October 29, 2014

5 Essential Tips for Background Checking Your Incoming CEO

InvestigationAs a board member, HR professional, or other senior executive, you may find yourself in the position of hiring a CEO. Because the CEO occupies such a supremely elevated position, the effects of a poor hiring decision can be devastating. For example, we have seen recent high-profile senior management oversights at a co-op bank — which lost a  record £2.5 billion last year after “fundamental failings in management and governance” — and at Tesco, which recently “overstated its half-year profit guidance by £250 million.”

CEOs hold the keys to the future success (or failure) of your business, no matter how big or small small, so it’s vital that you make effective hiring decisions in this area. In particular, it is imperative that you background check your incoming CEO — which, surprisingly, not all employers do. I have provided some tips and advice on how to do this.

1. Don’t assume that CEOs are completely truthful on their resumes.

Research from HireRight shows that around 49 percent of employers assume CEOs won’t lie on CVs, and 26 percent rely on gut instinct. However, HireRight also found that 25 percent of employers wouldn’t have hired certain senior execs had they done a background check first! It’s not crass, unrefined, or impolite to do a background check on your new CEO — it’s your fiduciary duty, and you owe it to board members, current staff, and yourself.

2. Remove choice and make background checks standard.

Make sure that you develop your CEO background-checking procedure in advance and seek board approval. The CEO background-checking process should be the most rigorous of all your staff background checks.

The people involved in collecting references and/or managing the process may be of lower status than the CEO, and they could eventually even be accountable to the CEO, which could make them feel uncomfortable about raising the topic. Remove choice and make the CEO background-checking procedure standardized and transparent.

3. Confidentiality matters.

Confidentiality is a must at every level, but it is particularly crucial at the CEO level, where knowledge of their interviewing elsewhere could destabilize a company’s business or share price. If your company was known to breach the confidentiality of an inquiring or interviewing CEO, it would seriously damage your employer brand and ability to attract top CEO talent.

4. Conduct a rigorous background check to provide certainty about their skills.

A rigorous background check is more than just a firm handshake, a look into the whites of their eyes, and a shared joke over a glass of chianti and a fillet steak. At the very least, a background check needs to verify qualifications and credentials, but you’ll also need to validate mission-critical experience too. Check that candidates have actually managed 200 staff, or driven through a complex change initiative, or played a pivotal role in negotiating a specific big-ticket deal, etc. You need certainty in all these mission-critical performance areas.

5. Consider using a third party.

The level of reference checking mentioned above can be very challenging for in-house staff. If you don’t want to get your hands dirty, you could consider a background-checking agency to do this discretely and efficiently for you. You will lose some of the hands-on authenticity, but you may arrive at pertinent information more quickly and efficiently. You might need a blend of both approaches.

If you found this article useful, look out for the next article in our CEO-hiring series, which looks at how to select an effective CEO.

Read more in Selection

Kazim Ladimeji is a Chartered Member of the Chartered Institute of Personnel and Development, and has been a practicing HR professional for 14 years. Kazim is the Director of The Career Cafe: a resource for start-ups, small business and job seekers.
http://www.thecareercafe.co.uk