4 Tips for Selecting a Potent CEO

We recently witnessed two high-profile senior management failings/oversights at Tesco and Co-op bank, the repercussions of which can be measured in millions and billions of pounds, respectively. These events shine a spotlight on the CEO and senior management selection processes, encouraging employers to up their game when assessing talent. However, many are not heeding this message: a recent HireRight study  shows that 26 percent of employers rely on gut instinct when hiring CEOs, 49 percent assume CEOs won’t lie, and 25 percent hire CEOs that they wouldn’t otherwise have hired had they done a background check.

It seems that the CEO and senior management hiring process is porous and may be letting unsuitable talent through the cracks. That’s why I have prepared four pointers to help employers up their game when it comes to hiring CEO talent and selecting more effective senior management.

1. Prefer Internal Hires/Sucession

This does not mean we need to over-promote people above their levels of competence, but firms should ideally be developing CEO succession plans that focus on hiring internal talent. Why? As this Wharton study reveals,  internal hires often outperform external hires, mainly because they understand the political mechanisms of the organizations, which can make them more effective.

2. Have a Rigorous Internal Hiring Process

Of course, having a preference for internal CEO succession versus external hires does not mean that you should just roll over and accept mediocrity or adopt a “jobs for the boys” approach. You need a rigorous new hire process. Take a lead from GlaxoSmithKline, which uses a 450-degree assessment process to evaluate the views of all executives who have worked with the final three candidates. This process led the company to appoint the initial “dark-horse,” who stood head and shoulders above the rest after this detailed analysis .

3. Appoint CEOS with Skills to Suit the Growth Stage of Your Firm

The qualities that you require in a CEO will vary according to the growth stage that your company is at (e.g., seed, startup, growth, established, expansion, mature, or exit phase). Acknowledging your growth stage can enable you to more effectively pinpoint the candidates most suited to the specific challenges of your business. For example, this study from the University of Alberta School of Business  found that graduates from elite schools outperformed the norm in small companies, as they were better able to apply their graduate-program-related skills in small organizations than in large ones.

4. Qualifications Are Especially Important in CEOs Leading Technical Companies

This research from Vell  shows that MBA CEOs outperform non-MBA CEOs at companies bringing in under $1 billion in revenue (159 percent vs. 89 percent median three-year growth rate). So, if you are hiring a CEO for a business with less than $1 billion in revenue, you should favor MBA-qualified staff. There doesn’t seem to be a significant difference in performance between MBA and non-MBA CEOs at companies with over $1 billion in revenue. The study also found that tech CEOs with technical degrees significantly outperformed tech CEOs with non-tech degrees.

If you found this article useful, you might be interested in the other article in this series, “5 Essential Tips for Background Checking Your Incoming CEO “