CEO transitions are becoming more common. Per a recent study, the median tenure of large cap company CEOs is down to just five years. Replacing a CEO requires time and planning from the board and executive team. And finding the right CEO can mean the difference between sustained growth and stagnation.
Harvard Business Review (HBR) recently noted that roughly a quarter of Fortune 500 CEO turnovers were involuntary while costing $112 billion in lost market value annually. Obviously something is not working. Per the article, “…we have seen a fundamental disconnect between what boards think makes for an ideal CEO and what actually leads to high performance. That disconnect starts with an unrealistic yet pervasive stereotype, which is shaped in large part by the official bios of Fortune 500 leaders. It holds that a successful CEO is a charismatic six-foot-tall white man with a degree from a top university, who is a strategic visionary with a seemingly direct-to-the-top career path and the ability to make perfect decisions under pressure.”
In reality, very few people fit this profile. In fact introverts tend to perform better than extroverts even though boards gravitate tow extroverts. Subconscious biases are difficult to recognize, so each assumption should be questioned and discussed. Another example is college pedigree. The study found no correlation to performance. Only 7% of CEOs have an Ivy League education, while 8% of CEOs never went to college.
What can make a candidate look like a great fit has little connection to their ability to perform in the role. The study identified four behaviors that do correlate to performance as long as they are practiced consistently and diligently.
Deciding with speed and conviction
This behavior does not mean CEOs make the right decision every time, what they do is make decisions, “earlier, faster, and with greater conviction. They do so consistently—even amid ambiguity, with incomplete information, and in unfamiliar domains.” CEOs that were considered to be decisive were 12 times more likely to be high performers.
Engaging for impact
CEOs who thrive in building consensus and alignment with their key stakeholders are 75% more successful. “They start by developing an astute understanding of their stakeholders’ needs and motivations, and then get people on board by driving for performance and aligning them around the goal of value creation.” Interestingly, concern with being liked or protecting their team from difficult decisions are traits of low performing CEOs. Top CEOs don’t shy away from conflict when necessary.
The business landscape is changing faster than ever before thanks to technology. CEOs that embrace a growth mindset are 6.7 times more likely to succeed. They don’t get hung up on setbacks, “Successful CEOs offer unabashedly matter-of-fact accounts of where and why they had come up short and give specific examples of how they tweaked their approach to do better next time.”
Never underestimate consistency and reliability. CEOs with this skill set are twice as likely to be selected and 15 times more likely to succeed. “A key practice here is setting realistic expectations up front. In their first weeks on the job reliable CEOs resist the temptation to jump into execution mode. They dig into budgets and plans, and engage with board members, employees, and customers to understand expectations. At the same time, they rapidly assess the business to develop their own point of view on what’s realistic and work to align expectations with that.”
It’s important to recognize that no single candidate is going to excel in each of these behaviors. You need to take into account your specific set of circumstances, your culture, existing skills on the executive team and related factors. These behaviors are by no means a silver bullet, but they can help improve your chances of finding the right CEO.