CEO is usually the most high-profile job at any business, and medtech companies are no different. But what do they actually do, and how has the role changed over the years? John McLean, managing director for the central region and coleader of the life science practice at executive search firm Witt/Kieffer, explains what it takes to hold the top spot at a medtech company and how to choose the right person for the position.
What does a typical medtech CEO actually do?
Typical medtech CEOs, unfortunately, run typically average medtech companies. Great medtech CEOs are building dynamic technology companies that have the potential to enhance the quality of life.
Today’s leading medtech CEOs have to be strategic, visionary leaders who not only inspire their teams to excellence but have the power to introduce life-changing medical devices and diagnostics to an ever-demanding, increasingly expanding marketplace.
These CEOs listen well to their customers and their teams, recognize opportunities in the marketplace, capitalize on those opportunities, set direction, and build great teams to execute.
Great medtech CEOs also know how to identify and assess great talent who can fully commit to the vision and strategy, and they take personal responsibility for outcomes of their decisions.
How has the role of CEO at medtech companies changed?
Strong leadership traits are a necessity in any marketplace, but CEOs in this complex, constantly fluctuating industry have to be more creative and nimble navigators than ever before.
Last year, there was so much uncertainty in the marketplace that we saw medtech CEOs talking about the need for increased innovation and global reach but instead being forced to focus on expanding their current share of existing markets.
In 2012, we are seeing CEOs shifting back to reclaim the lead driver role in new products and service innovation while still pushing for a stronger presence in emerging markets.
Spearheading new technologies and creating alliances with a range of organizations are front and center again along with addressing the challenges of comparative effectiveness, pricing pressures from bundled payments, decreased reimbursements and the financial implications of new excise taxes in 2013.
Increased consumerism from patients who are looking for greater quality of life outcomes is requiring top CEOs to be able to not only interface successfully with their internal constituents but also with a demanding external community including consumers, government agencies, and, of course, shareholders.
What should medtech companies look for when hiring a CEO?
To determine the “right” set of skills and experience required for the CEO role, we believe you first have to analyze their culture, their current team and what stage in the lifecycle the company is in.
The role of a CEO at a medtech company changes dramatically as the company grows. The skills and experience needed at the preclinical and developmental stages, translating vision into strategy and finding capital are vastly different to those required during the newly and fully commercial stages of scaling a company and building a brand.
Because each search is different, we always start with a blank sheet of paper and based on early discussions with the hiring team, develop a tight list of Key Selection Criteria (KSC). Weighted in order of importance, the Key Selection Criteria helps drive efficient vetting and decision making towards the best candidate selection.
Besides a strong leadership profile, medtech CEOs need to demonstrate verifiable success in leading comparable organizations though several business cycles.
What mistakes do medtech firms make when hiring executives?
All firms have room to improve their hiring strategies but medtech firms are especially vulnerable now with an increasingly tight talent pool.
A high level search requires the time and focus of all top management. If firms don’t devote adequate time defining the Key Selection Criteria at the front end of a search, valuable time can be lost throughout the selection process and the final hire will most likely not be the best fit.
Unrealistic deadlines can also push firms into not taking the time to see a large enough pool of qualified candidates and create a willingness to settle on “available” candidates” versus “best” candidates.
Time and focus are also required when top candidates are identified because the best candidates usually have a short shelf life. If firms are too slow in establishing a robust interviewing and vetting process, top candidates will see that as a reflection on the company’s inability to make effective decisions and many times choose another offer instead.
Finally, every firm must take the time to do deep reference checks and “back door” inquiries on finalists. Shortchanging this step is like playing roulette with the future success of your organization.
What trends do you see in executive compensation in the medtech industry?
We are seeing executive compensation programs in medtech continuing to reflect and support a business model that is vastly different from those of many other industries. The package changes alongside the company’s growth and acceptance into the marketplace.
During the preclinical stage, base salary and equity is the norm. Small cash bonuses tied to achieving key milestones are added in the developmental stage. At the newly commercial stage, compensation become more balanced across salary, bonus, and equity components.
During the fully commercial stage, companies turn off the equity component and focus on driving behavior through salary and significant cash bonus opportunities. Over the past few years, we have been seeing the salary component of executive compensation growing at 3% per year with a continuing focus on increasing the performance based bonus compensation percentage in the pay mix.