Finding the right fit for the big seat is often a daunting task. Either your CEO has resigned with appropriate notice, it’s a surprise departure due to a sudden personal issue that was not foreshadowed and thus the board is caught unawares, or it’s a termination and the board is fully aware and has triggered the exit.
The clock is ticking. Certain scenarios could be playing out – the seat’s abruptly empty, you’re dodging optics of being in crisis, the company may be in flux – and now the board must move quickly to initiate a replacement procedure.
You may feel pressed to act fast but it’s the perfect time to stop the clock. Choosing a CEO is a decision with long-lasting impact deserving of contemplation, deliberation, and considerable judgement. Stay objective and open-minded every step of the way. Contain any Mad Hatter urgency and instead take a long pause and assess your needs with calculation.
Here are tips that touch on various aspects of the selection process:
Decision makers & advisors
Be mindful when deciding who is going to select your next CEO. Typically, the board establishes an ad hoc hiring committee (HC). This is often comprised of members from the governance and HR committees and includes the Lead Director. It’s the board’s responsibility to construct a team to steer the selection process that is transparent for all members of the board.
Whether the sitting CEO takes part in the process depends on how, why, and when they are departing. If it’s an amicable departure with reasonable notice, the incumbent CEO’s primary involvement is to work with the CHRO to review the internal candidate bench and identify those who should be considered for the top job. The ease of transition may depend on the tenure of your incumbent. A long-serving CEO will have more involvement in the handover due to their depth of understanding of the organizational issues, and breadth and scope of the role.
Meanwhile, if it’s a sudden exit, it may be necessary to appoint an interim CEO from within the organization. Another option is to choose a board member to temporarily cover the CEO role until there’s a permanent hire in place.
CEO selection is a sensitive endeavour. Adhere to strict confidentiality in your communications within the board and amongst your search team. If your CEO has vacated the position, the board needs to notify all relevant stakeholders. An internal release needs to be relayed to employees, and it’s advised to quickly engage with key executives to maintain their commitment to the organization while a shakeup is underway.
Retain a search firm to assist in your CEO selection. These professional agencies are advantageous especially if your board is not prepared for the comprehensive task of a new CEO hiring. A search firm offers focused attention to selection procedures, presents an independent viewpoint, and can bring more expansive awareness to various complexities involved in the hiring process.
Envisioning the new CEO – make no assumptions
CEO selection doesn’t start with the search for candidates. It begins with a laser sharp examination of your company to decern where it’s been, where it’s at, and where it could leap towards.
The board must come to an agreement on what the next leader should look like, which is driven by the HC Committee, but involves the whole board. Consult with the CEO, key members of the executive team, and other key stakeholders to garner their perspectives, ensuring the board has an up-to-date and in-depth understanding.
It is vital to re-evaluate the current market position of your company, its mission, and 5-year strategic plan, in tandem with scrutiny by the board to assess company outlook and tactics, operational strengths and gaps, potential threats, and impactful trends. Following this, consider leadership parameters with an in-depth review of the current CEO role specification that includes job description, competency and capability requirements needed in the new CEO. This is a critical must-do so if the board doesn’t have this in play, make it happen!
When involved in CEO hires, you’ll have a considerable list of hard requirements. It’s essential to identify and pinpoint must-haves and nice-to-haves, as well as to rate must-haves according to importance for use in a weighted scorecard.
Expect to generate several iterations of the CEO profile. No one is the complete package but at the same time recognize that some capabilities are non-negotiable. Consider as well, what performance improvements the incoming CEO can make in the role being vacated.
Refrain from painting a portrait of Superman or Wonder Woman. You might consider someone who has never been a CEO but possesses core leadership attributes and key competencies. With support and guidance, a candidate who is a little outside the box can evolve into a high performer and be exactly who you need.
Having presumptions about your hire doesn’t always play out as expected. A decade long CEO Genome Project studied specific traits of high performing CEOs and revealed widely held assumptions. Data was analyzed on 17,000+ C-suite executives, including 2,000 CEOs. When selecting a CEO, the study found that boards often gravitate toward charismatic extroverts. Self-assured candidates more than double their chance of winning a CEO position, however, confidence is not an advantage in subsequent job performance. The research indicated that introverts are slightly more likely to surpass expectations of boards and investors.
As well, a mere 7% of high-performing CEOs held an Ivy League undergraduate degree, while 8% in the study were not college graduates. It appears that elite education is not a large factor in CEO performance. If you maintain an unbiased stance towards applicants, you may find the right fit is someone flying under the radar. Stay fully objective and consider other industries. Who knows where talent can spring from beyond your preconceived industry borders?
Great expectations: visualize with clarity
A forward-looking abstract of CEO requirements is more prescient than ever as we navigate ever-evolving business ecosystems. You don’t want to design an exact replica of your incumbent’s profile.
What are your next CEO’s competencies? Best-in-class leadership offers resilience, strategic foresight, integrity, reliability, and transparency. It’s a tactician who delegates authority and steers organizational performance, formulates proactive policy, knows to leverage team talent, welcomes divergent views, fosters relationships with key stakeholders, is passionate and inspires others, and hangs tough when making necessary change.
Imagine the best outcome in finding the ultimate candidate but also consider the true realities of the role and the unfeigned circumstances of your company. Seek a true picture of your future CEO and the many moving parts of the job.
The scope of what you may require in a leader can be hard to wrangle into a single profile. You may discern that you need a trendsetting innovator brimming with technical prowess who’s keen to implement a digital renaissance leading to new horizons. But you’d also like a sure-footed, driven leader who’s a versatile Jack or Jill of all trades with finely honed business acumen. Regardless, the best hire must possess a developed skill set which is in complete alignment with pressing company concerns.
Ultimately, you need your new CEO to improve company performance and enhance stakeholder value. You want a leader that is ahead of the curve and can lead transformation. Is it unrealistic to expect to find these diamond traits all rolled into one candidate? Perhaps. Nonetheless, aim high while keeping your feet on the ground when painting a picture of your next CEO.
Based on the organizational needs, relevant adjustments should be made to the role specification, which then informs the remainder of the CEO recruitment process. Having a well-crafted blueprint in place is far more favourable than starting from square one. Go the extra mile to gain the most out of this phase of the process.
Mind the method
You have constructed the ideal profile and requirements of your new CEO. The next step is to develop the methodology and evaluation criteria by which all candidates will be measured in accordance with the requirements.
Create an even playing field by staying in complete alignment with requirements you’ve set out for your next CEO. Don’t fall prey to the “halo” effect. Fight against the tendency to be swayed by the allure of high-profile candidates. Instead, use rigorous, objective, and merit-based methodology to evaluate all candidates, no matter who they are or whatever the level of experience.
CEO succession should include a full battery of leadership and psychometric assessment. Rather than an off the shelf method, leadership assessment protocols should be designed specifically to align to the competencies and requirements sought, so should the development of interview guides with structure and questions; the scoring scale and weighted score mechanism; and generating reference questionaries.
It is critical that your board use the same protocols to evaluate both the internal and external candidates, ensuring an equitable process for all, which increases the probability of retaining internal candidates who were not selected for the top job.
Everyone wants the right fit. But what does “fit” really mean? In our contemporary times, it applies more to a “personal fit” referring to an individual who shares common bonds and interests such as sport or school affiliation. Be forewarned: this is an ill-conceived approach to hiring a leader. Instead “fit” should be used in its original reference to top talent who are in step with your organization’s mission, values, and culture. Recognize the difference and you will stay on track with a genuinely objective and merit-based selection process.
The search is on
Finding, attracting, and selecting the “right” candidate can sound straight forward enough — but only if you’ve done all the necessary preparation work. With the newly developed role specification document in hand, it’s show time.
While a search firm will have a constant pulse on potential targets, ensure your search firm does not rely on a stale list of previous candidates, or simply just go to the low hanging fruit of the more obvious candidates. In order to develop a dynamic, robust, and diverse list of potential candidates, your search firm must engage in a targeted, research focused search to pro-actively cast a wider net to bring you untapped areas of recruitment possibilities.
The risk of hiring the wrong person is well-known. The risk of overlooking the right person is invisible. Using the leadership assessment protocols and interview guides developed specifically for your role, allows you to keep the focus on vital core competencies and characteristics of each candidate, avoiding the self-defeating, “impression-based” practices that often overlooks a candidate’s true ability.
Expect to engage in several rounds of interviews as you winnow the list down to 2 to 3 candidates. Remember that while you are vigorously interviewing candidates, they too are determining if your company is the right fit for them. Allow plenty of time for the candidates to ask questions and ensure that you are well-prepared to answer their questions.
Conduct meticulous referencing. References have categories; (1) safe referees – those who are safe to call and will maintain confidentiality. These are conducted on the 2 to 3 short-list candidates. And (2) critical referees – those referees who cannot maintain confidentiality. This is conducted once the finalist candidate has been provided and accepted an offer. It is important that the search firm gives direction to the finalist candidate regarding choice of referees.
When seeking other people’s insights on your candidate, find those who can speak to different aspects of the candidate’s experience. Include hard questions so that you are not overlooking red flags with potential blowback down the road i.e. What do detractors say about your candidate? Has this executive reached their peak? How do they handle setbacks etc.?
Be prepared to eliminate someone you were championing if reference checks turn up serious misgivings. Comprehensive referencing can also reveal additional talents and capabilities of your chosen candidate that will further benefit your company. Searching for a CEO is a holistic practice, and when done effectively, it will have a disciplined, well-informed, successful outcome for all involved.
Robust CEO onboarding & integration = ROI
The CEO is the most important hire a company makes, and yet not enough care and planning is taken to ensure the CEO is successfully transitioned. All too often the board leaves the integration up to the new CEO and fails to grasp the complex nature of succession. A well-designed onboarding and integration process sets the stage for leadership success by contributing to the CEO’s quick adaption into the organization and its unique culture. If the new CEO has not been a CEO prior, it brings with it a whole new set of expectations, responsibilities, and pressures. It’s no wonder that even the most confident leader can be hit with imposter syndrome.
All of the planning work to onboard and successfully integrate a new CEO starts during the search process, but kicks in as soon as the offer has been accepted. The board, the CHRO, and the incumbent CEO all play a crucial role in the success of the new CEO. The roles of each must be clearly defined.
You’ve found your new leader. The incoming CEO likely has been gifted a handsome hiring bonus along with an impressive compensation package. You are looking for this person to succeed in every way possible in order to get a ROI and a prosperous future for all concerned.
However, the stats on entry success are rather bleak. Corporate Executive Board (CEB) figures show 50% to 70% of executives fail within the first 18 months of taking on a new role. CEO onboarding is a board responsibility that shouldn’t be taken lightly. The role of the board regarding onboarding is perceived as being murky and more often than not, boards do not provide enough support to the new CEO. It’s a fine line to find the right balance between being viewed as too hands-on and being too remote.
There is a built-in tug-and-pull between a CEO’s need to take flight and make their mark versus the board’s role in oversight of the transitory process. Ego is involved too. With the high failure rate in the first 18 months, arguably it should follow that a best-in-class transition period should also last for 18 months, in order to get the company past the danger zone. Declaring an onboarding victory prematurely is all too common and increases the odds of CEO failure.
While intricately linked, clarity is often lacking between CEO onboarding and CEO integration. CEO onboarding is a short-term orientation program spanning approximately the first 90 days of the new CEO’s tenure. CEO integration is a longer period of transition beyond the 90 days.
Onboarding: the first 90 days
This is a crucial time and during this honeymoon period, the new CEO will be feted and tested. To affect a rewarding onboarding process, from the get-go, transition your new CEO with the executive team, board members, other significant leadership roles, and key stakeholders, in one-on-one or small group meetings to get meaningful connections started, build trust, and ignite collaboration.
Being the new CEO does not make you the most competent person in the room. The CEO should meet with key employees individually or in small groups. Ask questions, listen intently, and make note of your ideas and perspectives ongoing, but don’t voice your opinions. Managing the executive team and key relationships effectively will make or break your tenure as CEO — guaranteed.
The CEO will be stepping into an environment where some senior leadership team members may be concerned they will be replaced, and they may already be interviewing in other companies. The team will be assessing whether the new CEO will fit into their culture and be a supportive figure at the helm. At the same time, the incoming CEO aims to swiftly win over the management team, put their stamp on company strategy, and make decisions about key leadership roles. The new CEO needs to expeditiously forge a strong alliance and recognize the capabilities offered by the management team.
Gain an in-depth understanding about the business: the financials, cash flow, the products/services, the people, the customers, and key business challenges. Observe, discover, and encourage. Do not make any big decisions or sweeping changes in the first 90 days. Ask questions – listen, listen, listen is the name of the game.
Integration: 90 days & beyond
Many CEOs want to jump right in and take immediate action to initiate significant change, but time is required to gain a true understanding of what is “really” going on in the organization, not just what people want you to know. As the CEO moves beyond the first 90 days, the focus should now be on the development of new plans and actions. Here are some key considerations:
- Review management team and understand the gaps.
- Verify the company’s competitive advantages and identify potential new ones.
- Revise strategy as necessary, frame actions with defined priorities and deliverables in timeline chunks.
- Discuss new draft plans with the key management team members for feedback and work on their alignment to the new objectives.
- Communicate the overall plan yourself, have leaders communicate details to their teams.
- Harness the full potential of the management team, moving all in the same direction will make a difference for the business.
- Lay down the rules of how you work and what will be expected of them. Communicate well and make sure there are no hidden agendas.
- Finalize plans with KPIs along with a monitoring/evaluation framework.
- Meet with the Board for presentation of the plan, agreement, and sign-off.
- Put the approved plan into action, frequently meet to review progress, and adjust as needed.
- Go for short-term wins, celebrate success, and reward people who go the extra mile.
- It will be lonely at the top. You will need trusted advisors who you can go to for help with tough decisions. Some of these people will be outside of your company.
The CHRO is integral to the transition team, acting as advisor to the incoming CEO with the goal of helping them flourish in their role. Where possible, have your outgoing CEO share leadership insights with the incoming CEO. Discussions should cover operating styles, expectations of senior management, relationships with board members, and key stakeholder relationships including investors, clients, and regulators, among others. Have your outgoing leader provide the successor with knowledge sharing to allow for a smooth transition.
Confusion can reign in the early days of an incoming CEO. If the exiting CEO was terminated or pushed out, they will obviously have no role in the transition. If on the other hand, it is a planned succession, the CEO should be available for a handover period. It can become a tense parody of “Who’s on First?” with two CEOs in the seat simultaneously. Determine whether the new hire is coming in as CEO from day one, or as Number 2 for a specific period of time. In the latter scenario, it is critically important that roles of the incumbent CEO and the incoming CEO both be clearly defined. This scenario is fraught with issues so keep the overlap time to a minimum.
In conclusion, adhering to a proper search and selection process that accurately reflect your organization’s needs, will allow your new CEO to prevail and guarantee success. Ensure your CEO transition covers these four key elements:
- Re-evaluate your organizational strengths, challenges, and strategic objectives.
- Identify new CEO competencies and requirements that align with organizational needs.
- Follow a rigorous, objective, and well-designed search, leadership assessment and selection process focused on requirements to ensure the “right person” is hired.
- Institute a well-planned onboarding and integration program.
That’s a wrap for our CEO Succession Tips double feature. May the path to your next CEO shine bright.
Missed out on Part 1 of our CEO Succession Tips? The value of an ongoing succession plan can’t be emphasized enough. If you’re grappling with what that entails, find our thoughts on transition planning here.
In our upcoming issue of LBI Board & CEO Purview: Look for a special extended edition touching on topics relevant to leadership enhancement.
Facing a leadership change? Lansdowne Board Intelligence will guide you in preparing and executing your CEO selection process. As your consultant, we can assist in determining the right profile for your next CEO. Our job is to help you to align what your organization needs to accomplish with the identification of the required competencies to achieve those objectives. We’d be pleased to discuss your leadership transition agenda and share LBI’s expertise in the critical area of CEO search and selection.
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Lansdowne Board Intelligence is dedicated to helping your organization build diverse boards and leadership teams, optimize board composition and competency matrices, and implement best-in-class recruitment practices that enhance diversity.
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Gillian Lansdowne
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gillian@lansdowneboardintelligence.com
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