Choosing Your Next CEO: Tips for a Successful Search

One of the most consequential tasks entrusted to a company’s board of directors is choosing new executives. Executive searches are always challenging, but they’re arguably one of the board’s most important responsibilities. Here are a few tips for your board as you embark on your executive search.

Start by Collectively Agreeing on the Kind of CEO You Need

Members of your search committee share a simple, common goal: to pick the best new CEO. But what if each person has a completely different idea of what that looks like? 

Before you start recruiting, get everyone together and write up a “candidate brief,” or a summary of the qualities you need in a CEO. Think of it like writing a job description. Make sure you do it in person, too — when everyone can discuss the position, you can ensure they’ll all be on the same page.

Keep Your Distance

Networking is important. However, when it comes to high-stakes situations like selecting a CEO, directly using your networking relationships can backfire on you and on your company.

For example, imagine you’re on the board of directors of a company and you approach a high-level employee to tell them about the open CEO position. You tell them you think they would be a great fit. 

This might seem like a benign enough interaction, but if the employee isn’t chosen, they might resent you. Lots of people are capable of holding indefinite grudges, so you might find that this simple slip-up damages your personal and business relationship for years after the fact.

Fortunately, there’s an easy way to avoid challenges like these: leave the headhunting to your third-party executive search firm. You can, of course, suggest potential candidates to the firm, but it’s essential to let a third-party consultant make the approach. 

This way, everything is above board. If someone doesn’t get the job, you won’t have to worry about your personal relationship being compromised. As a bonus, working with a search firm can dramatically cut down on the time it takes to find and recruit new candidates.

Decide on a Compensation Package Early On

Have you ever gone through an exhaustive interview process, been selected for a position, and then offered a salary far below what you wanted? If you have, you understand the frustration of feeling like your time and energy were wasted.

Now imagine the same thing happening to candidates in a CEO search. It takes a huge amount of a candidate’s time, energy, and effort to go through the screening process. It also takes up your time and effort.

To avoid wasting valuable time, you should decide on your new CEO’s compensation package before you start recruiting. Make sure to consider the following:

  • Base salary
  • Any performance-based bonuses
  • Company stock options
  • Insurance
  • Paid time off
  • Long-term incentives
  • Any extra executive perks

This doesn’t mean that you can’t negotiate at all once you choose your new CEO. However, you should be able to give candidates a rough idea of what you can offer from the start. That way, they can move on if it doesn’t fit their expectations.

Don’t Downplay the Importance of Fit

When hiring a new CEO, lots of committees try to choose the best leader. That isn’t a bad thing. But if you focus so much on leadership that you ignore other qualities, you might choose the wrong executive for your company.

One of the most important things to think about is how well a candidate fits your company. A great example of choosing a CEO based on fit is when Apple brought Steve Jobs back for a second term as CEO.

Apple was failing miserably. However, in his time away from Apple, Steve Jobs had shown that he had a talent for innovation and a great ability to predict what kinds of products customers would want.

This combination was just what Apple needed. One of Jobs’s early innovations was the now-ubiquitous iPhone. Under Jobs’s leadership, Apple attracted new customers and became the world’s most valuable company for a time.

You want your new CEO to have the right talents to improve the company’s weak points. But you also want your new executive to fit in with your company culture. 

For example, if your business is a relaxed workplace where employees come to work in jeans and play ping pong on breaks, an executive with a stern, authoritarian approach will not be well-received. If there’s enough dislike of a new executive, you might find yourself losing other valuable employees.

Consider Forming Sub-Committees

If you have a busy board of directors, it can be a challenge to line up everyone’s schedules to discuss candidates. And if your company is like most, you don’t have an infinite amount of time to spend on your search

To speed things up and eliminate scheduling frustrations, you might consider breaking up the board into a handful of smaller committees. Each committee can evaluate some of the applicants and choose a few promising ones to bring to the rest of the board.

From there, the entire board can gather to discuss the top candidates. You’ll still need to coordinate schedules, but it takes a lot less time to discuss three or four applicants than it does to discuss the entire pool.

Finding the Right CEO Starts With the Process

You already know that there’s a lot riding on your search for a CEO. The right person can transform the company for the better. The wrong person can do irreparable damage.

If you want to maximize your chances of making the right selection, the key is to pay attention to every detail of the screening process. When you define the kind of hire you need, iron out a compensation package, form subcommittees as appropriate, keep your executive search firm between you and the candidates, and ensure your choice of executive is the proper fit for your company, you’ll be well on your way to making the right selection.