How to Hire a Great CEO

How to Hire a Great CEO

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“To hire a GREAT CEO, the work must be put in on the front end. That means ADEQUATELY TRAINED INTERVIEWERS, building the interviewing team, an accurate job description, and writing effective interview questions. If you get lazy or take shortcuts on any of these upfront steps, you’re likely to sabotage the hiring results you achieve on the backend. What’s at stake here is the success or failure of an entire organization. It’s worth doing it right!”

– Carol Quinn, Hire Authority, Inc.

There comes a time in the stage of a company where the founding entrepreneur feels an outside CEO may be able to do a better job. Hiring an outside CEO may be one of the biggest and hardest decisions an entrepreneur can make. It is like giving up your baby to someone else. This is something that needs to be done with diligence and there needs to be an elaborate process to hiring a CEO.

Lot of companies go through hiring a CEO without any documented process. This often leads to uncertainty, confusion and a lot of time being wasted which does not help in making the right decision.

Mitch Wienick , President and CEO of Kelleher Associates says, “the process varies depending on the context like size of the company, succession planning within a company, current business situation, anticipated future skills, experience needed to lead the business, etc. But the most common process, involves developing a position description, sourcing-screening-interviewing candidates, developing and making an offer, negotiating an employment agreement and developing an onboarding plan.”

Find below, a process that can act as a guideline when hiring a CEO.

Step 1: Identify the results the CEO needs to accomplish

The biggest mistake companies make when hiring a CEO is that they have no clue what is expected from the CEO. The CEO’s job and the results expected from the CEO needs to be very clearly defined. This brings clarity to the process.

Writing a job description and the results expected from the CEO is often the first step in the recruiting process.

The job description of a CEO varies from company to company, it may not necessarily be a generic job description for all companies. Mitch Wienick , President and CEO of Kelleher Associates who is responsible for performance and business coaching of senior executives says, “companies expect a CEO in collaboration with the leadership team to develop a strategy and business model that creates meaningful competitive advantage.”

On the other hand, Robert Holdsworth, President of Energy Edge Technologies Corporation who recently hired a CEO says, “for the most part, the CEO job description covers everything. He or she needs to take the lead on creating the corporate culture, determining and communicating the vision and direction of the company, managing operations, marketing, revenue growth, setting budgets, protecting profitability and building a strong senior management team. In addition, for public companies, the CEO should have strong public markets experience, the ability to raise capital and knowledge of how to cross-collateralize equity.”

Step 2: Identify the qualities, skills and experience you require in your CEO

The worst thing when it comes to hiring a CEO is NOT knowing what you are looking for. It is very important for decision makers to know exactly what qualities, skills and type of experience they are looking for in a CEO.
Robert Holdsworth, President of Energy Edge Technologies Corporation looks for “leadership, integrity, communication, vision and decisiveness” whereas Mitch Wienick, President and CEO of Kelleher Associates believes in New York Times’s Adam Bryant’s top five qualities of successful CEOs that include “passionate curiosity, battle-hardened confidence, team smarts, a simple mindset and fearlessness.”

Lot of entrepreneurs who have hired CEOs believe passion and vision to be one of the top qualities of a CEO.

Carol Quinn of Hire Authority, Inc says, “as the leader and the driver of an organization, I want a visionary, someone with a powerful ATTITUDE (this goes along with innovation) and someone who makes it a priority throughout the entire organization to ‘get the right people on the bus, in the right seat and get the wrong people off’ (A Jim Collins quote – author of ‘Good to Great’). And yes, that includes the latter portion of the quote about being willing to get the wrong people off and creating a maximum performance organization.”

The other qualities, skills and experiences you may need to look at are relevant industry experience, past experience in running a business and knowledge about marketing, finance and accounting. I personally believe a Good CEO should be knowledgeable about every aspect of the business like accounting, finance, marketing, sales, operations, human resources and should provide great leadership and inspiration for the company.

Step 3: Prepare Interview Questions

This is another important step in the interview process. Most interviewers are not well equipped to know what questions to ask in a CEO interview. They mostly ask questions from a generic template that is same for all work positions. Every question should be asked with an intention to identify the key skills and qualities in the CEO.

According to Carol Quinn of Hire Authority, Inc “every interview question needs to gather information that accurately predicts future job performance. If it doesn’t do that, then it’s useless and a waste of the interviewer’s time.”

She further states that, “some questions can actually cause the interviewer over-rate an applicant’s answer by helping them to spin positive information back. Bad/ineffective interview questions and hiring decisions based on an applicant’s skill level alone are the top 2 reasons bad hires happen.”

It is also important to understand that the CEO interview is a two way process. Just as the company is evaluating the CEO candidate, the CEO candidate is also evaluating the company. Remember, good quality candidates always have more than one option and you want to make sure you are their first option. At the same time, don’t focus on selling your company to the candidate instead focus on identifying whether the candidate has the required skills to be a great CEO.

Robert Holdsworth, President of Energy Edge Technologies Corporation says, “After giving the candidate a good overview of the company, I like to ask, what initial ideas do you have for growing the company and making it a success?”

Mitch Wienick , President and CEO of Kelleher Associates says, “the questions should be both strategy and execution-related, open-ended, narrative-inducing and designed to get a clear sense of the CEO’s ability to effectively communicate with key stakeholders, motivate the organization and drive significant change.”

Patricia Thompson, a corporate psychologist who works with companies and does psychological assessments on candidates for high-level positions says, “A good structured interview can help uncover some of the qualities required in a good CEO.”

She further goes on to say, “I encourage asking questions about their vision for the company, risk tolerance and where they see opportunities for growth within the business (to get a sense of their ability to think strategically and if their perspective is aligned with that of the board). Asking them what they perceive to be the biggest challenges they will have to face in the role allows the interviewer to get a sense of their understanding of the business and their ability to synthesize that information to give a well-informed answer.”

Patricia also suggests behavioral interviewing as an effective way to get a sense of past experiences in specific areas. She says, “Asking about their biggest accomplishments in the past year can give you a sense of their ability to drive results. I also encourage having them describe their strengths and developmental opportunities as a means of assessing their level of insight. If a CEO candidate tells you that her only weaknesses are that she’s too much of a perfectionist and she works too hard, it’s a good bet that she lacks the level of self-awareness required to excel in the organization’s top spot. More general questions to ask include why the candidate is interested in this particular company, what value can he bring to the organization and why this is the right next step in his career.”

Patricia also suggests something very important that is often overlooked. She says, “It is also helpful to ask administrative staff how they were treated by the candidate, as it is never a good sign if someone is only interested in making a positive impression on those who are in positions of power.”

Step 4: Consider doing a Psychological Assessment of the Candidate

Patricia Thompson, a corporate psychologist who works with companies and does psychological assessments on candidates for high-level positions says, “By the time someone is in the running to become a CEO, he or she has probably become quite skilled at interviewing and presenting a positive image. That is why the data one is able to gather by having a psychologist conduct an assessment can be a valuable addition to the process, as it enables the company to get a more in-depth, objective perspective that is less susceptible to being affected by one’s ability to manage his or her impression.”

In explaining the process further, she says “First, an objective assessment of the CEO’s intellect is gathered through the use of problem-solving measures. These are used to assess the candidate’s general cognitive ability, critical thinking skills, abstract reasoning ability and intellectual flexibility. Candidates are also frequently given various personality tests. This way, the psychologist can see the individual’s strengths as they align with the needs of the business and the areas in which he or she is likely to need coaching or assistance. Also, if the individual has certain qualities that are likely to be problematic, the organization can be alerted to this so a disruptive hiring mistake can be avoided. Finally, the psychologist takes the potential CEO through an extensive interviewing process. The interview allows the psychologist to assess the CEO’s insights into himself or herself and others, their judgment, ability to communicate effectively, interpersonal skills, listening ability, executive presence, etc.”

She further says, “I consider the assessment to be a data point that corporations can utilize in making their hiring decision – it should never be the only factor considered when making a decision. Through the assessment I am able to provide a great deal of advice in terms of how the CEO is likely to approach the business, how he or she will interact with people, his or her risk tolerance, work style, level of insight, drive, results-orientation, etc.”

You can download a sample of a personal assessment here to see how it looks like. In fact, this is an actual personal assessment of myself, the author of the article – Vinil Ramdev. {filelink=2}

Step 5: Build a well-trained Recruiting Team

This is another area where companies make a big mistake by having untrained and inexperienced interviewers on their team. An untrained interviewer can be a waste of time for the candidate and the company.

One CEO candidate who did not wish to be named said “One company that did a formal interview with me had somebody on their interview team who didn’t have a clue what was required of a CEO position. I felt like I was doing an entrance exam for an MBA program. This interviewer made a complete fool of himself by asking dumb questions like, what courses did you take in college? How many credit hours did you have in your entire college program? These questions might be relevant for an entry level interviewee but not for a CEO candidate who has several years experience of building solid businesses. This particular company did not know what they were looking for in a CEO. The entire interview was an absolute waste of time.”

Carol Quinn of Hire Authority, Inc says, “As I build my interviewing team, I will NOT allow anyone who has not been adequately trained on how to select the best to be involved. The role of each interviewer must be designated in advance and same with the interview questions. Interview guides must be created ahead of time and include effective interview questions for each of the skills determined to be necessary for success.”

She further states, “ How to hire a GREAT CEO, the work must be put in on the front end. That means ADEQUATELY TRAINED INTERVIEWERS, building the interviewing team, an accurate job description and writing effective interview questions. If you get lazy or take shortcuts on any of these upfront steps, you’re likely to sabotage the hiring results you achieve on the backend. What’s at stake here is the success or failure of an entire organization. It’s worth doing it right!”

Step 6: Make an Effective Offer

CEO compensation can be slightly different from compensation for other employees. I believe, the compensation for a CEO should be directly tied to the profits of the organization but this may not always be the case. It is also important to research the job market and identify the existing salaries of CEOs of similar companies.

Robert Holdsworth, President of Energy Edge Technologies Corporation says, “You start with a figure in mind which is a combination of salary, stock, bonuses and benefits. Part of the recruitment process is to then find candidates who are coming from a previous position with similar compensation and make it known what the compensation package looks like. This way there are fewer surprises and everyone on both sides of the table have similar expectations.”

It is also important to identify how much the company can afford to pay for a Great CEO. It is also important to be a little flexible. Even if you decide to pay slightly higher than what you initially expected, it might be okay because if the CEO is exceptionally good, he should be worth every penny because he could bring in great savings or additional profits to the company.

If you are 100% convinced about the caliber of the CEO and both parties want to work with each other, it is important to find a middle ground where the CEO candidate and the company are both quite comfortable with the arrangement.

Step 7: Build an On-Boarding Plan

This is another crucial step in the recruiting process.

How the Board of Directors and recruiting members welcome the new CEO and make him feel like an integral part of the organization will play a very important role in determining his success as a leader.

Several research findings have found that more than 30% of new managers and executives fail at their new jobs and leave within 18 months. Kevin Kelly, CEO of executive search firm Heidrick & Struggles said, “An internal study of 20,000 senior-level job searches revealed that 40 percent of executives hired at the senior level are pushed out, fail or quit within 18 months.”

Jackie Eder-Van Hook, principal and cofounder of Transition Management Consulting, an interim executive management and succession planning firm says, “An association executive’s first months on the job are critical. They can either help a leader understand the organization’s culture and stakeholders or alienate the CEO from staff and board members. With the right onboarding process, you can avoid the early missteps that make for short tenures.”

The On-Boarding Plan

  • On Day 1, sit down with the new CEO and prepare a 90 day or a 100 day plan for the company.
  • Be clear about what is expected from the new CEO. Give him a very clear job description.
  • Clear up the desk for the new CEO. Set-up the computer, internet and telephone ahead of time.
  • Give the new CEO a list of all the employees, their job descriptions, CVs and their contact information well in advance even before Day 1. It is important that the CEO takes some time to go through the CVs and job descriptions of each of the employees so that he understands the strengths and weaknesses of his team.
  • Board members should assign one person, preferably the outgoing CEO or an important Board member or a senior employee to introduce the CEO to all the employees in the company.

Some experts also recommend hiring a CEO as a consultant or in another capacity for a period of 3 to 6 months before transitioning him into the role of a CEO. Sometimes, this may not be an option. However, if this is an option, then it should be considered.

It is also important to have a succession plan in place and groom leaders within the organization NOT JUST to be future CEOs but also to be CFOs, COOs and Project Managers to take on leadership roles within the organization.

Lot of companies go through hiring a CEO without any documented process. This often leads to uncertainty, confusion and a lot of time being wasted which does not help in making the right decision. If you are looking to apply for a CEO position, it is important that you have completed a MBA Degree online or at an accredited campus, if you have questions, try here or contact a local school. Advancing in the business world requires both education and experience.

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