During at least two board meetings per year, the best boards study the quality and depth of the executives in the leadership pipeline. They also ask how the company is filling its pipeline, and what mix of skills and geographical experience the up-and-coming managers possess. Companies with best-in-class leadership programs, such as GE, Colgate-Palmolive, and Johnson & Johnson, continually identify their next generation of leaders at all levels and give them opportunities to grow through management rotations and by having them participate in carefully designed, selective programs that sharpen their leadership skills. Years down the road, the directors who know the people in the leadership pipeline will have a leg up in the CEO selection process. The board will already be personally familiar with the skills and abilities of leading internal candidates.
Despite the preference for an internal candidate, however, boards shouldn’t accommodate one by weakening their selection criteria. A board I worked with came to this conclusion during its recent CEO selection process. The board’s search committee of six outside directors listened to lobbying from colleagues as well as managers in favor of one or the other of two internal candidates. Although this is a healthy and typical situation, the board ultimately acted independently when interviewing the prospective CEOs over a weekend. The committee broke into two groups, both of which separately interviewed each candidate. They met in the evening to talk about what they heard from the candidates. There was a remarkable consensus that the internal candidates, including those whom members of the search committee had earlier advocated, weren’t qualified for the job.
The search committee also applied tough selection criteria when it interviewed three external candidates that same weekend. Earlier there had been a heated debate within the search committee over the critical attributes of the new CEO. Some criteria were quickly identified. For instance, the board decided to look for a steady performer (as opposed to a fast grower), someone who could bring a sense of urgency into the existing culture (as opposed to a radical change agent), and someone who could build a deep executive pipeline over time.
But the most important question the committee faced was, Should we substantially broaden the scope of the landscape in which we compete, or should we stay within the existing boundaries of the industry and design and execute a more aggressive strategy? In the end, the committee decided on the latter. Because of that decision, the leading external candidate was also eliminated because his claim to fame had been broadening the scope of his current company’s businesses dramatically — and the directors were clear that was not what they were looking for. By the end of the weekend, the board rejected all five candidates, including the CEO’s suggestion, and decided to seek out others.
After interviewing a second round of candidates, the search committee zeroed in on a successor. The directors interviewed the candidate twice more and personally checked his references in detail. The directors took the task very seriously and invested enormous amounts of time in it. They are confident their choice for a CEO will succeed because the directors were personally engaged with all aspects of the process, because they used selection criteria specific to the company and the time, and because they didn’t compromise their criteria to accommodate candidates.
Stand By the CEO
The collective judgment of the directors on a search committee is very powerful; equally powerful is the collective ability of directors to ensure that the CEO succeeds after appointment. First of all, boards that hire CEOs to execute a strategy should show backbone and stand up for CEOs when they do what they were hired to do.