(Answered)-STANFORD GRADUATE SCHOOL OF BUSINESS Ctsn: E279 DtrB: - (2025 Updated Original AI-Free Solution

Question

1. Read the attached and answer questions 1-5 below
3. 1.Evaluate Gaston?s hiring of Olivia DeCarlo as Aquamarine?s COO and President againstthe backdrop of best practice.? How, if at all, might her process have been improved?

1. 2.What process should Gaston use to develop a short list of executive search firms and what probing problems should she ask of each finalist?

1. 3.Would?you?choose?Warren??????Change?or?Steven?Phillips?to?be?Aquamarine?s?CFO??How?would?you?thinkabout?making?the?trade?off?between??experienced?and?proven??versus??young and?hungry??
3. 4.How would you continue checking references on your chosen candidate for the CFO position?? How much of that process should you delegate?

1. 5.?How?would?you?have?handled the?conversation?with?Albert?Johnson?in?your?office??

How would you have responded to his email?

STANFORD

GRADUATE SCHOOL OF BUSINESS

Ctsn: E?279

DtrB: 10/19/07

JsuNmER GASToN
You're only as good as the people you hire.
Croc, Founder of McDonald's

?Ray

INrnooucrroN
Jennifer Gaston, founder and CEO of mid?sized luxury jewelry company Aquamarine, examined
the necklace she was designing after hours in the company's Los Angeles worlshop. Creating
new pieces ofjewelry always cleared her head ? something she needed while thinking through a
couple of key hiring issues that had recently cropped up. In just six months, Gaston had brought
in a new COO and was about to frnalize a multi?month search for a CFO. Although she had
nearly completed the transfonnation of her executive team, she still needed to thoroughly check
references on the CFO candidate and extend a formal offer. A lot was riding on this position
and, despite the help of an executive search firm, hiring for it had not been easy. Then again,
Gaston thought as she flipped her soldering mask down over her eyes, she had not become an
entrepreneur in order to take the easy route.

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Gaston started Aquamarine in 1995, after matriculating through the Penland School, a
prestigious fine crafts institution, as well as Stanford Business School. Her company grew
modestly for the first three years until she hit upon Aquamarine's trademark aesthetic: thick
intertwining cables of silver and yellow gold studded with a range of large precious and semi?
precious stones. Of her colorful designs, Gaston noted,
like things that are mildty
exaggerated. What is the point of jewelry if no one notices it?" Fashion industy insiders and
top celebrity stylists agreed with her and Aquamarine designs began showing up on models and
actresses. By 2003, the company hit $150 million in sales. At that point, the organization had
200 employees who focused specifically on a high?end line of rings, bracelets, earrings and
necklaces for women. The eight?year?old company had semi?national distribution via ten
freestanding stores throughout Califomia, New York and Florida and also sold its collection
through department stores including Neiman Marcus and Saks Fifth Avenue.

"I

Bethany Coates prepared this case under the supervision of Jim Ellis, Lecturer in Strategic Management, as fhe basis
for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

Copyright @ 2007 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order
copies or request permission to reproduce materials, e?mail the Case Writing Office at: cwo@gsb.stanford.edu or
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? School of Business.
othertvise?without thepermission of the Stanford Graduate
rhis document is authorized

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Jennifer Gaston E?279

p. 2

Aquamarine's impressive growth showed no sign of plateauing. By the end of 2004, revenue
reached $200 million. In the ensuing eighteen months, Gaston's team had broken ground on five

additional locations (including stores in Atlanta, Aspen and Houston), hired another 225 people
and started a men's line of rings, cuff links and money clips. The wholesale channel had
broadened to include luxury boutiques within well?known shopping districts such as Rodeo
Drive in Los Angeles and Madison Avenue in New York City. By mid?2005, Gaston had
ambitious plans to extend Aquamarine's lines for women to include handbags as well as
perfume. She also wanted the company to break into the international market, where brand
awareness was currently low. "Business is accelerating," Gaston commented. "We would be
remiss not to exploit every opporfunity to get closer to our customers."

In order to fund the expansion she had in mind, Gaston realized she needed to raise growth
capital. The company's success had attracted a number of venture firms over the years, but
Skyline Capital stood out from the pack. With $100 million under management, Skyline was
small. However, its founder, Scott Craft, had over fifteen years of directly relevant investing
experience in luxury goods and retail. He originally struck up a professional relationship with
Gaston in 2001. By the time Aquamarine needed capital four years later, Craft knew the
business inside and out and Gaston valued his counsel. In November 2005, Skyline invested
$12.5 million to acquire a minority stake and the company's fourth outside board seat.

Srnncr Wpn n rHE IRoN rs Hor

By October 2006, Gaston realized that Aquamarine needed a President and COO. The business
had become both large and complex enough to warrant adding a sophisticated executive to the
team. Gaston envisioned carving out a key set of roles and responsibilities for this position. The
COO would likely be accountable for managing supplier and retailer partnerships, overseeing
quality control (a critical contributing factor to brand loyalty) and supervising the entrance into
new markets outside of the United States. Gaston wanted most back office functions to report
into this person as well so that she could focus on what she loved doing ? design and strategy.
Only an executive with at least ten yeaxs of experience managing a luxury brand would be
capable of taking on such a wide purview. Yet, a strong resume would not be enough. Perhaps
especially because Gaston still considered Aquamarine to be her "baby," a solid cultural fit was
also extremely important. She had asked a tremendous amount of her employees over the last
several years and she wanted to ensure that her top managers felt comfortable with the new hire.
Gaston noted, "From the outside, most luxury goods companies are sparkling and glittery. On
the inside, they tend to be highly political and emotionally charged. Aquamarine is no exception.
It will take a special manager to motivate and get the best out of what is, admittedly, a quirky
team."
Gaston expected to write a thorough position description before starting a formal search for
candidates. However, that plan changed during a casual lunch with Bob Hall, a trusted advisor
and former professor of hers from the GSB. When she mentioned the type of person she was
looking for, Hall exclaimed, "I have the perfect fit for you. Her name is Olivia DeCarlo." He
went on to explain that DeCarlo had helped run Isla Stark, a publicly?held high end clothing and
accessories company with $600 million in sales and 700 employees, for the last ten years. She
was currently serving as the VP of Operations. Hall had done some consulting work for DeCarlo
five years ago and had stayed close with her ever since. He gave her his strongest

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recommendation, saying, "Jennifer trust me. Olivia is a superstar. She knows how to manage
?
and grow a business like yours ? she will help you take Aquamarine to the next level." He also
told Gaston that she needed to act immediately if she was interested. DeCarlo had been looking
for an exit opportunity from Isla Stark and was days away from accepting an offer to help run thI
beauty and fragrance company Clarins Group USA.

Later that afternoon, Hall forwarded DeCarlo's resume to Gaston, along with an admonition to
"Call her today. She is too good to let slip away. I told her to expect io hear from you." Her
offer from Clarins expired in the next 48 hours. As Gaston quickly glanced through DeCarlo,s
?b"i"g
C.V., she agreed that it was impressive. In fact, it was close to
perfect. DeCarlo had
worked in her own family's accessories business for five years beforrlf *ur acquired by Isla
Stark in 1994. Since joining the larger company, she had quickly moved up the ranks and
ultimately oversaw the management of operations, sales and marketing as well as the
development of Isla Stark's online store. She had also spearheaded the company,s launch into
Europe, opening stores on the same day in Paris, Rome, Geneva and London. According to Hall,
DeCarlo was tired of constantly trying to appease Wall St. and wanted a change.
Gaston picked up the phone to call her. It furned out that DeCarlo was in LA on business and
she agreed to meet Gaston for an interview over dinner that night. The meeting lasted for three

hours and gave Gaston the chance to question DeCarlo about her professional results, her
thoughts and early recommendations on Aquamarine's expansion and her future professional
goals. At the end of the conversation, she phoned Hall back and said, "f owe you one. Olivia
has the right experience and drive for the role. She would be a terrific addition to the team." fn
order to get a second opinion on this important decision, Gaston asked Marcy Redding,
Aquamarine's lead designer, to have a one?hour follow up phone call with the candidate the neit
day. Redding, who managed over 50 designers, emailed Gaston afterwards, saying, ',The
"perfect" candidate never exists (at least when you want her to). But Olivia is a pretty great fit.
Only question mark ?will she be an effective team player?,,
The same question had popped into Gaston's mind, and made the need to rush through the
decision somewhat troubling. The time pressure prevented her from digging deeper into a iew of
DeCarlo's explanations about how she had achieved some of her results while at Isla Staxk.
Without being too obvious, Gaston had given DeCarlo multiple openings to mention her team's
contributions. For example, she had asked about the expansion into Europe and their successful
exploitation of a new channel things no one person could complete in isolation. yet,
DeCarlo's answers to such questions typically included comments like, "There is no magic speli
for this ? it's about rolling up your sleeves. I just set aggressive interim and long?term goals and
worked extremely hard to reach them."

?

Although Gaston's gut instinct was still to snatch DeCarlo up before another company did, she
had made the mistake of bringing in "go?it?alone" people before. Nine months ago, she had hired
Emily Knauss, a new sales director, after one terrific interview. Gaston recalled:

Emily felt like a younger sister to me and she was a go?getter. She wasn,t a
natural team player, but I thought I could mentor her. Unfortunately, she did not

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click with the designers ? they felt she constantly stole the limelight. I had to fire
her after two quarters and never should have waited that long.
Nonetheless, Gaston decided that, for having no warning or preparation time for the interview,
DeCarlo was remarkably well?spoken and thoughtful. At the end of the dinner, DeCarlo had
said, "This is exactly the kind of opportunity I was hoping for at this stage in my career. Ideally,
we'd have more time to get to know each other, but I'm willing to take a chance on you if you;li
take a chance on me."

Aside from some quick emails keeping them apprised of the situation, there was no time to
heavily involve her seven?member board in the decision. Gaston noted, "For one reason or
another, there will always be tough calls that CEOs have to make alone." Thfuty six hours later,
Gaston offered the position of President and COO to DeCarlo. Given the rush to come to a
decision, it had not been possible to sort out all of the details ahead of time. The offer letter
stated that 'Job responsibilities will be fully enumerated during the frst month of employment."
Unphased, DeCarlo said, "Look, yomg, fast?growing businesses have to do things bythe seat of
theirpants all the time. It just goes with the territory." She happily accepted the offer.
Nunannn CnuNcrmlc

In November 2006, it became clear that Aquamarine's Finance team was under?resourced and
lacked strong leadership. Scott Craft had been asking for detailed reports on same store
profitability as well as the financial cases for breaking into the European and Asian markets. At
the same time, DeCarlo, who had been with the company for a month, voiced a need for better
data with which to analyze business and accountJevel growth and profitability. All of the

requests were perfectly appropriate, but the information was not readily available and the finance
team was too stretched to take on additional projects.

Gaston concluded that the company needed a seasoned CFO to fill the gap, but no internal
candidates seemed to quite fit the bill. Aquamarine's Controller, Albert Johnson, came closest.
Johnson was a strong accountant and more than willing to accept direction and execute. He had
been with the company for six years, starting as a financial associate, and Gaston thought of him
as a solid member of the division. However, she wanted an executive who would takJproactive
ownership of the finance division and provide a strategic perspective to her management team.
Unfortunately, Johnson did not have the requisite level of experience yet. Nonetheless, upon
hearing nrmors that the company was going to hire a CFO, he scheduled time on Gaston's
calendar and asked ifhe could be considered.
During their meeting, Gaston explained:

Albert, in the interest of finding the best possible fit for this position, I have
decided to open the process to outside candidates. You are doing a terrific job as
Controller and I value having you on the team. However, it is important for the
company is to look at a range of people ? both experienced candidates and those
with very strong potential.

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Later that day, Gaston began thinking through how to source a qualified pool of contenders. She
noted, "Finding tlre right managers for key roles is really tough. Frankly, I'm wrong about
my
hires almost as often as I am right." Gaston figrred that she should retain a search firm to run
the process for her, but she was not sure how to interview firms or select a short list. Skyline
Capital had worked with Search Right (SR), a regional firm with a sole, large office right in Los
Angeles. Scott Craft said, "We have sourced some of our strongest executives through SR. In
this case, using a smaller firm is smart because they will view Aquamarine as
a largelfient and
devote a lot of personalaed attention to you." Marcy Redding had connections at a firm called
Morgenstem Summers (MS), but recommended doing some additional due diligence on them
first since they had "migrated away from luxury goods companies in favor of intemet ventures.n,
Gaston had also seen a recent Business Week article entitled: Want Results? Work With These
Top Ten Executive Recruiters. The piece listed a large international firm called Smart Fit (SF)
in
the top spot due to their "unparalleled access to top professionals in the retail, cons'mer gooar,
banking and telecommunications industries as well as their evident mission to 'provide unrivated
client support from ince_ption through successful completion of the executive search ptrocess.,,,
Gaston did not know of anyone who had worked with SF before and realized that she would
have to cold call their general number for more information. She was tempted to settle on SR
because Craft had already worked with them, but hesitated in case there realiy was a meaningful
difference between firms.
As a starting point, Gaston asked Jen Noble, the HR director, to call S& MS and SF, as well as a
few of the other the firms listed in the Business Week article. Noble agreed to ask each outfit to
send pitch books within the week. Gaston also emailed Jeff Lindley, a former GSB classmate
who had briefly worked as an executive recruiter in Europe. She typed out a list of questions she
wanted to pose to any firm in the running and then asked him, "should these be edited? Am I
missing anything?"

A Fnw Goon Mnu
Gaston ultimately hired Search Right in December 2006. By the end of February 2007,David
McCallum, her lead contact at SR, had presented her with 20 possibilities for the CFO of
Aquamarine. They used a two?step process over the next week to narrow down the field. First,
they focused on tangible results listed within resumes and cover letters (e.g. a ren percent year?
over?year cost reduction in General and Administrative expenses). Secondly, they looked fot
compelling rationale regarding why the candidate wanted the position Aquamarine did not
want to become negotiating leverage for someone targeting the CFO position at another
company. Other factors had some subjective impact, including the number of years in one's
current role, the size of the otganization managed and the quality of the companies for which one
had worked.

?

At the end of this preliminary process, Gaston and McCallum had narrowed the field down to 12

applicants. McCallum then screened out an additional 6 candidates during telephone interviews.
He crossed most of those off the list due to the level of perceived interest they indicated in the
role, whether they exhibited what he called "executive presence" during the conversation (e.g. a
confident, highly professional leadership style), and his take on their ability and inclination to
work in a chaotic, constantly evolving young?company environment.

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Gaston and McCallum then set up second?round in?person interviews with the remaining
slate of
executives. Gaston asked Redding, the design director, and Noble, the HR director, to jiin them
for these' The team of four planned to conduct structured interviews each candidate would
?
meet with every interviewer. Gaston, McCallum, Redding and Noble had unique lists of
questions that they would ask each candidate (with the intention of comparirrg
?rr r.rs later).
The list of questions included:

t Why were you selected over other candidates for your current role?
o The CFo position at Aquamarine requires both high energy and delicate interpersonal
r

skills ? how strong af,e you on those dimensions?
What are you best at? What would your subordinates say you are best at? Superiors?

After the second?round interview, Gaston and her colleagues narrowed the slate down to three
professionals. Each was asked to retum for a final interview. This third session was designed to
be free form and informal, so that they could get a "better sense of fi1." Gaston, DeCailo and
Craft, from Skyline Capital, did the interviewing.

After later comparing notes, they limited the field to two high potential possibilities: Warren
Chang and Steven Phillips. The two men had outstanding bui very difierent credentials to
recommend them. Chang, currently the CFO of Decathlon, a $1 billion public sporting goods
company, was in his mid?50's (see Exhibit 1). He had been CFO during?a 4?yen pe.ioa?wnen
the company's sales doubled. He had also orchestrated its successru IpO
lstrares jumped 12
percent during the first day of trading). At first glance, it seemed clear that he was well?rs arded

amongst his colleagues and counterparts who worked in casual lifestyle retail establishments. As
a case in point, he was invited to give an annual address at the prestigious "Retail in America,'
conference ? a meeting that drew thousands of merchants every year.

Chang appeared to understand the value he would bring to the role he had already tried to
?
anchor Gaston and, Craft on a compensation package significantly above Aquamarin!'s upper
range. In addition, he commented that his teams had always been a critical part of his succlss
and, in the event that he was selected for the position, he wanted his current bontroller to come
with him to Aquamarine. Putting some of the details aside, Gaston liked the fact that Chang
would hit the ground running as a CFO. He had already been through the types of growing paini
that Aquamarine was experiencing and would, she felt confident, be ableio predict and handle
the relevant challenges sure to arise as the company continued to grow over the next several

yeaxs.

Yet, Gaston was also impressed with Steven Phillips. Phillips was in his mid?30s, but already
had a successful professional track record (see Exhibit 2). He started a business while attending
Princeton University, ffid then graduated Phi Beta Kappa in Chemical Engineering. H;
subsequently joined the analyst program at Goldman Sachs and was ranked uith. top?of his
class. After three years, he left to attend the Stanford Business School and then went on to join
Morris Phelps (MP), a prestigious private equity firm. While at MP, he stepped into a ?few
portfolio companies to straighten out their finance departments and also once served as the
interim CFO of a luxury apparel company called Siena for eight months. Despite the glowing
resume, Gaston knew that Phillips had less relevant experience and would requir?e morE

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handholding initially. On the other hand, he...