When looking for C-level executives, from the chief technology officer to the chief human resources officer, boards must think carefully and strategically about the traits required for each position. One of the most difficult positions to hire for is the chief executive officer. The CEO must have the ability to make informed decisions at the drop of a hat and be able to keep tabs on all facets of a business, all while learning how different departments interact without actually becoming too deeply entrenched in details.
Trying to hire a new CEO quickly can result in choosing someone who is not an ideal candidate. In a perfect world, the board and other decision makers would take the time to clearly identify the goals of an executive search and create a search committee from people with varied, yet directly applicable expertise. When creating a candidate pool, it is important for decision makers to realize that the performance of a CEO is not the only deciding factor in the company’s success. They must also identify the trade-offs they are willing to make when creating a candidate pool. The decision of whether to hire an insider or outsider candidate, for example, would be affected by the group’s willingness to compromise.
Unfortunately, the ideal process is often derailed by the pressure to make a decision quickly, which distracts boards from approaching the process in a systematic fashion. Brash decision making, however, results in bringing on CEOs who do not have the skills needed for the position or whose visions do not align with those of their respective boards.
The following suggestions will help boards avoid some of the most common pitfalls when searching for a new CEO:
Complete an organizational introspection
The importance of organizational introspection cannot be overemphasized. When a company needs to choose a new CEO, it has the chance to evaluate its performance and diagnose some of the problems that may be holding it back. Pressure to choose a leader comes from several sources, from other executives to investors, and some boards will identify candidates without taking any time to look at what the company actually needs in a leader. How can a board identify the best candidates if it doesn’t understand what sorts of candidates the company needs?
Before engaging in an executive search, boards should develop a clear statement about where their companies have been and where they want them to go, complete with the steps necessary to get there. Then, boards can think about the types of skills and experiences they want in a leader. Perhaps the profile is not much different than that used to hire the last CEO, except that the former CEO did not exactly live up to expectations. What, then, can boards build into the search process to ensure that they don’t repeat this mistake?
Through organizational introspection, boards can identify the major demands of the CEO position as the company grows. Stating the demands of a position is often a more helpful way of judging a candidate’s ability to perform than making a laundry list of desired qualifications.
Elect an effective search committee
When creating a search committee, some boards will focus primarily on directors and other key decision makers because these individuals have the experience necessary to distinguish between acceptable and questionable candidates. However, individuals in these positions of power also struggle with time management and typically have so many responsibilities that they cannot possibly put the necessary time needed into an executive search. The demands on their schedules often lead to a hasty, and sometimes uninformed, decision.
While directors are important members of an executive search committee, the truly key members are those with a deep understanding of the company and its history. Directors typically only receive small amounts of information at quarterly meetings, therefore they cannot possibly make decisions that take into account the singular peculiarities and understated strengths of the company. Search committee members must have a clear vision of the future of the company and the challenges that it will face.
Directors can, however, contribute to the executive search by bringing in particular expertise. Ideally, the search committee consists of directors from a variety of different functional areas who can weigh candidates based upon each director’s particular experience.
Create a large candidate pool
The third common pitfall is creating an incredibly narrow candidate pool. Boards typically realize that CEO succession is an opportunity for great organizational change. However, when the time comes to define a candidate pool, they use very conservative selection criteria and thus create a very narrow pool of candidates who are unlikely to institute the type of change needed. One of the most common requirements is previous experience as a CEO. This requirement may seem logical, but it leads to an extremely narrow pool.
Another way that the candidate pool becomes overly narrow is through preoccupation with outsider reactions. Boards worry about what members of the business media or market analysts might say about a decision and therefore begin to emphasize the importance of a candidate’s prestige in a manner that severely limits the candidate pool. Prestige should never take precedence over a balanced discussion about a candidate’s qualifications to lead the company. Gil Amelio was brought on as the CEO of Apple largely because of his prestige, and while the hire caused the stock to rise momentarily, the poor fit ultimately caused both the company’s performance and his reputation to suffer.