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How to select the right CEO to upscale your business

How to select the right CEO to upscale your business

One of the most important assignments for any Board of Directors is to hire the right CEO and the right supporting executives. This is not an easy job. Most boards are left frustrated after completing the processing of hiring the CEO. The frustration stems from the fact that the person fails to deliver as expected. More frustrating is that generally, Board members may not have consensus on what performance for a CEO looks like. They may also not have a consensus on what failure or non-performance is for the role of a CEO. When the Board has no consensus on these issues company performance deteriorates very fast. If the Shareholders are vigilant the Board will be fired. How then can Boards hire the best candidate for a CEO role? “Just three in five newly appointed CEOs live up to performance expectations in their first 18 months on the job.” Eben Harrell, “Succession planning: What the research says,” Harvard Business Review, December 2016, pp. 70–74, hbr.org.

  1. The first step in hiring a great CEO is to agree on what they will be doing. The job profile of the target CEO needs to be done thoroughly. Boards have the tendency to copy generic job descriptions from other companies or from the internet. How do you get the right profile for the role? You may need to interview Board members {provided they have an in-depth understanding of the business and where it is going}. This information should be combined with what scientific research says about successful CEOs. The other way is also to look at literature and what it says about CEOs that failed. Do they have a certain profile? Once you find the profile of unsuccessful CEOs you can then avoid hiring one.
  2. In the job profile avoid overemphasising experience as experience has no relationship with performance. Some organisations miss exceptional talent because in the job profile they have put requirements such as; 10 years experience at the CEO level. In an article by Alison Beard {Harvard Business Review}, she reports on a study by  Chad H. Van Iddekinge {et al}  of Florida University, they reviewed 81 studies to investigate the connection between an Individual’s prior work experience and performance in a new organisation.  The results are revealing; they found no significant relationship. What is even more worrying is that even in cases where people had worked in exactly the same role in other organisations, they found no significant relationship.  What this means is that scientific research shows that candidates who have more experience do not perform better than those with less experience in a job.  What this means for employers is that they do not overemphasize years of experience when hiring as that has no relationship with actual job performance. Most employers prefer to put arbitrary experience requirements that are not backed by research. This makes the selection process based on this criterion more unstandardized leading to the selection of the wrong people for the job.
  3. Do not put unrealistic educational requirements. Remember years of eduction only contribute 1% to job performance variance. As people move into senior roles their technical knowhow matters less and less. What you need is a visionary capable of executing your strategy.  You do not necessarily need a miner to run a mine.  You do not need a medical doctor to run a hospital. What would be important on qualifications is to indicate the first degree as a requirement. You may also want to include for example 5 major verifiable achievements that changed the course of business. I notice some put a Masters degree as a mandatory requirement or an added advantage. This adds no value. It does not follow that your best candidates will have a master degree. The situation is worse in Zimbabwe where qualifications are easy to obtain, properly or fraudulently. There is no added advantage in demanding a Master degree for a CEO role.
  4. You need to consider first time CEOs. There is a tendency to want to hire people who are already CEOs. There is a pool of talented people at the executive level who are never given a chance to be CEOs. As a board, you must always give opportunities to people at the executive level who have never been CEOs as long as they are capable
  5. After shortlisting your CEO candidates based on their CVs, take them through psychometric assessment to check if they have the cognitive power and the right personality to handle the role. It is bad practice to start with the interview then send people for psychometric tests.  Research shows that the interview methods on average only explain 8% of the variation in performance. This means that if you hire 100 people using an interview there is a chance you will find only 8 of these people being good performers despite your interview results have confirmed all the 100 candidates as performers. 
  6. After psychometric assessments, the successful candidates must then be taken through assessment centers. In an assessment center candidates goes through simulations of the target role, in this case, the CEO role.  They will be assessed in those simulations by trained assessors. Some of the exercises are role-playing, leaderless group discussion, presentation and the in-basket exercise. In the assessment center, you are now assessing a variety of leadership competencies required in the role.
  7. The last important part is the interview. Given the shortcomings in an interview doing it as the last part reduces your risk of hiring the wrong CEO. You would need standardized questions and a standardised environment for the interviews. The people who will be part of the interview panel  need to be trained so that they are equipped with interview skills

This process above will ensure that you get the right CEO for your organisation. Remember good CEOs tend to hire good lieutenants as well.

Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 4 481946-48/481950/2900276/2900966 or cell number +263 77 2356 361 or email: mnguwi@ipcconsultants.com  or visit our website at www.ipcconsultants.com

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