September 1 2007 - A recent report from psychometric assessment and consulting firm Caliper
Canada argues that selecting a new CEO one of the most important roles for a corporate board of directors. However,
there is a tendency to overlook high-potential internal candidates.
John Szold, managing director, Caliper Canada said:
"When it comes to finding a new CEO, more often than not, the search committee picks up the phone and calls a head hunter. And head hunters do what they do best - look for external candidates."
The report argues that an external candidate may not be the best choice. Outsiders are more likely to import disruptive change with potential benefits often outweighed by the advantages of an internal candidate who understands the organization. The Center for Creative Leadership has found that two-thirds of senior managers hired from outside fail within the first 18 months; a crisis often blamed on undue influence of head hunters who were financially motivated or poor communication between board and senior management.
The report recommends preparing for a change of CEO by ensuring a consistent and rigorous succession planning process is in place well in advance. This helps the board evaluate internal candidates and make informed choices.
Specific suggestions include:
- Start the planning process early: for example, with a six-month product development cycle, Intel t
hinks about succession ten years out;
- Create the conditions for candidates to develop integrative thinking: for example balancing sales' need for more variety with manufacturing's to rationalize production;
- Provide an opportunity for candidates to appreciate and utilize the value added by other staff
resources (for example finance, HR, and market research) in making informed decisions;
- Engage the board (for example in the creation of cross-functional learning opportunities like
national or international assignments) and keep the board involved in evaluation and outcomes.
John Szold commented:
"By taking a more proactive, up close and personal role in the care and feeding of potential CEO successors, the board will not only retain a pool of great talent, but will provide insurance against organizational turmoil and loss of shareholder value."