Is your board about to pick the wrong CEO?
Given its importance to a company’s health, it’s no favorite topic in the business press. That iconic companies like Apple, Hewlett-Packard, and GM have recently named new CEOs only adds to the interest. And as troubled firms such as Best Buy and Yahoo! announce new chiefs, Monday-morning quarterbacking around their selections has become a favorite pastime. There is no shortage of advice around what a healthy CEO succession process looks like. We don’t have an issue with the advice that’s been proffered – it’s all about taking care to ensure a good outcome. Yet in spite of all the attention the topic has received, we contend there is a key missing piece. The missing piece is that the first and arguably most critical step in a succession process is ensuring that the right people are sitting around the table to execute the process.
Not only should the board about to make the decision on the next CEO be experienced in such matters, but the interrelationships among the board members should also be healthy. These criteria are often overlooked. It’s generally assumed that the board is ready for the responsibility of picking the next CEO.It may not be. And when it isn’t, we are concerned that giving the wrong people the right instructions does not foreshadow a good result.
Below we share our take on the board characteristics that should cause concern during a CEO succession.
#1: Is There Interpersonal Conflict?
Boards are often filled with larger than life individuals, each with long track records of success and strong opinions they are more than willing to express. While a certain level of conflict helps avoid ‘groupthink’ through the discussion of multiple perspectives, conflict can be harmful when it gets personal. A lack of trust, private agendas, and the like can cause tremendous damage in the decision-making process around the naming of a new CEO. Frankly, situations like that recently witnessed as Hewlett Packard struggled through a number of succession challenges led many to question the board’s capabilities to provide proper governance.
When the conflict becomes personal, strategy and vision take a back seat. The incoming CEO – no matter how talented – is starting out at an extreme disadvantage when coming into a scorched-earth battlefield left by a warring board.
#2: Are There Irreconcilable Differences Regarding the Vision for the Company’s Future?
The nature of business today – economic uncertainty, increasing globalization that brings with it both threat and opportunity, technological advances, and equivocal signals from governments around fiscal and regulatory policies — brings with it a very noisy decision-making environment. It is easy to see how different strong, experienced individuals could develop commitment to different strategies as the best path forward. And no other single act more clearly affirms a strategic direction than the selection of a new CEO. When board members do not share a common vision for the future, they likely will be looking for very different capabilities in the next CEO and likely will not be able to agree. At Yahoo!, for example, it’s fair to say that the best strategic direction for that company has remained a mystery for the board.
If the board can’t agree on a strategic direction, an incoming CEO could be like a star quarterback who’s suddenly asked to pitch a no-hitter. A board’s ambivalence can set up an otherwise talented CEO for failure if he or she is brought in to play the wrong game.
About the Authors
Stephen A. Miles is Founder and Chief Executive Officer of The Miles Group. Previously, he was a Vice Chairman of Heidrick & Struggles where he ran the Leadership Advisory Services within the Leadership Consulting Practice and oversaw the firm’s worldwide executive assessment/succession planning activities. With more than 15 years of experience in assessment, top-level succession planning, organizational effectiveness and strategy consulting, Stephen specializes in CEO succession and has partnered with numerous Boards of global Fortune 500 companies to ensure that a successful leadership selection and transition occurs. Stephen holds a Bachelor’s degree in Psychology and a Master’s of Business Administration both from Queen’s University in Kingston, Canada; and a Master’s degree in Psychology from the University of Victoria.
Nathan Bennett, Ph.D., is Professor of Management in the J. Mack Robinson College of Business. He specializes in leadership and strategy execution, managing innovation and change processes, top management team dynamics, and contextual influences on individual behavior in organizations. Nate has published in numerous widely-read resources for managers including the Harvard Business Review and Wall Street Journal. He is co-author of the 2006 Stanford University Press title “Riding Shotgun: The Role of the COO” and the 2010 book “Your Career Game: How Game Theory Can Help You Achieve Your Professional Goals.” Professor Bennett received both his Bachelor’s degree in Sociology and Master’s degree in Applied Research from Tulane University, and a Ph.D. in Management from Georgia Tech.