Read: Contact Magazine Summer 208/19
The failure of a CEO can come as a surprise. This candidate was selected because they felt like the right fit for the company. The executive team naturally gravitated towards them. Their attitude was positive and their values aligned with leadership’s. The owner had a ‘gut feel’ this person was the right choice. So, why didn’t it work out?
To avoid costly errors in judgement and find the best CEO for your organisation – rather than the one you like the most – we recommend the following objective strategies.
1. Replace emotion with reason
You cannot hire the right CEO if you’re unclear about your organisational strategy. Before meeting any candidate, the Board and/or executive team must reach agreement around the organisational direction. In understanding the organisational direction, a profile of the best CEO will emerge. For example, a company looking to make significant acquisitions as part of its growth strategy will require a CEO who is a bold visionary and great integrator. In contrast, a company focussing on its core business may seek a CEO with deep industry and operational experience.
To remove unconscious bias in the candidate selection process, the Board and/or the executive team must agree on the company’s future strategy and the competencies the CEO will require, and then determine how these will be assessed and evaluated objectively in each candidate.
2. Look past loyalty
Many companies lose sight of the need for the ‘right person for right now’, and hold onto a CEO who has shown great loyalty to the business but is no longer the right fit. Given the CEO is typically a long-term ambassador for the organisation, it can seem counter-intuitive to let a loyal one go. However, intuition stems from the emotional, right side of our brain, and although many successful businesses were launched off the back of a hunch or a ‘good feeling’, today’s organisations must make savvy decisions based on business insights and a deep understanding of the current phase of the organisation.
Selecting a CEO is not a one-size-fits-all exercise. It’s critical to match a CEO to a business. The best start-up CEOs are often founders, thanks to their passion, focus and audacity. However, if an organisation is seeking an alternative CEO in the start-up/entry phase, qualities to look for include:
- leader and learner
- experimenter and innovator
- risk-taker and change-maker
- gutsy decision-taker
Although founders make excellent CEOs in the entry phase, they often have little or no experience in leading larger, more mature businesses in their growth phase. Here, the role of leader changes from inception to execution, and from development to scale. The traps and challenges for a founder-CEO who was once innovative can be complacency, rigidity and consistency. In the growth phase, qualities to look for include:
- motivator and cheerleader
- connector and enabler
- advocate and role-model
- big-picture thinker and agile decision-maker
- champion for customer/client
3. Risk a fresh perspective rather than bank on a familiar face
The challenge of whether to hire a CEO from outside the organisation, or promote someone internally, can only be addressed by going back to your organisational strategy and considering the qualities you need in a CEO at this moment in time. Research shows that both external and internal candidates can perform well in the role.
Whilst research suggests that external CEOs outperform internal CEOs by a margin of about five to one, the overwhelming majority of top-performing CEOs are actually insiders. High performing outsiders bring a fresh external perspective and a willingness to challenge the status quo. Insiders have the advantage of understanding the organisation’s ethos, and knowing the key players to influence in order to drive innovation and growth.
When considering an internal candidate you might ask: Are they progressing as expected in their current role? Is it time to stretch them? Do they have the right experience to transition into this new role? And most importantly, are they – and the team - ready for this new challenge?
Looking for a candidate from outside the organisation requires a different set of considerations. Does the organisation need a fresh perspective? How do they compare to our in-house talent? Are we willing to be challenged?
If you can marry the dispassionate objectivity and readiness to make change of an outsider with the understanding of the organisation and power to influence of an insider, your organisation will benefit from the strongest skills of both worlds.
4. Don’t let the charming CEO overshadow the predictable performer
Successful CEOs have only one thing in common: they get the right things done.
The myth of the stereotypical CEO as a charismatic and confident executive who has climbed to the top with an elite school qualification, has been busted by a new 10-year study called the CEO Genome Project. Emerging from extensive research by a leadership advisory firm and economists from two business schools, the project found that just over half of the CEOs who did better than expected were actually introverts.
Roughly half the candidates earning an overall ‘A’ rating when evaluated for a CEO job in the study had distinguished themselves in more than one of four unexpected management traits. These provide a useful blueprint for any organisation looking for a new CEO and include:
- being a people person and reaching out to stakeholders
- being willing to shift course by being highly adaptable to change
- being reliable and predictable rather than showing exceptional, repeatable performance
- making fast decisions with conviction, if not necessarily perfect ones
Making the decision
Selecting the next leader of your organisation is complex. We often see CEOs fall short of expectations because the hiring process not undertaken objectively, with an assessment of each candidate’s skills and experience against business needs. A number of other factors come into play that cloud the executive team’s judgement.
Candidates with confidence, charm, likeability and loyal service may immediately feel right for the role of CEO. However, if you have a strong understanding of what your business stands for, the opportunities and challenges it faces, and the areas it needs to grow, you will have the confidence to think outside the box and seriously consider the candidate you didn’t initially ‘like’ for the role.
If your organisation is considering making a critical hiring decision such as appointing a new CEO, Pitcher Partners can support you in the recruitment process. Please get in touch with your Pitcher Partners contact.