Choosing a CEO is incredibly difficult. Between 50 and 70 percent of executives fail within the first 18 months—but strategic steps can make a significant difference in the success rate.
While there’s no “ideal” candidate, the wrong people are in abundance. Boards that make a genuine effort to examine the objective and fundamental criteria in determining leadership potential have the best chance of ensuring their organization’s continued success under new leadership.
While every board operates differently, the roles associated with a board’s responsibility in choosing a new CEO involve selecting, transitioning and enabling a new CEO’s success.
It’s a delicate balance between the CEO’s management responsibilities and the board’s oversight responsibilities on succession: the CEO’s responsibility is typically to generate potential candidates; it’s the board’s role to take the right steps in assessing candidates and making the final decision.
Most companies don’t approach this work well. Yet common elements can be found among those who do it well. Essentially, the board must have a clear and defendable process. The key component involves agreeing on the criteria upon which potential candidates will be assessed. It’s crucial to agree on what skills, traits and experience they are looking for in a successor.
Boards will often examine a number of factors, such as the ability to raise capital, financial acumen, alignment with strategic direction, executive presence, etc. However, the most important variables that determine leadership potential should hold center stage, and, in most cases, they do not.
The four most reliable variables that predict leadership potential, based on extensive research, are intelligence, personality, motivation and learning agility. The first two, intelligence and personality, are largely fixed. If people don’t have the cognitive horsepower, they won’t be successful because decisions only become more complex the higher one goes in an organization. As far as a candidate’s personality, any indication of limited emotional intelligence will minimize their impact. Significant derailers, such as aggression, negativity, extreme self-promotion and low tolerance for risk-taking, will wreak havoc in an organization.
The other two variables, motivation and learning agility, can be developed, but only by the potential leaders themselves. Individuals control their own level of motivation and learning agility. Motivation is necessary because leaders need to take on big challenges. Learning agility is critical because of the need to assimilate information quickly and to continually evolve based on the changing world. If the candidates don’t already possess high degrees of motivation and learning agility, no amount of cajoling will improve them.
Boards should develop a well-defined CEO profile with a heavy emphasis on intelligence, personality, motivation and learning agility. A large deterrent to successfully choosing a leader is the amount of variation that exists in the criteria people use. With a clear set of decision criteria, board members have a well-defined standard through which they can assess each candidate.
Often, board members have little or no experience in choosing an organizational leader, and not all board members have been CEOs or run a business before. This makes unifying perspectives and finding alignment on key criteria especially important. Relying on the predictive value of intelligence, personality, motivation and learning agility is a strong strategy to align perspectives and assess the potential of a candidate to be a great CEO.