CEOs and senior leaders have special significance in your organization, and they can be the difference between failure and success. However, despite their seemingly exalted status, CEOs and senior leaders are not gods, and they should be subject to the same hiring assessments and due diligence as any other employee. Failure to do so could leave you in the embarrassing situation in which Yahoo and several other corporations have found themselves: hiring a person to helm your business who has lied on their resume.
That being said, hiring a CEO or senior leader is very different from hiring a more junior staff member. There’s far more ambiguity and uncertainty in the higher echelons of business, and decision makers must often rely more on their own judgments and intuition when hiring high-level executives. Hiring CEOs and senior executives is a process that requires its own set of specific protocols. To help you navigate this difficult process, here are four questions you should always ask yourself before hiring a high-level candidate.
1. Should I Hire From Within or Go External?
Some studies show that internal hires tend to cost less than, and outperform, external hires, so you might think it makes sense to always hire internal candidates for high-level positions.
However, this six-decade study from the University of Missouri of 2,524 CEOs between found that external CEOs tend to make different business decisions than internal candidates make. They spend more money on research and development, showing a commitment to innovation. So, if you are looking to rejuvenate or turn around a poorly performing business, there is an argument in favor of hiring an external candidate. On the other hand, if you are looking for someone to steer the ship — be that a department or the entire business — you might want to go internal.
2. Is the Candidate Confident or Overconfident?
When your company is in dire straits and suffering from a leadership vacuum, a confident, bold rainmaker who promises to bring a swift end to the drought can be attractive and even intoxicating. However, all that glisters is not gold. This UNSW Business School study shows that such a leader may make you feel safe, but if that leader is overconfident and arrogant, you could be in trouble. The study found that overconfident CEOs’ firms were about 25 percent more likely to be subject to securities class actions than other firms. Before hiring the aforementioned rainmaker, you’ll want to take some time to consider whether the brash candidate sitting before you is supremely confident or dangerously overconfident.
3. Is the Candidate Narcissistic Enough?
It’s fair to say that most of us would rather not deal with narcissists in our lives, but if you are looking to hire in a CEO for your business, then perhaps you should make an exception. Research from the USC Marshall School of Business shows that narcissism is a very valuable trait among CEO. The study in question found that companies with narcissistic CEOs report higher stock prices and earnings per share.
A few words of caution here: firstly, this study was based on stock-market-listed — and, therefore, large – enterprises, and so the findings are not necessarily applicable to smaller enterprises. The study also warns that the methods employed by narcissistic CEOs may indeed boost financial health, but they could also erode the long-term health of the business over time.
4. Will The Candidate Dominate and/or Overwhelm Your Management Team?
Companies with dominant CEOs who overwhelm the rest of the board deliver performance that is either much better or much worse than the competition, according to this study presented in the Journal of Management Studies. A megalomaniac, overpowering CEO is a high risk. If you feel a CEO candidate could be too dominant and domineering, you might need to either bolster your board’s power to rein the candidate in, or hire a slightly less powerful but equally effective candidate.