Bignell at a dinner party in 1983. They hit it off and became friends, often meeting for lunch or breakfast in toney Manhattan restaurants. "I would tell Achilles how frustrated we were, because we knew we really should be doing more planning for the future, but there just never seemed to be time for it," recalls Bignell.
The solution, Perry suggested, might be something that had worked well for his own consulting business. The two women should find a friend whose judgment they respected and meet with that person on a regular basis to discuss the business. Perry volunteered his services, free of charge, as a sounding board for Bignell and Tweed. The three met five or six times, on each occasion with a specific agenda. "He was actually giving us Management 101," Bignell says. "And we didn't want to show up unprepared. A couple of times I stayed up half the night, the night before, doing my homework. It was terrific discipline. It really made us concentrate for the first time on where we wanted Gilbert Tweed to be in 5 or 10 or 20 years."
Perry zeroed in on the problem of creating value in the company beyond the partners' contribution. "If you want your business to survive you, or if you ever hope to sell it, you have to make it grow to the point where your presence and your services are no longer quite so critical," Perry told them. "It seems obvious, but professionals usually don't think about exactly how to go about doing it." Once Bignell and Tweed began to consider ways and means, they envisioned their goal in practical terms. Says Bignell, "We wanted prospective clients to call Gilbert Tweed and want to work with any professional in the shop."
Reaching this new level in the company's growth, they knew, would be the most difficult challenge they had ever faced. The first step, though, was relatively painless: they appointed a board of directors. Bignell and Tweed voted Perry a seat on the board; next came Gary Frashier, president and CEO of Genex Corp., a publicly held biotechnology company in Gaithersburg, Md. The board's mission, as Bignell explains it, was to continue the advice and consent that Perry alone had provided informally. "We thought a board of directors, with regular meetings, would keep us from getting so wrapped up in day-to-day operations that we lost sight of managing for the long run," says Bignell.
To lessen the company's reliance on the founders' own recruiting efforts, they decided to open new offices outside of New York City. Although the firm had for years done most of its business elsewhere, potential clients still thought of it as a New York firm. "We were already a national company," says Bignell. "And we wanted to be perceived as one." Offices outside of New York could leverage the founders' reputation but develop business independent of them. So the partners agreed to open new offices in Boston, Chicago, and Washington, D.C. Moreover, they wanted those operations up and running as soon as possible -- say, within 18 months. Looking back on the episode, board member Gary Frashier diplomatically observes, "When you're as bright and energetic as Lynn and Jan are, it's easy to spread yourself too thin."
The experience showed only too well how dependent the firm was on the two partners. As they took on new staff and offices, Bignell and Tweed became more and more enmeshed in administrative details -- negotiating leases, picking out desks and telephones, launching publicity campaigns. Throughout most of 1984 and 1985, a period the partners shudder to recall, they put in 90-hour weeks of dashing helter-skelter from one Gilbert Tweed office to the next. At the same time, they were determined to keep running executive searches. "Most enterprises like ours have an 'inside' partner, who deals directly with clients, and an 'outside' partner to do the administrative stuff," says Bignell. "But we both got into this business in the first place because we like doing searches. So neither one of us wanted to give up working with clients and be the outside partner."
Nor was that all. Even at its home base in New York, Gilbert Tweed still had only the sketchiest of financial controls, and costs elsewhere soon soared out of sight. On top of that, ironically, the partners conducted their own executive searches with far less care than they would anyone else's. "Our biggest mistake," says Bignell, "was one that we would never let our clients make. We hired the wrong people to run the out-of-town offices, because we were in such a hurry to fill those positions -- so that we could get back to doing what we really love, which is working with clients -- that we never sat down and figured out precisely what kind of managers we needed."
In two of the branches, the partners brought on managers whose only experience had been opening and running new offices for large, well-established search firms with streamlined corporate procedures and deep pockets. Bignell and Tweed realized too late that what they should have found instead were, in Bignell's words, "people who knew how to work with mirrors, how to jump rope, chew gum, and talk on the phone at the same time -- in other words, entrepreneurs."
It was a costly error. By early 1986, the new offices had dropped at least $250,000. Exhausted and demoralized, the partners surveyed the smoking battlefield and decided to retreat. They closed down the Chicago and Washington offices -- the Boston branch, miraculously, was holding its own -- and limped back to New York to think up a new strategy.
The founders had gained a crucial insight, painfully learned. The two came away convinced that, if their company were to continue its strong growth, it would have to do so with the help of a professional manager. Together with the board, they decided to hire a president who would act as chief operating officer. That person, they hoped, would put careful financial controls in place, help to plan future growth in an orderly way, and take care of the thousand and one responsibilities -- from payroll to pensions to postage costs -- that would attend any future expansion.
Moreover, the founders decided they didn't want just a hired gun. To provide additional motivation, why not offer this person a contract that would provide, if all went well in the first two years, that he or she would own a chunk of equity in the firm? Why not, in other words, take on the "outside partner" that neither Bignell nor Tweed wanted to be?
"Our friends all told us we were out of our minds," says Bignell. At times, she and Tweed wondered whether their friends were right. After all, during the firm's lean early years, the founders were typical entrepreneurs: as they built the business one 12-hour day at a time, they sometimes paid themselves less than what their secretaries were making. Now that it was a flourishing concern, did they really want to give away any of their sweat equity? Gilbert Tweed's two outside directors doubted it -- especially when the search for a suitable president (and future partner) dragged on for a year, and most particularly when Bignell and Tweed kept nixing one candidate after another, including the one they turned away when he showed up for work on Monday morning.
But the founders stuck with their plan. "Every time somebody said, 'Are you crazy?', it forced us to reconsider. And each time we rejected a candidate, the board was so dubious that Jan and I had to look each other in the eye and confirm that yes, we really were sincere," recalls Bignell. "We kept coming to the same conclusion: that we weren't going to be able to grow and still concentrate on our clients unless we brought in another partner." Finally, they found their man. Gary B. Fiebert, 40, a former manager in the management-consulting division of Touche Ross & Co., had run a couple of small companies and served as a human-resource consultant to several others. He arrived at Gilbert Tweed in July.
Fiebert is slowly becoming the administrative power center within the company. Among his current projects: computerizing the accounting systems, reviewing the firm's policies on pay and personnel, and overseeing the pension fund. Eventually, his tightening of the screws should fatten Gilbert Tweed's skimpy profit margins. Neither he nor the founders admit to any significant friction between them. "We were so anxious to delegate all this stuff, I can't begin to tell you," Bignell says. But Fiebert's style probably has at least as much to do with the apparent ease of the transition. A soft-spoken man who chooses his words carefully, he has practiced management by consensus, conferring with Bignell and Tweed over suggestions for change, and avoiding any sudden ultimatums. "Lynn and Jan are giving up a lot of operational control," Fiebert acknowledges. "It has to be a gradual process. For me to try to change things all at once, in a high-handed kind of way, would be very wrenching."
The two partners are promoting others to more central roles. They tapped vice-presidents Barbara Talabisco and Stephanie Pinson for new posts on the management committee. Both will continue to search for executives full-time. Before long, Talabisco and Pinson will each hold an equity and a profit-sharing interest in Gilbert Tweed. It's another part of the founders' plan for adding value. Professionals who have a direct personal stake in revenue and profit growth, they reason, will be more likely to aggressively seek new business. More than that, the sharing of the wealth and the policy-making will encourage the new part owners to make a long-term commitment to Gilbert Tweed.
The two founders will probably give up a total of 25% of the firm's equity. That prospect no longer bothers Bignell. "Right now, it's 25% of an unsalable, not-very-profitable company," she says. "A few years from now, if Jan and I end up owning 75% of a marketable, profitable firm, isn't that better than 100% of nothing?"
Bignell and Tweed would not give up on the idea of branch offices. But this time, instead of opening far-flung branches with large, expensive staffs, they decided to concentrate on bringing aboard a few painstakingly chosen go-getters. The ideal candidates, the founders agreed, would be willing to crisscross the country from modest bases in the Northeast; and they would be, above all, able to manage their own clients with little help from their bosses. Over the past several months, Gilbert Tweed has hired three such energetic types in New Jersey, one in Vermont, and one in New York. The firm also has a foothold in Paris: a joint venture with a French personnel agency that specializes in finding executives for U.S. companies' European and international operations.
"I think Lynn and Jan have learned what it will take for Gilbert Tweed's marketable value to grow," says Achilles Perry. "It's the old Delphic inscription: 'Know thyself.' Do what you do best, and don't be afraid to delegate." Some encouraging early signs suggest that the strategy is beginning to work. Even as revenues set a record last year, the two founders were a lot less central to the company's success. Other people were managing the day-to-day operations. And the newly hired recruiters were shifting the company's center of gravity away from Bignell and Tweed. "Janet and I used to bring in almost 80% of the new business around here," Bignell states. "Now, I would say we're down to about 40%."
Even more telling, they're learning not to insist on managing every search themselves. "We've finally realized that the team we've got here can run their own practice, and do their own searches, while we do ours," says Tweed. "It's really kind of nice to know that you can depend on people and they will get the job done."
Perhaps the best result of Gilbert Tweed's travails is that, with somebody else to look after the mundane managerial details, the founders are enjoying their work as never before. "Having a chief operating officer is great," crows Tweed. "If I never have to sign another check again. I'll be happy."