In a recent report carried out by Chad Harrison International, we assessed what men and women both value from a leader. There were a number of important qualities that were highlighted. The most important of which was communication, closely followed by the ability to inspire. Other traits included the ability to delegate, confidence and a positive attitude.
Whilst every organisation’s ethos and requirements differ, appointing a new CEO that encompasses the core qualities of a top-level executive is, therefore, very important. Choosing a new CEO is the single most important decision a board will make. The appointment impacts a company’s strategy and financial performance. Consequently, organisations should have a process a three-tier strategy, which begins with internal succession planning, includes the external search and selection process (either as a successor or an emergency replacement) and concludes with the appointment.
Prior to a CEO leaving their position, companies should be outlining and implementing a succession plan. The average median tenure of a Fortune 500 company has fallen from 9.5 years to 3.5 years over the past decade. Furthermore, in a survey by PricewaterhouseCoopers, nearly half of board members are dissatisfied with their companies’ succession plan.
Many organisations don’t begin a succession plan until the last year of a sitting CEO’s tenure. Boards, like CEOs, are busy, and outlining a succession plan doesn’t influence the day-to-day business so the task often falls to the side. Similarly, depending on the relationship with the Board, CEO’s are so focused on driving their agenda and creating their personal legacy, that they often tend not to broach the subject with the board. Subsequently, it doesn’t leave enough time to prepare the internal and external process and often, it is the incumbent’s heir that is the only viable option.
More often than not, a company without a succession plan will struggle in the years following a CEO resignation but it’s not the same for all. Successful Boards do several things that many others don’t:
1. They clarify the key skills, traits and qualities required for that business at that period of time
2. They regularly benchmark candidates internally and externally against successful CEOs on the market
3. They assess candidates’ track records, industry knowledge and whether they have been tested internally or externally with tough assignments /projects
4. They keep an open mind about where the best candidates will come from and more often than not find fresh non-industry knowledge can have a competitive edge
5. They don’t look for perfection
6. They outline a plan for finding the right candidate
7. They are continually developing a slate of strong internal CEO candidates on a regular basis.
Succession planning is a task that occurs over a long period of time and is something that requires regular maintenance. It doesn’t work if it is drawn up and left as a rigid and stagnant framework. It must be viewed as an organic task that is constantly evolving as the company progresses. Subsequently, internal candidates that are being prepared for the position will change over time and their expectations/motivations may alter. It can never hurt to have a back-up and it’s worthwhile assigning a select team of board members to be responsible for the search.
Using a brand ambassador
When selecting a CEO, it’s also normal to consider external candidates for two main reasons, they bring a wealth of diverse experience to the business and they also act as a benchmark against internal candidates that are in the running.
Strong boards usually have a talent pool of candidates that could take up the position of CEO should the need arise, but they will also be aware of the capacity in the available market. Instead of rushing a decision to place an internal candidate immediately, a good Board takes a step back and lists the requirements of an organisation in the short, mid and long-term. This helps define the process of appointing a CEO and understanding the type of person required.
Finding external candidates for senior roles in a business is never easy but a succession plan framework will facilitate the process and potentially eliminate the need to source externally. Once in place, choosing brand ambassadors to represent a company and source the right breadth and level of candidates can be considered to either fulfil the requirement or provide benchmarking to the internal applicants.
A good brand ambassador is normally a consultant that works for a global executive search company that has the experience and network to provide the organisation with comparative candidates who can be benchmarked against internal prospects.
A good brand ambassador will be able to utilise an extensive, global network to source candidates. They will do this by understanding the company, it’s culture, it’s challenges and the requirements of the organisation then accurately representing the values, ideals and requirements of the organisation in question to the market either confidentially or publically, both having their advantages and disadvantages. Additionally, as well as having a well-connected network, a talent ambassador will use various marketing channels to attract the right CEO candidates, presenting a shortlist within an agreed timeframe, whilst also providing intelligent advice on the capacity of the available market.
Identifying the right CEO candidate from a shortlist
Once a shortlist has been defined, it’s crucial to look at the initial requirements once again and ask the question, ‘What are the crucial attributes these candidates will bring to help us overcome the challenges we face?’
Taking on a new CEO is as much about having an organisational leader to take the reigns to manage the challenges as well as having someone with a vision that will push a company forward. Take the retail sector as an example, in order for retailers to compete with companies like Amazon, a strategic leader with expertise in that field is essential. A like-for-like industry may not be the most successful strategy as the challenges facing the industry as a whole may require the expertise from an industry which has been there before and can transfer that experience over.
No CEO selection is risk-free and the results will not be instant but by following some planned steps and seeking advice from the experts, the risk can be mitigated. To discuss your CEO search in more detail, contact Chad Harrison International today.