Obviously,
no decision is more important to a business than selecting
a new leader. At stake are millions or billions in shareholder
value and-quite possibly -corporate survival. At the same
time, the rewards for shareholders when the right CEO is
selected are immense. A strong leader ignites a business,
driving revenues, increasing market share and making smart
decisions in difficult times.
It's not surprising that executive selection is a high-risk,
high-reward process. The true surprise is how few organizations
have strategic processes in place to reduce the chances
of troubled CEO successions. At a time when risk in CEO
selection has never been higher-turnover is at a shocking
high and tenures are shrinking dramatically-companies are
in dire need of methods that will improve their leadership
choices.
Selection Decisions
Is there an intrinsic advantage in selecting an internal
CEO successor rather than a candidate from outside of the
company? While there are clear advantages to considering
internal candidates who know the company and are better
known to key decision makers, choosing from an internal
pool never guarantees success. Common pitfalls to internal
candidate selection include:
· Focus is placed on individuals rather than the
characteristics and requirements needed for success
· Internal candidates are untested and inexperienced
in different and challenging environments
· Reputation and past results become more important
than the candidates' capabilities for the new role
· A mentor or sponsor loses objectivity trying to
help a protégé succeed rather than focusing
on overall consequences for the company
Alternatively, considering external candidates greatly expands
the pool of talent, but companies are still susceptible
to weaknesses in their selection processes. When searching
outside the organization, companies often overlook the importance
of thoroughly researching and assessing external candidates
and rely too heavily on search firms to seek out the limitations,
strengths and compatibility of potential successors.
While
both options-selecting from internal or external candidates-offer
advantages and drawbacks, the true test of the selection
process' effectiveness is not in deciding from where the
candidate should come. Ultimately, reducing the risk of
CEO failure rests on the internal selection team's ability
to define the requirements of leadership and objectively
assess potential candidates for the skills, talent, vision
and experience it will take to run the company.
The
Assessment Factor
While many companies experience the difficulties in failed
CEO successions, others have had great success in bringing
on new leadership. For example, Cisco Systems has seen profit
and sales increase tenfold and market value swell by hundreds
of billions of dollars during John Chamber's tenure as CEO.
General Electric® has become renowned for its approach
to executive recruitment and selection, which has led to
numerous successful leadership transitions.
How have companies like these been able to make good decisions
and reduce risk in their selection processes? Time and again,
the critical difference is executive assessments. Companies
that incorporate rigorous executive evaluations and measurement
standards into their succession and employee development
practices minimize their selection risks.
In addition to helping yield the strongest CEO candidates,
comprehensive assessments help companies better understand
and manage internal talent in four ways:
1. Readiness
Assessment processes better calibrate internal views on
a candidate's readiness for the next position and reveal
what executives do well and what areas need improvement.
2. Retention
The career guidance that accompanies the assessment process
signals to key executives the company's desire to invest
in them and gives valuable insight on how to develop skills
while building their careers.
3. Targeted Development
Through assessments, training needs are properly identified
and a company can better select where to invest in development
initiatives.
4. Formalized Feedback
Often lost in executive arenas, the assessment process legitimizes
feedback and places focus on providing reviews and counsel
in a structured, objective setting.
Components
of a Thorough Assessment
For executive assessment processes to be effective, a number
of key components must be in place.
· Assessor-A skillful
talent assessor is needed to navigate the pathways of an
executive's background and work experience to extract meaningful
information and to project the likelihood of success.
· Clear-cut Criteria-The
best assessments occur when there are clear evaluation criteria,
such as requirements for a specific role, leadership standards,
performance goals or skill competencies.
· Experiences-An assessment
should examine work and life experiences that demonstrate
the executive's accomplishments, style, motivation, education
and career interests.
· Work History-Work
history is rich input that reveals keys to the executive's
successes and failures, including obstacles that were overcome
and the resulting knowledge gained.
· Street Smarts-An assessment
should give strong insight into the self-awareness and practical
intelligence that executives possess.
· Overview & Outlook-A
comprehensive final assessment should be done to quantify
key accomplishments, weaknesses and strengths while providing
a detailed and complete look at the candidate.
Choosing the right CEO has clear and measurable impact on
a company and all of its stakeholders: customers, employees
and shareholders. Although there is no foolproof system
to ensure that the right leader is selected, comprehensive
candidate assessments can help ensure that hiring or promotion
decisions are made using relevant data and insightful investigation,
thereby reducing selection risk. Good internal assessment
practices also serve a company in ways far beyond CEO selection-strengthening
individual performance and retaining key contributors who
drive innovation and increase the organization's value.
Chris
Horn, a director in the Human Capital Consulting Group of
Spherion Corporation (NYSE:SFN), has extensive corporate
and consulting experience in strategic talent management,
succession planning, executive assessment, staffing and
training. For more information, please visit www.spherionhumancapitalconsulting.com
or call 919 474-3023.
