Reading the Tea Leaves: A Board’s Role in Anticipating CEO Talent Requirements
An interview with David Nosal, Chairman and CEO, and Saara Robles, executive coach.
Question: Each of you has helped numerous Boards develop CEO succession plans. How would you describe the ways in which Boards typically think about talent requirements for CEOs?
David: CEO hiring is more often than not reactive: a CEO suddenly departs, leaving Board members scrambling to find a suitable replacement. What I have observed during my 20+ years recruiting CEOs is that the Board’s first impulse tends to be to find someone similar to whoever was previously in place. In reality, what companies often need most is someone with an entirely different profile than the departing CEO.
Saara: That’s right. As an organization matures, its leadership requirements evolve. The skill set that you sought in a CEO four years ago isn’t necessarily the set of competencies you will need during the next four years. The same holds true for current leadership. The CEO in place may not be the best fit moving forward. A more effective approach to evaluating CEO talent requirements is to take into consideration a company’s stage in its lifecycle.
Question: What then would be your specific recommendation to Boards relative to CEO development and succession planning?
David: The Board’s recognition of what it takes to be CEO of a company is one of the most important dimensions of its role. Most Board members have an ongoing dialogue on this topic not only with each other but also with Board members for other institutions. Although the CEO’s role is typically top of mind, even the most proactive Board in terms of thought leadership around this issue can be caught off guard by a sudden CEO departure.
Saara: There are four basic scenarios in which this type of analytical approach can make a huge impact: (1) determining leadership requirements for an organization before initiating a CEO search; (2) helping an existing CEO adapt to a new stage in the company’s lifecycle through executive development support; (3) active succession planning once a Board realizes that its CEO is not the right leader for the company moving forward; and, (4) in the case of a company making a radical departure from its present business model, assessment of a leadership team to determine whether they can adapt to an entirely new direction.
Question: This sounds like a major initiative. What exactly is involved?
David: Undertaking this sort of analysis in a proactive way generally requires a lead time of 12-24 months. The executive search and executive development teams should work with a Board to scrub down requirements and understand underlying issues. But during this process the Board also needs to spend time with other types of external resources, such as consultants who can evaluate the market and its direction. All of these sources of external support should work together to help the Board understand what the company will need long-term. After the analysis is complete, the Board can put into place a seamless strategy to make it all happen.
Saara: And in addition to identifying external candidates, the Board should identify high-potential internal CEO candidates that they might groom for the role through a variety of training and development initiatives. The Board should also work with external experts to understand what else might be presently missing from the organization, and what it will need as it continues to evolve. What we are suggesting here is an analytical, proactive, and holistic approach to addressing leadership and executive development requirements. You simply cannot achieve sustainable results when considering leadership in isolation from a company’s stage in its lifecycle. You need to understand where a company and industry are heading to accurately assess leadership requirements.