I firmly believe that there is no decision that an organization makes that is more important than the selection of its CEO and other C-Level executives. Executive selection is more important than ever before, and the costs of high-profile leadership failure continue to grow. If a company can get the right leaders “on the bus” so to speak, then it can execute strategies effectively, and if environmental conditions change, those leaders can smoothly change directions. Remember, if you have the “wrong” leaders, then even a brilliantly conceived strategy won’t matter – your leaders won’t get you there anyway.
Here are some things to keep in mind when thinking about the topic of executive selection:
- Executive turnover remains high. According to an annual study by Booz & Company, the turnover rate at the world’s 2,500 biggest publicly listed companies remains high at 14.3%. Unsurprisingly, the financial sector saw the most blood-letting in 2010, with 5.2% of bosses fired and a turnover rate of 17.2%. In an interesting paper that I just came across, researchers Florian S. Peters and Alexander F. Wagner of the University of Zurich estimated a 25% – 30% probability of a new U.S. CEO being fired during his or her seven-year tenure. http://www.fma.org/Prague/Papers/vcempNov1707-1.pdf
- Many executive selection decisions go wrong, probably at least 50% of the time. Executive failure is common, across industries and across countries. The rate of executive failure for leaders brought in from outside of the organization is even higher.
- Having a logical, objective and data-based process in place increases the likelihood of a successful executive selection decision. Our understanding of the process of executive selection and the tools we use to assist companies in making these choices have improved substantially over time. Using a combination of well-validated instruments such as interviews, personality assessments, assessment centers, competency models, measures of “fit”, 360 data and others typically leads to a more well-informed decision.
- One trend that I’m seeing in the executive selection space is that potential executives (as well as newly hired ones) are already being asked about their approaches to developing their own successors. Thus, from Day One, organizations are sending the signal that CEO’s and other C-Level executives have to take the issue of succession-planning seriously. I’m also seeing more board involvement in these decisions.
- Here are some key questions that should guide the executive selection decision:
- What do we need to know about the role?
- What do we need to know about the company?
- What do we need to know about the external environment?
- What do we need to know about the candidates for the role?
- What combination of methods can we use to most accurately access the information that we need?
- Once we have the information, how do we evaluate it, combine it, and arrive at a decision?
- What constitutes a successful executive selection decision for the company, both with respect to the process and the end-result?
- What “post-hire” developmental support does the company need to put in place to most fruitfully manage the initial executive selection decision?
Having thorough answers to these questions will improve your odds of getting the “right” leaders on the bus, and keeping the “wrong” ones off.