Prospective CEO Assessment

Directors too often approach the CEO succession decision-making process as an HR issue, rather than from an initial focus on corporate strategy. BEP believes that the CEO selection process must first carefully assess and define the company's future strategy and growth challenges and then identify leadership competencies necessary to meet those challenges.

This strategy-based vision of required CEO competencies is especially important in situations where there are divergent views among directors and executives on the current health of the company and future goals and objectives. An independent analysis can be valuable, not only in better defining the type of CEO to be selected, but also in developing a consensus on the critical future direction for the enterprise.

BEP suggests that directors consider a methodology we have found to be effective for the CEO selection process. We have summarized the process in "Selecting CEOs," Chapter 6 of Board Effectiveness Insights.

BEP's approach encompasses a four step process:

1. In-depth assessment of the company. Phase 1 consists of an in-depth assessment of company resources; the vision for future growth, goals, and strategies; and implications for leadership competencies. Stock performance, operating metrics, historical metrics for key busines units, and historical capacity to define and implement large-scale change are some of the areas of assessment. An analysis of industry challenges and key competitors is also conducted.

2. Stakeholder interviews and collaboration. A list of key stakeholders is compiled for confidential interviews. Interviewees from within the company, as well as key customers, suppliers, and outside professional advisors are selected to ensure that a full circle of observations and recommendations on the current state and future prospects for the company is explored. At the end of this phase, BEP begins to develop a broad consensus on critical leadership competencies against which to judge the candidates.

3. In-depth assessment of each candidate. A thorough assessment of each candidate is important, not only for the sake of the company, but also to help the candidate realistically evaluate whether the CEO position fits his or her skills and future goals. The assessment should include reviewing the candidate's competencies, vision for the company's future, planned timeline and milestones for change, and observing the candidate's interactions with colleagues.

4. Triangulate on truth - the process of assessing and rationalizing wide-ranging perspectives. An aggressive interview plan results in responses that vary greatly, and frequently by 180 degrees. A process of qualitative and quantitative assessment is needed to arrive at consensus - a process we call triangulating on truth. Through this process, the alignment between company needs and candidate abillities becomes clear to everyone involved in the process.

Once the new CEO is selected, the Board's job is not finished. The board must have an on-going process to ensure the success of the CEO. It is a disservice to stakeholders, as well as to the new CEO, to step back, hope for the best, and 12 months later discover that the new executive is floundering, unable to meet the goald the board expected.

BEP recommends that a small group of directors be charged with ensuring both immediate and long term success through mentoring, collaborating on priorities and success metrics, and working as allies with the new CEO. We have addressed this topic in more detail in "Role of the Board in New CEO Success," Chapter 8 of Board Effectiveness Insights.

The following are examples of attributes that may be important in evaluating CEO candidates. The list can be used as a means of stimulating an open discussion with the candidate. It is just an example of one tool used in a CEO prospect assessment.

BUSINESS LEADERSHIP

Visionary Thinking

1. Creates and articulates compelling vision
2. Translates vision into strategy/strategic position and action
3. Inspires shared purpose
4. Understands big picture
5. Anticipates opportunities

Knowledge/Expertise/Intellect

1. Business acumen; general business knowledge
2. Knowledge of industry
3. TQM skill/ability
4. Understands technology of the business
5. Intellectual horse-power; deals with concepts and complexity comfortably
6. Proven performer
7. Inspires confidence

Business Judgment

1. Exercises seasoned judgment
2. Ability to critically assess; uses analytics, data and logic
3. Ability to synthesize and communicate
4. Effective problem solver, sets priorities
5. Ability to manage risk
6. Makes effective decisions in ambiguous situations

ENTREPRENEURIAL AGILITY

Foster Innovation

1. Has sense about managing the creative process of others
2. Thinks outside box
3. Receptive to out-of-the-box thinking
4. Can project how potential ideas may play out in market
5. Good at bringing creative ideas of others to market

Change Leader

1. Champions continuous change
2. Initiates new approaches
3. Impatience for improvement
4. Grasps technological change
5. Ability to manage crises and adversity

Flexible/Agile

1. Tolerant of varied views, open-minded
2. Adaptable
3. Ready to consider change
4. Encourages constructive challenge
5. Stays focused on the vital few

Continuous Learner

1. Seeks opportunities to learn
2. Learns from mistakes
3. Seeks feedback and changes as a result
4. Seeks and uses counsel/advice
5. Learns quickly when facing new problems
6. Enjoys the challenge of unfamiliar tasks
7. Picks up the need to change behavior quickly
8. Builds networks

INTERPERSONAL SKILLS

Communication

1. Effectively communicates to different stake holders; Board, stockholders, analysts, customers, management employees
2. Listens, fosters open dialogue
3. Managerial courage; doesn't hold back things that need to be said
4. Actively participates and contributes
5. Not voice own views too early

Energy and Passion

1. Passion for the business
2. Energizes others
3. Demonstrates a strong commitment
4. Perseveres

Promotes Teamwork

1. Shares leadership
2. Integrates across functions
3. Shares wins and successes
4. Approachable
5. Resolves conflicts

Leverages People

1. Attracts, develops and retains talent
2. Creates effective organizational structures
3. Builds effective group at top
4. Coaches and mentors
5. Delegates effectively
6. Confronts performance issues
7. Fosters diversity

Integrity

1. Trustworthy
2. Honest
3. Tells truth about important and unimportant things
4. Fair; does not use authority carelessly
5. Authentic relationships
6. Consistent in action
7. Keep confidences
8. Does not misrepresent self
9. Respect for individuals

RESULTS ORIENTATION

Focus on Results

1. Drives for results; bias towards action
2. Sense of urgency
3. Seeks competitive edge
4. Develops and improves processes
5. Demonstrates initiative/takes ownership
6. High performance standards, performance driven
7. Productive fear of failure
8. Able to penetrate to micro level of business
9. Perseveres, demanding
10. Ability to close (internally and externally)

Customer/Supplier Focus

1. Deep customer understanding
2. Develops and grows customer and supplier relationships
3. Commercial focus
4. Market focus
5. Pursues opportunities
6. Ability to close

Global Mindset

1. Understanding of global commerce
2. Cross cultural awareness
3. Sees things from multiple perspectives
4. Reaches outside for new ideas