The misses are devastating-and very public. Mentoring, coaching, senior team members with complementary skills, and special help from the board can’t compensate. Nothing good comes of having the wrong CEO. Other board members add objectivity through their questions, and the outgoing CEO helps the decision makers learn more about the company and internal candidates. Often they are current or former CEOs, respected for their wisdom and judgment. The Key PlayersĬhoosing the directors who will lead the process is also critical. An entertainment company might need a CEO who can imaginatively apply algorithms, amass digital properties, and reorganize resources and people. For example, to compete against Amazon, a retailer likely needs a CEO who can focus on the end-to-end consumer experience and grasp how digital technology can transform the business. Directors must define it in specific terms and get it right. The ChallengeĮvery firm has a distinct pivot. What distinguishes directors who are great at picking CEOs? They zero in on the two or three capabilities a chief executive needs to succeed at that particular firm (the “pivot” on which the succession decision turns), keep an open mind about where the best candidate will come from, go deep to understand who is the best fit, and allow for imperfections. Finally, they allow for the imperfections in the chosen candidate, figuring out which gaps can be filled by other executives or corrected with coaching. They go deep to understand which person is the best fit with the pivot, doing their own due diligence.
At their urging, the board brought in Lou Gerstner, who quickly turned IBM’s $8 billion loss into a $3 billion profit.Īstute directors also keep an open mind about where the best candidate will come from they shed assumptions about insiders and outsiders and may even consider a leader a few levels below the CEO. (Charan calls this the “pivot” because the succession decision turns on it.) For example, when IBM was conducting a CEO search in 1993, many thought it should hire a technologist, but two directors saw that what the company really needed was an executive with business acumen, a customer orientation, and execution skills. In this article he describes how they go about picking the right candidate.ĭirectors who excel at selection zero in on the two or three distinct capabilities that a CEO will need to thrive at the firm in question.
In his work advising companies, Charan has observed that some board members are especially great at succession decisions. The choice may devastate a company or create enormous value. When it comes to selecting a new CEO, judgment really matters.
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