Tips on Hiring a CEO

Hiring a CEO is something most of us don’t do very often. If we are doing it a lot, things are going poorly. That is unless you’re part of a private equity firm. When they invest in a company, they often hire a new CEO. According to Alix Partners, 58% of CEO’s are replaced within two years of a private equity investment. This means they are hiring multiple CEO’s every year to run their companies. As you can imagine they’ve learned a few things along the way.

One of the surprising findings of a study featured by Harvard Business Review was the fact that they “pay less attention to attributes such as track record and experience, the criteria typically most prized by recruiters, and to give more weight to softer skills.” This may come as a surprise to you, but as we’ve seen time and time again at Sheer Velocity, culture fit matters as much or more as technical fit. We are such strong believers in it, we collaborated with an industrial psychologist to create our own Cultural DNA Alignment.

The study provided five key findings:

Experience is overrated

Just because someone has previously been a CEO or is from the same industry, there is no guarantee they will be successful. This is especially true of corporate hires who are transitioning to smaller more agile companies that have far fewer resources than they are accustomed to, and much more aggressive growth goals. The right candidate may not look that way on paper, but has been identified because they have the skill set to take the company to the next level.

Team-building skills are paramount

This is the highest ranked attribute in the study and makes sense since the CEO will be expected to build a high performing executive team quickly and efficiently. The faster the CEO can identify internal talent and bring in new talent, the quicker the growth curve will trend up and to the right.

Urgency outranks empathy

This is a controversial finding in the study. Others have argued that one without the other results in a team that is afraid to make a mistake. While there is a need to drive results quickly, using empathy in specific moments emboldens the team to rally around goals, creating greater velocity.

Resilience is a must

Adaptability is critical for private equity CEO’s. They are coming in to a situation that needs their attention. It may be unlike any situation they’ve ever faced before. Their ability to read the tea leaves and pivot as necessary is a leadership trait not for the faint of heart. On the bright side, their private equity partners are there to help guide the decision making. CEO’s are not expected to have all the answers, but they are expected to know when to ask for guidance.

Candor is key

Honesty and transparency are mandatory traits for successful CEO’s at private equity companies. There is no stock price to worry about. Smart, informed decisions require an ability to speak candidly as soon as an issue is realized. There is no room for fear based information sharing.

In a related study, Bain & Company found that the success of private equity CEO hires is not without its challenges. They found three traits were lacking in the CEO’s that failed.

  • An inability to operate at both a strategic and systematic level
  • An inability to build executive alignment and commitment to the strategy
  • An inability to develop executives skill sets to meet strategic needs

You may notice that all three of these traits can be traced back to soft skills. Overlooking these factors, though they are harder to discern, is a recipe for failure. That’s why you need an executive search partner. At Sheer Velocity, we specialize in executive search with Private Equity backed companies, while helping you identify and hire the right candidate for your specific needs. Send us a note and let us know how we can help.