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Monday, October 30, 2006

How to Hire a CEO

How to Hire a CEO

At sometime in the future as you grow the business you are probably going to have to hire a C.E.O. this is the game plan that I propose, I have interview for a couple of C.E.O. roles and see it executed badly and seen it executed well, I hope these notes help you when it comes to that traumatic time to hand over your company to a new C.E.O. that bit easier.

You don't appoint a selection committee . Assign ONE person to lead the effort: a board member or a top executive. This doesn't mean you don't want input from multiple sources you certainly do.

The game plan:
Get the organization's major stakeholders in one room: The CEO's direct reports, board members, department heads and a few of your best customers.

Standing at an easel pad, pump the group for "outcomes.": What results or outcomes does the group want to occur as a result of the CEO doing his/her job reasonably well? Don't set impossible outcomes (we'll discuss standards later) —it's self-defeating. Outcomes/results should be described as specifcally as possible.

The CEO is expected to: Increase profit • Improve productivity Gain market share Increase share value

STEP 2. Have the group achieve consensus (not an easy task) on developing bench marks with one or two assessments that final candidates will take. The value of assessments is that they can reveal critical information about the candidate that the candidate is either unaware of or can't demonstrate, such as:

• Is the candidate a fast learner? What is the candidate's preferred communication style?
How agile with numbers and words is the candidate? What is the candidate's management style?
Relative strength in: • What motivates the candidate?

Decisiveness/results-oriented Objectivity
Sense of urgency Independence
Future vision Assertiveness
• Motivating others Energy level
Self-con?dence Optimism
Listening Following policy
Follow-up Attention to detail
• Consistency • Handling paperwork

STEP 3. When the outcomes list is complete, consolidate similar items, and gain consensus on the final list. Opposite each outcome, get the
group's input on standards —the measurable levels at which the outcomes should be achieved: If any standards aren't quantifed and measurable, they may sound exciting, but they're worthless —don't waste your time. Beware of grandiose or unrealistic standards. They are self-defeating, and only set up the chosen candidate for failure.
For example :
Increase net profits 2% year one, 3% year two, and 4% year three.
• Increase output 5% per year for five years, and reduce capital resources required by 5% per year for five years.
• Capture 2% more market share per year for five years.
Increase stock value 3% per year for five years. etc., etc., etc.

STEP 4. Get the board's stamp of approval on the outcomes and standards. Do not proceed further until this set in concrete.

STEP 5. Given the outcomes and standards, determine the competencies necessary to achieve them. At TBC, we use an excellent tool, based on solid research, that identities 68 competencies that have been shown to be directly relevant to managerial success in all kinds of organizations. We use this tool to: Provide consistent language describing the behavior of someone who has the competency, the behavior of someone who lacks the competency, and the behavior of someone who overuses the competency.
• Provide solid content for a job description.
Provide excellent performance planning material.
Provide excellent performance evaluation material.
Provide on-target material for individual development planning.

The 68 competencies cluster around eight categories:
1. Future skills
2. Day-to-day management skills
3. Courage
4. Energy
5. Leading change
6. Inside skills
7. Personal and interpersonal skills
8. Growth and balance

STEP 6. From the competencies list, develop a behavioral interview format to be used with every candidate.

STEP 7. Now have the group develop initial selection criteria —what every candidate must bring to the table to be considered for an interview —sometimes called "price of admission." The criteria will depend on a number of factors: Do you want a candidate with experience in your industry OR do you want someone with years of experience as a CEO OR are you willing to consider a highpotential individual who is ready for entry to the CEO spot? How much education is REALLY needed for the job? This is the most frequently inflated requirement I see. The problem is that it often excludes available talent that can do the job. No matter how dazzling the resume or persuasive the referral, only candidates who meet the criteria should be considered for an initial interview.

STEP 8. Identify and pursue candidates. Where are the best candidates likely to be found? They're probably currently employed. Either network your way to good candidates through referrals, or hire somebody who knows how to reach them. Tap all of your contacts to identify likely candidates.

If, after a couple of weeks of doing this, you haven't identified six or more interested candidates, then it's time for a search firm or an ad.

STEP 9. Conduct as many interviews (using the behavioral interview format developed in step 6) as you can fit into one week. Rank the candidates on the extent to which they meet each of the competencies (0= does not meet; 1=meets; 2=exceeds).

STEP 10. Check the references of those candidates who scored well on the initial interview, and performed acceptably on the assessments. Use only professional references (no personal ones), and do an in-depth exploration with one each of:
1) current or recent boss;
2) current or recent peer;
3) current or recent subordinate; and
4)current or recent customer.

STEP 11. Have the remaining qualified candidates complete an assessment or two to see how closely they match the bench marks for the job.

STEP 12. Arrange for the board to meet the top three finalists. Provide every board member with a complete package on every candidate: resume (with compensation history), initial interview results, assessment results, reference notes. Since you have already determined that the candidates can do the job, the board should focus on two issues:

•How's the board's "chemistry" with the candidate:
How enjoyable and productive do they think it would be to work with the individual?
How well does the board think the candidate will "fit in" the organization's culture?

STEP 13. If one of the candidates proves to be the board's choice, and the candidate wants the job, it's time to negotiate —probably a contract. Make sure you provide the candidate with the written outcomes and standards developed in steps (1) and (3).

STEP 14. After the candidate accepts, with process followed above the new CEO is likely to succeed!



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