When the vacancy is the CEO's chair, the stakes are even higher.
Identify the company's needs
All new hires affect a company, but none more so than a chief executive officer (CEO). Start the search by considering some specifics about the company—the size, corporate culture, and position in the market. A small start-up company will need a different type of CEO than an established, Fortune 500 company will.
Enlisting an executive search firm
Utilize an executive search firm for the resources, connections, safety nets, time, and energy that your company does not have. However, keep your company actively involved throughout the process to ensure the most successful conclusion.
When looking for a search firm, get to know who you'll be working with, says Bruce Woods, the principal of Bruce G. Woods Executive Search and Contracting with 23 years of industry experience. Talk to references. You'll know whether you're dealing with the right firm or not.
Bury your chosen firm with information about your needs so they can begin to determine what you want and what you can realistically expect, says Woods. Also, discuss a realistic time frame.
Dipping into the pool of potential CEOs
Begin your CEO search among your current executives. Industrial psychologist and management consultant Dr. Robert K. Smith says that promoting from within is highly effective. But he also cautions that the needs of the company must remain the top concern. Seniority is not the key. Qualifications and accomplishments are.
Woods agrees that the initial search should start with executives who already know the culture and pulse of the company and have built up loyalty and alliances with people there. However, Woods says that if there is no one appropriate internally, widen your horizons. When you eliminate CEOs with a bad track record, CEOs who do not want to move, and CEOs who won't fit with the culture and size of your company, the field is significantly narrowed.
So where should you be looking? Consider other executives who are ready for a CEO position but have not yet had the opportunity. Woods says that a company can look outside the box for a CEO, but the company's size is a factor.
A small firm could find a sharp entrepreneur who has made some good investments and is sitting on a pile of money looking for a challenge instead of a big salary, Woods says. In a large company, you have to go with someone who has been in another large organization. The larger the organization, the more rigid.
Smith notes that age discrimination has limited some companies.
Companies are focusing on younger people when their greatest resource base is 55-year-olds, he says. With an emphasis on e-commerce, people are looking to younger leaders. But the same business standards apply. Youth has an energy, but people with experience have wisdom.
A closer look at potential CEOs
After narrowing your search with realistic parameters set by your company and the executive search firm, start looking at the individual traits of candidates.
Smith advises his clients to look for effective listeners and managers, people who use their status to encourage, support, and give positive energy to their employees to make good things happen. He says successful leaders place a high priority on their employees and respond to employee concerns and opinions.
In addition, Smith says to consider the following questions when looking at someone who has not yet held a CEO position:
Does the person build relationships both within and outside of the company?
Is he or she already handling certain responsibilities handled by CEOs?
Has the person won the allegiance and support of the people at the company?
Has the person promoted good people?
Have others grown under his or her leadership?
When looking at non-CEOs, do not assume that success in one role will equate success in another. Smith and Woods agree a smart and detail-oriented CFO won't necessarily make a successful CEO.
CEOs look for solutions and seize opportunities, says Smith. They are not scared of risks or controlled by them. CEOs must advance into battle in the lead. They cannot be behind the lines looking at the risks and costs of the battle. A CEO should focus more on productivity and profits instead of risks and finding the cheapest way to get around things.
Smith advises using pre-employment assessment tests to determine the traits and characteristics of CEO candidates, as they eliminate some of the guessing and risk in the hiring process. The better you know the candidate, the more confident you can be in making a smart hiring decision.
Luring away the choice candidate
Be realistic in terms of compensation when trying to snag the ideal CEO. Don't waste time with someone you can't afford. However, money is not the only way to sway a CEO. Woods says that discovering your favorite candidate's passion can make the difference.
You are really fortunate if you find a person whose passion is part of the business or if the industry is something the person has always wanted to be in, he says. If I were offered a job as the CEO of a fly rod company, for example, I would jump at the chance because I love fly fishing.
You also might work a candidate's passion into the compensation package: offer a fly-fishing aficionado first class, week-long trips for great fly-fishing at Yellowstone, New Zealand, the Florida Keys, and Alaska. Woods also says that typical perks can be a draw, including country clubs, car allowances, company boats or planes, and vacation homes.
A successful transition with the new CEO
Once you hire a person, support that person, says Smith. Don't say, 'Okay, now we'll see how he does.' Be confident in your decision. There will always be naysayers and detractors, but make sure top levels give a united front.
Compensation is key to retain a CEO, but one whose needs are being fulfilled will be more likely to stay.
We all pretty much work for money, but I've seen CEOs that I couldn't move with dynamite because they'd been at their company for a long time, had built close personal relationships, went skiing at the corporate retreat with their close colleagues every year, Woods says. Then it's a lifestyle issue, not just compensation. You can keep them because it's not a job, it's a passion.