Ron Malachuk On How The Chemical Industry Should Attract, Hire, And Retain Top Talent

Finding top talent is getting harder, and the chemical industry is not immune to this phenomenon. Here to unpack and offer solutions to this problem is Ron Malachuk. Ron is a Partner in the Chicago office of JM Search and a core member of the firm’s Chemicals and Materials practice. With vast experience in executive search, he joins Victoria Meyer to share some wisdom on how companies should adapt to this supply-demand imbalance for top talents. More than just attracting and hiring top talent, Ron also touches on why companies should focus on retention and how to do that. Get valuable business advice to boost your business and learn how chemical companies can elevate themselves in the competitive market by listening in on their discussion.

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Ron Malachuk On How The Chemical Industry Should Attract, Hire, And Retain Top Talent

I am speaking with Ron Malachuk, who is a partner at JM Search, an executive search firm that does a lot of work in the chemical industry and elsewhere. He has been in the executive search area for a very long time. Although he did start his career as a chemical engineer, at least he studied that way and then apparently quickly jumped into helping people as opposed to helping chemicals per se. We are going to talk about that and more. Ron, welcome to the show.

Thank you. Wonderful to be here.

Absolutely glad to have you. Let’s start with your origin story. How did you get into the world of chemicals and executive search?

A chemical engineer by schooling and graduated from Illinois Institute of Technology and joined the locomotive business of General Motors out of school. It was a fascinating time. It was as the EPA began to regulate heavy-duty diesel. It required the manufacturing and engineering arms to start looking at regulations and other types of governmental requirements that they hadn’t historically.

It was a great time to be around. It was also where I would say the human capital bug was planted inside of me. There was a significant amount that was taking place in terms of the engineering and the manufacturing directly related to emissions compliance and the next generation of engine material. With that had a cross-functional role right out of school, and that was where I stayed until I ultimately moved into corporate planning and corporate strategy at Exelon. During my last few years at electromotive diesel, as it was called at the time, I completed a Master’s of Science in Environmental Management and then started my MBA at the University of Chicago now, Chicago Booth.

What I think is interesting is that your first two companies weren’t chemical companies. I don’t necessarily expect the chemical engineers to go into heavy locomotive at GE but it sounds like there was a good connection from the environmental side of it.

There was a great connection, and it was like building the plane as we were flying when all the locomotive business had been around for decades. It was a time of transformational change, and that change ultimately went itself to the locomotive business of General Motors getting acquired by a private equity firm. That was also my first entry point into the world of private equity. More from being a business that was carved out and now was being stood up, and while I didn’t have a front-row seat, I was able to see the differences in certainly being part of a strategic corporate environment to now being a part of standalone private equity back to a portfolio company.

 

I can only imagine the difference between GE and independently owned private equity firms. Strikingly different, I would imagine.

It also shined a light that there was a lot of untapped value, and there was also a lot of untapped human capital and folks that were excited about the expected future states. In some ways, having a bit more degrees of freedom to drive that operational and ultimately that financial performance.

How did you get into executive search because that’s where a large part of your career has been, and obviously, it’s a part of the corporate universe that you love and thrive in?

Like many did not know much about how to get into executive search or, even at that point, what the industry had to offer, I was brought into executive search by serendipity and good fortune. I was recruited by a recruiter if you will. The more I went through the interview process and the more information that I gathered, it seemed that this fantastic intersection of business strategy and talent strategy. I have been in and around new executive search for several years.

You work a lot with chemicals and private equity, is that right?

That is correct. Within JM Search, about 2/3 to 70% of our work plus or minus is directly tied to sponsored back vehicles. As you might imagine, the last few years have been an absolute rush of activity. Within that environment where our team and I focus is in the process industries. For me, in particular, that’s chemicals, materials, agribusiness, and any type of process type manufacturing would fall under our team’s purview.

What everyone wants to know is what the heck is going on in the world of job search, recruiting, etc. That’s something that people ask me. They are like, “You are talking to somebody that knows something about this.” What’s happening? What can you tell us?

The most difficult transition an executive makes is going from that subject matter expert and individual contributor role to now being a leader of people and leader of teams. It’s a transition that some can make and others can’t. Click To Tweet

What is happening is a host of different factors, a confluence of things. I would say the first, and this is irrespective at a C-Suite down to the individual contributor level, is simply the most talented people have more options in front of them. At any point I can remember, there might be times previously where that was the case but it is remarkable the supply-demand imbalance for the top talents.

With that, the optionality that the candidates have is close to unprecedented, so because of that, it’s placing lots of focus and a lot of energy on companies as they are going to market for executive search. This is irrespective of a public company, family-owned company or sponsored-backed company in that the compensation continues to creep.

The benefits and other factors continue to creep, and that includes not just a target bonus equity, things of that nature but its remote hybrid work having a type of flexible schedules and things of that nature. Yet, against that backdrop, companies are having to move faster than ever to identify and ultimately recruit that top talent without circumventing their own process or not doing the requisite due diligence. It is moving faster than I can ever remember, and yet the top talents are typically sitting on multiple offers or close to multiple offers at any one point.

What is driving this imbalance? You mentioned this as a supply-demand imbalance for search. I have heard about people retiring. Is it that there is a lack of people? Is it people that have exited the workforce? Are there more job opportunities in the workforce or a combination of both? What’s driving this, do you think?

In my view, it’s a combination of those factors. From the public company side, the world of private equity has attracted and retained a number of top chemicals leaders who, in prior times or before the explosion of private equity, would be the next generation of business unit and platform leaders and a public company would have an incredibly strong bench from which to draw. Much of that talent has gone into either private equity or venture, some type of sponsored-backed startup.

It’s because of that that the public companies are having to get a bit more creative for their next generation. On top of that, you are also seeing the global macro factors that we all read about in terms of artificial intelligence, robotics, connected devices, cybersecurity, and data analytics. What that means is these organizations are also looking for skillsets that they may not have had or may not have had in great supply, but yet you can’t lose that connectivity to the business or to what it means to be part of a chemicals manufacturer.

What we have seen clients do or best-in-class companies do are several things. One is they do offer very agile career developments, whether that be taking technologists and putting them into different functional roles, putting them into business unit roles, and allowing them in a short time to broaden their skillset.

 

We have also seen, and this is more at the graduate or entry-level but it does have many relevant applications, is immersion programs. From where you’ve worked, the world of chemicals and broadly, process industries are very complex. If you didn’t grow up in a lab or as a plant manager or whatever the case might be, it can be a very scary proposition to walk into this very complex global value chain.

What we have seen companies do is create these immersion programs to help, whether it be STEM graduates whether it be graduates who don’t have a Chemical or Chemistry degree. It helps them to get acclimated to understanding from a macro perspective, and then it allows the distillation down into micro or functional type of levels.

That then lends itself to as we hear all the words around globalization, digitalization, and what that means. This allows the best-in-class companies to hire folks that may not have grown up in a chemicals company and have the opportunity to immerse them as if they did. You can hire great data analytics, hire great cybersecurity IOT type of talent and take the skills they have and teach them how it applies to a chemicals or materials company.

Do you see this happening at the private equity portfolio companies or is this more at still the global companies? My assumption based on history has been that a lot of the PE-backed firms are looking for people that already have that experience and expertise and are pre-cooked and ready to roll but is that still true?

It’s still true, and much of it depends on the sponsor itself. If it is a bulge bracket, Marquee private equity firm that is taking a big swing of a big investment, then the most likely exit is going public, and that timeframe is going to be more compressed. If you are looking at smaller to middle-market private equity firms where their investment thesis and holding timeline might be 5, 7 or 10 years down the road, then there is an opportunity, and certainly, you can argue the need to invest in that type of interconnected talent.

You are right. The global public companies have certainly been looking at avenues to bring in talent from different disciplines or to extend their reach to the best and brightest STEM graduates. Distilling that further into the best and brightest diverse STEM graduates and being able to offer that entry points that ramp up points very early in their career.

In some ways, maybe this is also filling the void that the middle-management tier that’s getting sucked into private equity. It’s a way of accelerating to fill the void. Is that what you see?

Organizations are getting a bit more creative in their agile talent development. Click To Tweet

That’s what we see. From the public company side, as the large chemicals materials companies get larger to leverage the economies of scale and have that operational focus to sweat assets, it does create a by-product, unfortunately, where what we call the training wheels P&Ls or the roles where you can take your truly high potential high performers and put them into that first P&L opportunity.

If they are successful, then you have the opportunity to scale them up and offer roles of larger reach and responsibility. If, for whatever reason, it doesn’t quite work out in the grand scheme of the balance sheet, it’s likely going to be a rounding error. You then have the opportunity to implant the next P&L leader, and P&L leadership simply isn’t for everybody. Some folks maybe are best suited or better suited to be functional leaders but at least you had the opportunity to see where their skills match best with the company.

You and I chatted about this previously. Your whole point about scale. I certainly saw this when I was at Shell. The first time that you got to a P&L was a giant business. Where percentage error has a significant impact as opposed to some companies which have their businesses broken into smaller P&Ls where, as you say, they are easier training grounds. If something goes awry, it’s recoverable. You don’t see it. It’s an interesting universe that we are in, just the way the majors have evolved. It feels like a lot more companies or divisions and businesses are getting shifted into private equity to create that nimbleness if you will, and be able to extract more value.

It is both the research that bears this out. Empirically, we see this as the most difficult transition an executive makes going from that subject matter expert and an individual contributor to now being a leader of people and a leader of teams. It’s a transition that some can make and others can’t.

What do you see companies are looking for when they are going out looking for talent? We already said there’s quite a draw on talent. What are deemed to be the most critical skills or experiences for leaders?

In many, it remains consistent irrespective of capital structure. It is that bias for action, a strong operational and financial focus, and a results orientation but then it’s one where some people understand it. Maybe others understand it less but it’s followership. The followership gets to the early parts of the comments around the best and brightest executives have an unbelievable amount of options and parts of what draws that top talents to organizations are their leader or who their boss will be.

Whether that’s the CEO, business unit leader or a functional head, it gets down to, “Is this an individual who is going to challenge me, push me, add tools to my belt that I don’t already have, and take some stretch opportunities and maybe half step promotes me? I’m then ready for it but it’s going to give me the degrees of freedom and the autonomy to learn on the job and to course-correct.” If your first move is into a very large global P&L, that can be incredibly overwhelming but if you have an incremental step in between, it does help make the transition a bit easier and keeps that confidence level high.

 

The Great Reshuffle, a lot of people, have moved roles. I saw some interesting statistics and would like to test you on this. I’m putting you on the spot a little bit here. I’m genuinely want to know your opinion on this. I saw this data from a company called Betterworks. It’s about counter-offers. When somebody is leaving the company, they come and say, “I’m hitting the road. I’m moving on to a different offer.”

There are different schools of thought on whether counter-offers work and whether they should be done. Some people would say, “When somebody made up their mind, they have made up their mind and move on.” Others say, “Maybe there’s a chance to keep them.” What was interesting was men in this study and had basically equal proportions of men and women that were in this study. Men were 17% more likely to receive a counter-offer, and if they received a counter-offer, it was 30% more likely that it was a financial counter-offer, whereas women were more likely to receive the soft counter-offer. Based on experience, what’s your interpretation of that because you worked with both parties. You are working with the candidate and the company. What do you think about this?

The research that we have seen and some of the studies that we have either conducted or had access to show that at the margin, 70% of executives plus or minus that accept the counter-offer ultimately do depart their company within 12 to 18 months. On the one hand, the financial incentive that is offered at the time feels great or might gloss over why he or she was looking outside in the first place. In the longer run, the same issues or the same unhappiness will continue to manifest itself.

What is interesting, and this maybe ties back into not only of late when we think about the Great Reshuffle, pandemic, the Great Resignation or however one wants to classify it. If anything, what it’s allowed is that it’s allowed executives much more time to reflect. We are all very busy. We all have day-to-day responsibilities, and then we have medium to short-term, long-range planning, or what have you.

It’s gotten to time to reflect, “What is my purpose? What has value? What has meaning to me?” Specifically for the STEM and Millennial generation or the Millennial STEMs, if you will, it is, want to have a sense of pride, sense of ownership, and impact. More importantly, also working for a company that feels the same way about those issues that espouses those values, that has a very similar corporate ethos. That is something we have seen quite regularly here over the years. It has become a driving force in getting those best and brightest STEM graduates interested in the organization.

In my viewpoint, I know this is a chemical show. The chemicals industry offers that cradle-to-grave impact around ESG and circularity and tries to have an impact at each step of the value chain from that raw material exploration of the production all the way to the consumer. That is, whereas the chemicals industry continues to rebrand or continues to refocus, it has such an incredible opportunity to reach these graduates.

Some folks may enjoy building apps or doing things of that nature, and that’s all well and good. I think there’s a high or at least a good percentage of the STEM graduates or engineers that liked the product, the manufacturing or liked to see what the end state could be and how ultimately these products meet the addressable market.

It’s one thing to recruit the talent, and it’s another to retain them. Click To Tweet

There’s this aspect of a tangibility of it that some individuals. I certainly felt that way when I spent a big part of my career in and out of polyethylene and polypropylene. What’s nice is at the end of the day, you could feel what you produced. You could go look, see and touch it, which you can’t do with some of the chemical products. You also can see, for instance, when I was in the surfactants business, I loved the fact that I could say, “Your laundry detergent, your shampoo, your whatever is made of our products.”

Maybe you don’t know that but we are feeding, providing, and supporting a better life. When we think about the whole corporate value and the importance of that when people are looking at roles, do you see that more with the Millennials? I’m working with a very young executive who’s re-strategizing her family’s company business for the next generation. That’s one of the things she said very clearly is, “I wanted to connect with my personal values and my peers’ personal values.” The question is, do you see that more with the Millennials or across the spectrum of the clients that you work with?

I would say we still see it larger with the Millennials but in some respects, even the companies that may be indifferent about ESG or some of these other topics, the markets are forcing their hand. Some of this is simply that there is an increased pace of change in innovation and a shorter time to commercialization and trying to strike the right balance from a chemicals product development perspective around now versus next.

The companies that we have worked with, our clients, and prospective clients are best-in-class in the industry and have earned the rights to partner and innovate alongside their customers. In doing so, they are able to explore these opportunities together. That allows the chemicals companies, the formulators, and intermediaries, they are able to improve their product development deficiency because they are getting a bird’s eye view of what’s happening to their customer’s customer.

With that, many of the chemical companies are now focusing more of their efforts or their efforts on having a more well-rounded product development leader. A more well-rounded R&D leader. There are many chemical companies historically that thought of themselves as business partners first and functional experts second. That is the mentality that we continue to see winning more in the market.

What about the talent pipeline? We have talked about this a bit. For a long time, there was a concern that there was not enough talent to fill the pipeline. Do you see that? Is that still true?

It is still true, particularly when you are looking at the transition from where the chemicals and the broader industrial market were to where it’s going. That is where we continue to see the reskilling of talents and the redeployment of talents, where organizations are getting a bit more creative in their agile talent development or may be said differently.

 

It’s one thing to recruit the talent and to get them in. It’s another thing to retain them, and the best-in-class chemical companies that we see have a very robust, and in some ways, even a fit-for-purpose tailor-made type of talent development roadmap, where the roadmap you take for somebody with a PhD in Chemical Engineering might be different than somebody you take with a Bachelor’s in Data Analytics.

When you are looking at that endpoint, you need both of these respective individuals in this hypothetical case to get to a similar point but how you train, skill, and put these executives into various roles to develop them is different. It’s that level of agility and cross-functional pollinization as you and I talked about before. When you work in a global chemical environment, much of your leadership is by influence and internal stakeholder management. The earlier in one’s career, he or she can learn this and then see the benefits of having that type of internal stakeholder management, the better they are going to be.

Does that hold true in the PE-backed firms? In my mind, they are often smaller. I suspect that the dynamics are a bit different.

The dynamics are different simply because there is an expiration date to the transaction. In many cases, the smaller to middle-market private equity firms, the carve-outs that they are investing or the businesses that they are acquiring from larger strategics tend to be more geographically siloed. While their customers are global, and they may have sales distribution offices in key geographies, the manufacturing and the real center of gravity tend to be in a specific geography.

When individuals are looking to make a change, want to be recruited, and want to be one of those individuals that have multiple offers waiting for them, what can they do to be more attractive to employers?

There are a few things. The first is to have as broad of a product and application experience as the organization allows because we continue to see to use the phrase that cross pollinization into different industries, markets, and applications. When you look at the chemistry and the molecules, there are a lot more similarities than differences, and each respective market or industry vertical may have its own subtleties or idiosyncrasies but there’s a lot more in common than not. Bringing that broader product and market experience is going to make one more attractive, particularly as you think about the high margin, high growth, high touch industries that do require some immediate credibility. The second would be to identify what are the core strengths and competencies.

Maybe said simply, “What excites you? What gets you out of bed in the morning?” For some folks, it might be that drive to be a CEO. For others, it might be to lead an innovation stage-gate process, and certainly a host of things in between but it’s almost reverse engineering where you like to be, and then identify, and that goes to have a very robust network.

 

Identify those 3 to 4 or 5 very senior leaders that are either the identified experts in that field, product category or application category. If you have a chance to meet and know them, great. If not, then find mentors who have a similar skillset that is seemingly seen as leaders in their function, and spend time to understand what were the opportunities that challenged them. What are the roles that prepared them to get to that step?

Along the way, you also then learn that very valuable step of leading through others and leading through people because you do reach the point. In private equity, it’s going to be a bit more hands-on for the CEO but you are ultimately still the chief growth, culture, and officer. That requires to broader your functional skillsets, the more that you are able to understand what the different functions and business units are dealing with, and you can become a problem solver. Ultimately, you could become a hurdle remover.

On the flip side, how can companies be more attractive to candidates? Given that it’s a seller’s market, how can companies be more attractive to the candidates that they are trying to get?

Part of this goes back to our earlier comments where it has that purpose-driven culture. For us, and most of the readers, I would imagine of this show, it’s going to be through that chemicals and materials lens. That’s where it’s me, the chemicals industry does offer a true closed-loop recycling, closed-loop manufacturing paradigm, and you do have the opportunity to create that type of self-sustaining manufacturing process.

Really leaning in on sustainability and stuff.

Part of this is customers are demanding this of the products or customers have much more than a passing interest in the history of the energy of the carbon footprint. Understanding the products that they use and the products that are consumed. In that way, the chemicals industry does have a decided advantage because from start to finish, there is some type of chemistry, molecule development, and application footprints that is going to be derived back from the raw materials.

We have seen this. It’s certainly not anything novel now but companies are releasing their sustainability index and report. Having the Dow Jones sustainability index, or the FTSE4Good, whatever it might be. There are enough agencies out there now that bring that credibility and that data metrics-driven approach to put a scoreboard and where we are working, what we are doing in our personal lives, we would like to win.

It’s always great to see the winning side versus the non-winning side. With that, the chemicals industry does have an opportunity to continue to position itself. It will be interesting to see what transpires here over the next 5 to 10 years, and obviously, very large institutional shareholders are demanding this in some ways. We are seeing funds that are created with this type of ESG investment methodology. Where does that go in the future? I don’t think my crystal ball is that clear but in some capacity, it’s here to stay.

This has been awesome. I appreciate you joining us on The Chemical Show. Thanks for sharing your time and your insights.

Thank you so much. It is wonderful the forum that you have here, and I’m excited to be a part of it.

Thank you very much, and thanks, everyone, for reading. We will see you next time.

 

Important Links

• JM Search
• Betterworks
• https://www.Betterworks.com/wp-content/uploads/2022/05/2022-PESurvey-Report.pdf

 

About Ron Malachuk

Ron Malachuk is a Partner in the Chicago office of JM Search and a core member of the firm’s Chemicals and Materials practice. His expertise is in providing talent-advisory consulting services across multiple sectors, including agribusiness, chemicals, engineering and construction, metals and materials, packaging and plastics. He has also authored several white papers on the emerging technology, innovation and digital trends disrupting the process industries.

Over his career as an executive search and talent consultant, Ron has conducted Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and Senior Advisor searches and leadership projects. His clients include global industrial conglomerates, the Fortune 500, middle market manufacturing organizations, and portfolio companies of leveraged buyout and venture capital firms

 

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