This post is the third of a five-part series on best practices in CEO succession. The purpose of the series is to share some of the insights I’ve gained while helping companies manage the messy, sometimes confusing terrain of CEO succession.
Question 3: What Criteria Should Be Used to Select a CEO?
If you could create a list of the top 10 CEOs in the last decade, my guess is they would seem to have very little in common. There is no magic list of competencies, personality traits, or characteristics that can be used to separate the winners from the losers. (But you know me, I like a challenge. I made a list anyway.)
The variety in profiles of successful CEOs stems from variety in business profiles: the best CEOs are the ones who fit their environment well at the time they are hired. Sometimes that means being kinder and gentler, sometimes that means being able to make very difficult decisions very quickly. As a result, hiring a new CEO requires a careful examination of the company’s current state and its future needs. Then the task is to carefully choose from among the available alternatives. A common mistake is to just hire someone who can run the company in its current state. This is not enough. The best CEO candidate is the person most capable of navigating the gap between where the company is today and where it needs to be in the future.
Though a magic list of universal CEO capabilities doesn’t exist, there are 5 areas that should be considered absolutely non-negotiable when it comes to evaluating a future CEO. These five areas are not all created equal, but they are all necessary. In order of importance:
The Five Essential Success Factors for CEOs
- Trusted by the board. Whether hiring from the outside or promoting from within, the entire board must trust the new CEO. If there are any doubts, keep looking. Period.
- Respected by peers. Being liked by peers is not necessary, but being respected is essential. Co-workers, industry colleagues, and even competitors can be invaluable resources for assessing talent. Think of any successful CEO in any industry, and I guarantee it: she may not be liked, but she will be respected.
- Impeccable integrity. As the organization’s face and voice, the CEO must be absolutely trustworthy. When problems arise or opportunities present themselves, having a leader who consistently takes the high road is an excellent recipe for long-term success.
- Vision for the future. A significant portion of the CEO’s time should be spent thinking about and focusing on the future. Let the COO take care of today, while the CEO plots the course ahead. This is the most common roadblock for a COO being promoted and it represents one of the most common mistakes when promoting from within. The CEO needs to know where the company should be in the next 5 years.
- Industry knowledge. At the core, a CEO needs to understand the value a company brings to the marketplace. A deep understanding of the company’s market, its history and the company’s market position is essential for moving the company forward. Having a deep knowledge of the industry is how the CEO will know why her vision for the future is right, but more importantly it will show her how to get there.
You may have things to add to my list, but if you look closely they can probably be learned on the job. Keep in mind that no matter who is hired, she will be learning on the job because no other job is quite like that of CEO and no company is quite the same as the next. The bottom line is that if a candidate is missing any of the five success factors listed above, then she is likely to fail and you are better off continuing your search.
Stay tuned for the next post, Question 4: How transparent is the succession process? In the meantime, I would love to hear about readers’ experience on Question 3. Would you exclude any of the five success factors? What factor do you think I missed?