- March 17, 2010
Greg Carrott is a founder of Cavoure, LP, an executive search firm headquartered in Chicago. Greg has more than 20 years in search, and his articles have appeared in Forbes and the Harvard Business Review. The Chicago Tribune recently turned to Greg for an article exploring Lovie Smith’s job security as head coach of the Chicago Bears. In this interview, Greg shares some of his insights and advice for businesses seeking new leadership.
In your recent Forbes article, you give the five essential steps for picking the right CEO. Are you oversimplifying this task?
Yes and no. Finding the right leader for your company is a complex process. Small differences between candidates can make the difference between success and failure. Companies may also have different strategies to increase shareholder value, so these rules should not be the final word. Still, following these guidelines is important.
Five Key Steps for Selecting a CEO
1. Know how the company can best create shareholder value.
2. Examine strategies for development and choose one.
3. Focus on “what to do,” not “how to do it.” Create a strategic vision.
4. Try to pick a CEO from inside the company.
5. Personality and compatibility with corporate culture should come last.
You have been assigned the task of finding new leaders for many organizations including both public and private companies. What are some of the challenges in finding the right fit for a company?
Company leadership needs to know its strategy. Is it improving existing products and services? Or is it expanding through acquisition? There needs to be a consensus among all stakeholders. Also, the company needs to have clear expectations for a CEO. What type of role is he or she going to play? In what direction should the CEO take the company?
I believe that a potential CEO should have a “been there, done that” background. If a company is down in the dumps and needs help, they should hire a leader who has a history of revitalizing struggling businesses. In other words, the CEO should fit the strategy and the company’s current direction.
Leadership is a quality that should not be mistaken for competence. Oftentimes companies may look within to find a CEO. While it is often a good idea to promote from within, you should also bear in mind a good executive may not necessarily become a good CEO. A stellar CFO, for example, may not make a good CEO because he or she lacks the strategic vision necessary for future development.
What are some of the biggest risks facing company boards in connection with their CEOs?
In my experience, many companies have had emergency situations in which the CEO is unable to perform his or her duties due to illness or death. This happens more often than you’d think. In privately held companies in which the brand equity is often tied up in the owner, losing that person can destroy a company. It is important to have a contingency plan in place for these types of companies.
Private companies, especially family owned, are often reluctant to bring in someone from the outside due to a fear of losing control. We hear horror stories of the havoc that outside leadership creates. It is important that private companies have a good understanding of the role that outside leadership is going to play and make their expectations and limits clear.
Tell us about the basic process of filling a position. How much time should this process take?
I’m a bit like George Clooney in “Up in the Air,” though I have only five million frequent flyer miles. I travel for the opposite reason. Instead of firing people, I have the pleasure of helping clients hire people.
At any rate, the process takes about five months. We subscribe to the school of behavior-based interviewing, which means that we want people who have done it before. My company has an extensive database of potential leaders and we also utilize a vast variety of industry news and publications to find out more information about prospective CEOs. We then set up interviews with interested parties and present our selections to the company and its board to make a final selection.
We are experiencing one of the biggest business downturns in decades and everyone is looking for “green shoots” of economic growth. Is an uptick in activity in your business any kind of leading economic indicator? What are you seeing out there?
After many months without much activity, we have seen an uptick in search demand. We have seen this in the past and typically this has been an indicator of a better business environment ahead. Given the severity of this recession, however, what we are seeing could also be the equivalent of restocking shelves after inventory was allowed to get very low. Time will tell of course, and we are happy to see a spike in demand.
Do you have any advice for companies who may be seeking new leadership in the months ahead?
Since it is unlikely that the current market is going to get away from you, company stakeholders should press hard and get the best CEO possible. Perfection may be elusive, but finding an excellent fit between a company and its CEO is well worth the extra effort.
Finally, do you still believe, as reported in the Chicago Tribune last month, that the Bears will not be seeking a new head coach in the foreseeable future?
Yes. As I told the Tribune’s business columnist, professional sports teams do not necessarily have to win to maximize earnings — they just have to be good enough to keep the seats filled. That, apparently, is not a problem for the Bears, regardless of their performance on the field or place in the standings. Unless and until that changes — by, say, the team’s other “stakeholders,” the fans, voting with their feet — the Bears’ decision to stick with Smith is completely rational, at least from a business standpoint.
For more information, please contact Jay Dobrutsky at firstname.lastname@example.org or 312/840-7089.