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November 24, 2010 - Bloomberg Businessweek

The Rising Star of CEO Consulting

Diane Brady

At 43, Heidrick & Struggles’ Stephen Miles has quietly built a client list that includes BHP Billiton’s Marius Kloppers and Best Buy’s Brian Dunn. Who is this guy?

Anyone setting out to explain the remarkable success of Stephen A. Miles, a rising star in the world of executive coaching, might start with the nomadic childhood that helped turn him into a student of human psychology. Born in Nairobi to a schoolteacher mother and an agro-economist father, Miles lived in South Africa, Iraq, and Argentina by the time he turned eight, then in Canada—New Brunswick, Ontario, and British Columbia—honing his adaptability and talent for observation all along the way. “You have to read people quickly to fit into the social network,” says Miles, 43. “My whole world is about trying to read people, to find that one ticket in, and get them to do something differently.”

Someone else might point to Miles’ years as a young prison caseworker with a master’s degree from the University of Victoria, counseling maximum-security inmates at Ontario’s Kingston Penitentiary. Caring for an often violent population, he had to explain to clients why they couldn’t expect parole anytime soon, or gently convey that they wouldn’t be granted furlough to attend a father’s funeral. “I didn’t like the negative environment,” he says. “But it gave me the confidence to tell people anything.” Beyond that, Miles is reluctant to discuss his career behind bars. He deflects the question of whether there are useful comparisons between the inmates he worked with then and the chief executive officers he works with today, a list that includes Marius Kloppers of mining giant BHP Billiton (BHP), Best Buy’s (BBY) Brian Dunn, Stephen Elop at Nokia (NOK), and Shantanu Narayen, of softwaremaker Adobe Systems (ADBE).

Miles may not enjoy such biographical scrutiny, but it is the method he uses with his CEO clients. “Our first encounter was three hours,” says New York Life CEO Theodore Mathas, “and I think we got up to when I was in the seventh grade. He asked questions like ‘Did you get your homework done?’ and ‘Did you spend more time with your mom or your dad?’ It was a little unusual.” Miles says his goal is to understand what shaped the executives as human beings. “I care less about what they think than what they have done.” Says Mathas: “He made me feel comfortable, but it was clear he wasn’t there to be my friend.”

An arm’s-length relationship makes Miles more valuable. After hours of interviewing senior executives and those who work with them, he paints a portrait that can be surprising to the subject—and crucial to their careers. For some, it’s the key to getting a CEO job. For others, Miles’ insights are indispensable in managing the transition to the top job. And friends or not, they all regard him fondly. “I love him unreservedly,” says Kloppers, with a laugh. “He’s wicked smart,” says Narayen. “It has been fascinating to see the wisdom he brings,” says Stephen MacMillan, CEO of medical device maker Stryker, “for such a young punk.”

Although he’s been consulting for barely a decade, Miles has already developed a client list rivaling those of the world’s best-known consulting sages, such as Marshall Goldsmith and Ram Charan. “Stephen is near the top, especially given his age,” says Goldsmith, 61, the longtime dean of the executive-coaching set. “He probably has a broader knowledge base than me.”

His success has sparked jealousy, too, as well as skepticism. There are some in the business world who dismiss the lucrative leadership-advisory niche as little more than a “rent-a-friend” service, patronized by CEOs who want someone to hold their hands and tell them they are brilliant. Yet the field is growing rapidly. Once limited to solo practitioners and boutique firms, leadership advice is now on the menu at large management consultancies, accounting firms, private-equity shops such as Clayton Dubilier & Rice, and executive-recruiting firms such as Heidrick & Struggles, where Miles serves as vice-chairman in the firm’s Atlanta office.

The proliferation of competition irritates some veterans of CEO advising. “Any ex-high school football coach can hang out a shingle and call himself an executive coach,” says Thomas Saporito, CEO of RHR International, which has PhD-level psychologists on its staff. “We’ve been at it 65 years, and in the last five, there are a lot of people moving into our space who hadn’t been there before.”

Miles doesn’t see “the space” as having strict boundaries. It’s more art than science, he says. “Most people think you can use a set of tools and apply them against a methodology and out pops the right answer.” To the contrary, “leadership comes in all forms, and you get better at assessing it with time. It’s like an artisan: You have to paint a lot, and paint at the high end.” The work pays handsomely. CEO coaches can earn annual fees per executive of $75,000 to $250,000, according to people in the field. One coach says a really big name can earn as much as $75,000 for a two-hour session—a figure that Miles greets with a laugh. He won’t discuss his own compensation, noting only that “our fees vary depending on the length and depth of the project.”

Helping rookie CEOs adapt to the new role has become a speciality for Miles. “You don’t go to bed the night before you become CEO and wake up the next morning with a pointy hat and a bigger brain,” says Best Buy’s Dunn. “Steve understands that human pathology doesn’t change.” Miles works with corporate boards to help them choose and groom the right leader, and he’s fascinated by the multiplicity of factors that make a CEO succeed or fail. “My job is to assess people to find out how much potential and capability they have, and whether it fits the needs of the company,” he says, adding that nothing is more important than getting succession right. “It’s a whole lot of work, but your personal brand and your company’s brand is on the line.”

When Miles arrived at Heidrick & Struggles in 1999—after leaving prison work, earning an MBA, and spending about a year at Andersen Consulting—the search firm had only a small leadership-services practice. He worked on research papers and internal assessments, also teaming up with colleague Meredith Ashby to interview CEOs and pundits for what became his first book: Leaders Talk Leadership. He found mentors in powerful Heidrick partners like Joie Gregor and John T. Gardner, who introduced Miles to CEOs and directors.

His pivotal moment came in 2004 when then-BHP Billiton chairman Don Argus hired Heidrick to develop a succession plan. Miles interviewed executives and worked with them on the professional-evaluation process known as the 360, as in 360 degrees, a sometimes painful process in which an executive is assessed by those above, alongside, and below him. The initial assignment spanned 18 months and included multiple reports to the BHP board. “Stephen turned the 360 into a development process,” says Argus. Along with delivering what Argus describes as astute assessments, Miles helped create a program to nurture new leaders. And he began working with Kloppers, a cerebral South African with a PhD in materials science from Massachusetts Institute of Technology and an MBA from INSEAD. In late 2007, Kloppers ascended to CEO.

One reason Kloppers says he still works with Miles is the consultant’s ability to ask tough questions. “Stephen is fearless in a soft but determined sense,” says Kloppers. “We all have baseline personalities, and we have to watch how those proclivities manifest themselves to keep them in check.” Neither Kloppers nor Miles would apply that observation to how Kloppers handles the CEO job. Miles is typically reticent when asked about his executive advisees, wary of betraying their confidence.

Settling into a leather chair at Ralph Lauren’s RL Restaurant in Chicago, Miles has the laid-back manner of a man meeting a buddy after work. He is cheerful, clean-cut, and rarely at a loss for words, showing no strain from having circumnavigated the globe for a quick stop in Chicago, where a storm is about to hit. He asks as many questions as he answers. And when the wine menu comes, he immediately hones in on a particular Cabernet Sauvignon. “We have to get the Stags’ Leap,” he says. The label is owned by Foster’s Group, and chairman David A. Crawford is a client.

Executives stress that in the course of giving advice, he never promotes his company’s recruiting business. In fact, several CEOs note that they rarely think about his Heidrick affiliation, though some see the company’s heft as a plus. Miles seems to live for his clients, even those he sees in person only once a quarter, with phone and e-mail contact in between. “He has this capacity to stay in touch and be available, wherever he is in the world,” says Foster’s Crawford. “I just hope he doesn’t get overworked.”

It’s a reasonable concern. Technically, Miles lives in Atlanta with his wife, Kelly, whom he met while in college. She started her career as a case-management officer at Kingston’s Prison for Women and now works as an associate principal in Heidrick’s leadership-consulting practice. They don’t see each other very much, however. In the tradition of the famously mobile management guru Ram Charan, who for years had no fixed address, Miles spends almost all of his time on the road, half outside the U.S. He has earned top-tier status from three separate frequent-flyer programs. (Even the jet- setting corporate downsizer George Clooney played in Up in the Air can’t match that.) To sustain their marriage, it helps that the Mileses have no children and Kelly endorses her husband’s travel needs. “We build in long weekends,” he says.

Still, even clients who manage global businesses marvel at his schedule. “I’ve never seen a person who travels so much,” says Hikmet Ersek. The Western Union CEO credits Miles with convincing him to move from Vienna to Englewood, Colo., to take his current job. Ersek had never worked in the U.S. “It’s more of a U.S. thing to have someone like Stephen working with you,” he notes. Compared with their European counterparts, “U.S. companies and boards are more open to outside consulting,” he adds. “I think it gives you a wider view.”

CEO coaching, though, continues to have a mixed reputation on both sides of the Atlantic. ITT’s Steven Loranger echoes some of Miles’ other clients when he says, “I have a historically jaundiced view of leadership consulting, and Steve is the exception.” While legendary management theorist Peter Drucker validated advisory work, helping leaders from Procter & Gamble’s AG Lafley to General Electric’s Jack Welch, the profession can still evoke images of hucksterish motivational speakers and earnest sidekicks offering self-evident tips. Some skeptics resent Heidrick’s muscling into counseling. They argue that a recruiting firm primarily interested in scoping out executive talent shouldn’t be trusted to do coaching. “Once you have information about talent, it’s hard to have that information not seep into other areas,” says veteran recruiter Peter Crist. Leadership consultant Geoff Smart calls it “a structural conflict,” though he admits that he’s impressed with Miles’ “commercial success.”

While Heidrick doesn’t allow assessment data to be shared with recruiters, CEO Kevin Kelly says worrying about this potential conflict is “an antiquated notion.” Up to 40 percent of all searches involve internal candidates, he points out, with extensive assessment going on. Having helped rebrand Heidrick as “a global leadership advisory” firm, he hopes to build on Miles’ work: “What he’s doing is the future of the industry.” Indeed, Heidrick’s overall revenue dropped 36 percent last year, to $396 million, but its leadership-consulting services grew 11 percent, to $26 million.

Competitors such as Spencer Stuart grab more headlines for handling top CEO searches, while Korn/Ferry has a larger leadership-consulting practice. Ana Dutra, CEO of Korn/Ferry’s consulting practice, refused to be interviewed for what spokeswoman Mary Beth Barron described in an e-mail as “an article about a competitor less than half our size.” Miles says simply that Heidrick gives him the resources, reputation, and relationships he needs: “It’s an incredible brand.”

One reason Miles may be in demand is that he seems to keep his ego in check, and he seeks advice from other experts. As Marshall Goldsmith told him: “The biggest mistake people make at your age is thinking you’re a guru when you’re not.”

Brady is senior editor at Bloomberg Businessweek in New York.