Turnover rates for CEO leaders have been somewhat high for the past few years but not surprisingly, at least one third of turnover is related to poor performance. In other words, these CEOs were forced to resign because they did not meet their business objectives. When this occurs, it’s my experience that the CEO has only been in place for approximately 18 months. In fact, in more cases than not, the individual hired was not the right fit in the first place.
Still other CEOs are asked to resign as a result of financial improprieties, disagreement with a board, or serious charges of personal improprieties such as sexual harassment. The recent story of Hewlett-Packard CEO Mark Hurd who unexpectedly resigned following a sexual harassment probe is only one example of this type of resignation.
Unfortunately, however, these terminations are often a shock to both employees and investors. The terminations also typically have a significantly negative impact on the finances of an organization. For instance, it was reported that shares of HP plunged 10% immediately after the press release regarding the resignation.
Needless to say, the task of recruiting a new senior leader at the CEO, CFO or COO level is probably one of the most daunting tasks an organization might encounter. The consequences of a poorly conducted search are huge, as not many organizations can afford the loss of public support or an unexpected financial crunch.
Conducting an executive search for a CEO requires a very systematic approach beginning with the establishment of a small objective search committee consisting of members of a board. The selection committee must be briefed on the search process, support a thorough approach and respect the time it will take to find the right candidate.
One of the first tasks of the search committee is to establish the skills and competencies required by a new CEO. This is not as easy as it seems because each member of the selection committee will have their own view. The committee needs to hold an intense discussion on the skills and determine a final set of competencies that can be used along with the recruitment tools. As well, staff input at the senior level is quite common and requires individual interviews. Staff involvement will also help these individuals accept their new CEO as they are aware of the qualifications requested of each candidate. Finally, the committee must ensure that the CEO job description is up to date and that the key objectives for the first year of tenure are well known.
The next biggest challenge for a selection committee is evaluating the candidates who are brought to their attention. It is important that a number of steps be undertaken at this stage of the selection process. This includes face-to-face interviews with the committee, perhaps a presentation of some kind, a tour of the organization, introduction to other members of the senior management team or dinner out with the president. Some of these steps are not finalized until candidates have gone through some form of initial screening.
Once the selection committee has narrowed their candidate list to approximately three potential candidates, it is important for these candidates to participate in a psychometric assessment process. There are a number of online tools that assess communication and leadership skills and styles as well as emotional intelligence and problem solving skills. These are then matched with the competencies the committee selected.
Importantly, a final decision needs to consider what is called, “organizational fit”. This means that the personality and leadership style of the new CEO must fit within the culture of the organization. If the selection committee deliberately selects an individual whose direction is to change the culture, then the organization needs to be aware of the tough changes and challenges that will soon come into play. The new CEO must be supported through this change as it is well known that culture always wins.
The best way to reduce the risk of CEO turnover in your organization is to prevent it in the first place. A solid executive search process is the first key step.
Research and review by Candace Weselowski, Legacy Bowes Group.
About Paul Croteau:
Paul is known as one of Manitoba’s leading executive search professionals. His more than 25 years of experience in the recruitment of senior management and executive leadership professionals are the foundation to his solid reputation for developing a deep understanding of his clients’ needs, enabling him to provide exceptional service and successfully meet the complex challenge of matching the right leader to his clients’ business needs.
Paul is a Certified Management Accountant (FCMA) and holds a Bachelor of Commerce degree majoring in accounting. Paul has extensive experience in all phases of executive search and has established a solid reputation in the national marketplace. Prior to joining Waterhouse Executive Search Partners, through KPMG and a local independent firm, Paul twice developed the largest and most successful executive search firms in Manitoba providing services to a variety of industries.
Paul has completed numerous executive “C” level and general management searches for a variety of organizations across all disciplines. Some of his clients include prestigious organizations such as the City of Winnipeg, Manitoba Blue Cross, Manitoba Teachers’ Retirement Allowance Fund, Wawanesa Mutual Insurance Company, CanWest Global Communications Corp., the Canadian Wheat Board, the Asper, Jewish and Winnipeg Foundations, Rice Financial, MGI Securities Inc., HED Insurance and Risk Services, Canadian Association of Agri-Retailers, Wildcat Exploration Ltd., The University of Winnipeg Foundation and Kraus Global Inc.
This article initially appeared in the August 29, 2010 edition of The Winnipeg Sun.