The failure of a new CEO can be costly, but many boards still don’t employ a rigorous process designed to identify the best CEO candidates. Given the stakes, boards will want to assemble as much data as possible about potential successors. Fortunately, even the “softer” yet crucial skills that CEOs require—those related to personality, leadership, risk taking and decision-making style—which you used to have to guess at, can be quantified. That’s good news for directors everywhere: data can now be substituted for guesswork and intuition.
Boards charged with the critically important task of selecting a new CEO—one of only a handful of their primary duties on behalf of shareholders—face the challenge of assessing candidates and predicting how they will perform in a position they have never held before. That will almost always be the case with insiders, and most successful boards will promote from within when possible.
Assessment science has advanced to the point where boards can make these predictions with increasing accuracy, gaining a balanced view of the more apparent skills and competencies integrated with the less visible but equally important and still measurable personal traits and drivers that result in a “whole-person view.”
To capture the information you require to make an accurate decision, your CEO assessment process should be based on a few basic principles.
The primary, overarching goal is to assemble a four-dimensional picture of each candidate. This portrait should be based not only on past achievements and competencies, but also reflect a powerful combination of personal leadership traits and motivational drivers to predict future performance.
In addition, those seemingly unmeasurable core traits that get to the essence of who someone really is can, in fact, be assessed—and they must be if someone is a serious contender for the CEO spot.
Finally, development doesn’t stop when someone is appointed as CEO. This is when it’s more important than ever to chart a strategic leadership plan that will provide clarity about key priorities and how to have maximum impact.
Boards have a duty to all stakeholders to identify and vet prospective successors, employing a process that results in a well-rounded view of each candidate’s strengths and gaps, and then supports development programs that will close gaps and create the most capable CEOs and other top leaders.
While identifying an excellent CEO successor is the immediate goal, cultivating two to three generations of CEOs is the broader objective. The best companies link their overall leadership development process to their CEO succession planning process with the understanding that a robust leadership pipeline is essential to sustain the organization into the future.
Five recommendations to guide your CEO assessment process:
- Consider the résumé merely the starting point. The skills and experience listed on a candidate’s résumé are only the most visible part of the picture. The traits and drivers within this person are equally important to his or her success as a CEO; these can and should be surfaced. In addition, boards should assess whether the candidate possesses the skills, competencies and experiences required to handle the challenges of the CEO role.
- Sidestep the extrapolation trap. To assemble the most accurate picture possible, aggregate many data points—from interviews and other exposure to the candidate, psychometric and simulation assessments, as well as from others who know and have worked with him or her. Don’t discount your own experience or what you’ve heard, but make sure it’s properly weighted.
- Avoid the clone mentality. The current CEO may have done a great job, but someone very different may be needed as a replacement, depending on internal and external conditions and challenges. Let the strategy and linked multifaceted profile serve as the “north star” in your plan rather than any preconceived notion of what the next CEO ought to be.
- Recognize that there is no perfect succession candidate. Every potential successor has strengths and weaknesses. Even the best-qualified, best-prepared CEO successors will never be quite ready to step into the CEO role until they’ve done it. Because it really is a one-of-a-kind role, serving as CEO is not really something one can totally prepare for, but strengths and gaps can be identified and readiness accelerated. The trick is to determine which gaps can be adequately addressed in the time available.
- Build on strengths. Close gaps. Strengths and weaknesses are—lack of critical experience or leadership style issues, for instance—and address any shortcomings with the right intervention, such as additional development assignments and an accelerated development program. Early intervention is always better to ensure preparedness. Make sure to match the proper intervention to the gap identified for development.