Becoming the chief executive officer is a lifelong goal for many leaders, and yet, the path is rarely clear.
A big win leading or transforming a business is often your ticket to getting into the pool. Sustained success driving multiple business initiatives, especially in challenging circumstances, will also get you noticed. However, as every CEO who has won the job knows, your track record is just table stakes when it comes to landing the top job.
A momentous decision
A board of directors has a duty to ask, “What will make this company stronger today, and tomorrow?” When the time comes to consider CEO succession, they are keenly attuned to what a momentous decision it is. They are responsible for the future of the company, and accountable to employees, shareholders and customers for decision they make.
More and more, as CEOs come under fire for fiscal, legal and corporate cultural issues, directors are being held accountable for management oversight, including the actions of the CEO. They are taking these responsibilities seriously. A report by the outplacement firm Challenger, Gray and Christmas found more than 1,323 CEO’s left their jobs in 2018, a 24% increase from the previous year. While many departures are attributable to attrition due to job changes and retirements, the statistics also suggest it is a challenging time for CEOs.
How boards approach the task of selection
At the start of the selection process, a board may be quite comfortable with the current CEO, and therefore be concerned about upsetting the cultural apple-cart or losing key talent. This may tempt them to look for version two of the same person, a younger replica of the leader in charge. However, selecting and placing a “care-taker CEO” who executes on the strategy set by the previous CEO is high risk. No two leaders are alike, and, the future rarely calls for the same type of leadership.
Some boards may be unhappy with CEO performance and feel forced to consider a change to help the company move forward. They may begin a quest for an “ideal” candidate, and search without success for a perfect person who doesn’t exist. In either situation, boards need to step back and take time to establish what kind of leader they need for the future before they look at which candidates are best.
Directors can sometimes be tripped up when they go out seeking “change agents” or saviors that have a big name. Strong results at another company may not translate. All the same, proof of past performance is alluring and can give a board greater confidence in an outside selection.
Many a CEO selection derails within 6 to 12 months when the new chief executive can’t exert influence and seems too out of touch with the realities of the current company. If you are looking to move up instead of out, be assured that directors often conclude that a well-rounded internal candidate who has the “right stuff” is the best choice.
The CEO succession process
If you are looking to be CEO, it’s important to know precisely what would make you a great candidate. These decisions are typically not made quickly. Opinions form about you throughout your career, long before succession gets underway. There is time to develop yourself and broaden your experience.
Many boards take a minimum of two to three years to identify and develop candidates for CEO. This is good idea, though it can be an agonizing period for those in line for the job. During a lengthy selection process, uncertainty abounds. At the same time, a shorter process can put exceptional pressure on the company and the candidates to try to address perceived gap areas that they didn’t tackle during their careers.
The best companies do not allow CEO succession to become a bitter, ruthless race, a contest of personalities, or a duration test of wills among rivals. Rather, they make it a thoughtful process in collaboration with the current CEO; a progression that includes developing good candidates into great ones. These companies also embrace the idea that no organization can, or should, try to clone the current CEO. Instead, they establish the “what” of leadership before they decide on the “who.”
Potential stumbling blocks to navigate
One of the stumbling blocks we often see for CEO successors is they have come up through the organization as operating executives, often without external responsibilities, experience managing key external relationships, or perspective on managing the corporate brand, reputation, and perceptions of analysts and the media.
Skill and fluency in communicating with external audiences is essential. This means not only high level capability in public speaking, but also a demonstrated ability to handle difficult questions with a balance of optimism and reality. Directors are cautious when considering candidates that have not had regular and successful exposure to these discerning audiences.
While some CEOs are reluctant to provide their lieutenants with this experience, you should have a thoughtful conversation with your CEO to negotiate the right amount and quality of exposure to media and analysts. You need to develop some visibility so external audiences know you, and you need to develop your voice and instincts managing these high stakes interactions.
Another potential stumbling block for otherwise good candidates can be the fullness of your experience in confidential matters like corporate development including divestitures and acquisitions. It can be a challenge for some executives to gain this type of experience, so again, have these conversations if you are a succession candidate, and embrace opportunities like this when you have the chance, even if you are fully engaged in your current role.
A highly active, visible CEO is often pleased to bring you into the inner circle in negotiations and confidential interactions, as this can clearly be further proof of your executive capabilities. Building relationships with suppliers and competitors is also valuable as it enables you to identify suitors or targets for acquisition.
While it may be difficult to find the time, know that boards may also look more favorably at candidates who have outside board management experience as directors. This provides you with far more appreciation for how boards work. Giving presentations to your current board and participating in board meetings is valuable. However, learning first hand a board’s duties and responsibilities in corporate governance, compensation, and management oversight will help when you go to interviews in the later stages of the process. The more you understand, the better able they will be to imagine working with you in the future.
Perhaps a shorter summation from one CHRO who was present for many CEO changes is that boards are comfortable when candidates have three qualifications:
- They’ve led something transformational for the company
- They have strong external visibility
- They are a “no brainer” to analysts, the board, employees and shareholders
The 7 strategies to prepare to be CEO
Over the years in working with top leaders, and preparing many for the CEO succession role, we’ve noticed that there are 7 important strategies to get ready for this big step. We have seen some senior executives practice these strategies intuitively and they are second nature. However, few leaders practice all 7 strategies. Understanding all of them will help you to better prepare to successfully step into the role.
Remember that while you may not be the selected by your company for this role, chances are at the end of the process you will be qualified and well suited to lead another company. By adopting these strategies early, and embracing your own development, you’ll accelerate the process to become as they say, “ready now.”
The 7 strategies are:
- Establish your why
- Build a compelling vision
- Be a leader of people
- Establish a kitchen cabinet
- Embrace your development
- Get to know the board of directors
- Live your leadership values
1. Establish your why
There’s a difference between being a senior leader and being the chief executive. All your life, you’ve been practicing in higher stakes situations how to make decisions, rally the support of others, overcome challenges and achieve great outcomes. At the top, however, life will be different. Even the most confident chief executives have sleepless nights when it dawns on them that they have ultimate responsibility for the enterprise. When part of your businesses is failing, or a mistake is made, it’s on you. You own what happens in your company.
Given the tremendous responsibility and the emotional burden, it is worth asking the question, “Why do you want to be CEO?” Yet in conversations with candidates we’ve noticed many have trouble coming up with a ready answer. It may seem obvious, but this is an essential exercise. There is nothing wrong with healthy ambition, in fact, it is necessary to your success. However, ambition to be the top leader is not sufficient to make you a great leader, earn the trust and support of others, and to enjoy and be successful in the role.
The ”why” for you is probably different from the answer others might give. You are your own person, beginning with your background, interests, beliefs, hopes and values. The question of why you want to be CEO is tied to your vision for the company, but it is not the same thing. The why is a personal answer to a question about assuming this mantle of leadership. And it can be very hard to answer.
One way to get at your own motivations is to put yourself into a future state. Imagine it is five years from now. You have been CEO for four years. What has changed? What is better? A couple of years ago, I asked a CEO candidate to close his eyes and tell me “how is the company different?” and “how are you different?” The result of these reflections was powerful. It helped him make the decision to go for the top job, and two years later, he was selected.
Imagine a future time and ask yourself, what impact have you had on the world around you? What are you proud of? Reflecting on this with an outside advisor or coach is helpful, as that person can listen carefully and synthesize what you’re saying and not saying. This is a good process whether the opportunity is imminent, or you just want to start imagining yourself in the CEO role.
2. Build a compelling vision
Creating a vision for a company is not for the faint of heart. Change and disruption are givens. It’s ludicrous to think that any of us know precisely what’s ahead, so we need to be the kind of leaders who embrace that business is unpredictable, risky and messy pursuit. By now, you have enough experience to appreciate that competitors will always change the rules of the game. Innovation and technology are constantly evolving, and the best companies take risks and work to stay ahead.
Assess the landscape of your industry, develop a clear idea of what the future could hold, and consider the types of moves you would make to position the company for success in the next five to ten years. Those who interview you will want to understand this vision and how you think. Are you flexible, curious, and agile? Are you able to make decisions when you don’t have all the answers? Do you have conviction without arrogance? Your vision and these qualities of thinking are equally important.
We helped the president of a division prepare a white paper on his vision and present it to the board. This leader had made it a practice to attend conferences, meet thought leaders, read widely, and lead game changing initiatives. He had exciting ideas, and they aligned with how the board was thinking. Just as important, they liked his calmness under pressure, and unflappable ability to handle crisis and challenge. They voted for him over the more experienced candidate.
3. Be a leader of people
People leadership is often discussed but not always valued as leaders are promoted, when bottom line results tend to speak the loudest. However, research shows, and our experience tells us, that leaders who achieve long term success get results and develop their people. This was affirmed recently in our research on leadership qualities that drive growth and innovation.
We discovered by looking at high growth and low growth companies, comparing results to our data on 15 qualities of executive leadership, that while confidence and assertiveness were important, they were not the differentiators. Leaders of high growth companies, considerably above GDP, were evaluated as higher in two qualities: authenticity and integrity.
Being a leader of people is important because over time, successful hard-driving leaders without these other qualities in evidence either burn people out or leave a trail of destruction. Winning leaders inspire people to get outstanding results because others admire them and trust their character. They can be tough and still win others’ trust and best efforts, because they are reliable, truthful, real, sincere, genuine and transparent in their interactions.
4. Establish a kitchen cabinet
One leader we know who joined a global manufacturing company as COO had a long track record of success in his industry. However, he had not built and maintained peer relationships along the way, as he worked to give whatever time he had left after business to his family. He and another leader were regarded as successors. The leader realized he would need to develop relationships inside and outside the company to accelerate his learning as a CEO candidate.
His advisor recommended that he reestablish relationships with former peers he admired, have dinners and exchange ideas outside work. This confidential network helped to broaden his thinking and put issues into perspective. He also deepened the conversations with his coach/advisor, to help him navigate personal and professional challenges. He also began inviting in a few trusted peers within the company to accelerate his learning.
As a result, the CEO noticed the COO was becoming calmer, more thoughtful in his contributions, more reflective in his approach, while offering new, interesting perspectives. This increased the CEO’s faith in the COO’s candidacy. The story clarifies the value of having a kitchen cabinet that can educate you, tell you the truth, and keep it real. The cabinet can consist of both external and internal supporters. Be thoughtful about the role you want them to play, make sure you are thoughtful about what you share, and don’t allow internal politics to stir up unwanted issues.
5. Embrace your development
In all the years we’ve worked with senior executives, we’ve noted one truth about the best. They have, all their lives, embraced their own development. Never content to rest on their business laurels, they seek to learn what they think they may need know to be successful in the next assignment. They invest time in their learning and have an openness to change.
The best leaders also know is that as the saying goes, what got them here won’t get them there. One of our clients learned earlier on that his quick wit, analytical skill and confidence in his decision making got him noticed. However, in his role as president of a division, people saw it as arrogance. Through our 360-assessment people on his team were able to safely express their views that he was stifling ideas, shutting down debate and causing people to wonder whether they were valued.
The leader was surprised and hurt at first, but ultimately happy to get the feedback. He worked with his advisor to ask more questions in meetings and listen without interrupting. This work changed his style and though he was not made CEO of the company, he landed a chief executive role at another company a year later, and, got off to a strong start in the role.
6. Get to know the board of directors
As a senior leader, from time to time you’re asked to present to the board. These are typically brief sessions with a few slides and time for questions on topic where you need to prepare for tough questions. This is a good opportunity for the board to get to know you, but it isn’t enough to evaluate your candidacy.
While it’s not a good idea to be “running for office” by making it obvious you want the job, it’s a good idea to get exposure to the board when you can, outside the boardroom, at the invitation of the CEO. There are many ways to learn more about their backgrounds and views prior to interviews for the CEO role.
Know each member, prepare yourself for a lively discussion, and treat these as very individual meetings. Know your “why” and articulate concisely and clearly your vision for the company, while soliciting input. Don’t assume that the board members agree. Make it a dialogue. At this stage, they will be looking to learn not only “Where do you want to take this company?” but also, “Who is this person I might be working with in the future?”
7. Live your leadership values
You may be great at sharing your leadership values. Not everyone is. Many leaders say honesty and integrity are their guiding principles, however, it is important to go deeper. What have you learned along the way as a leader and how? What have your experiences taught you about life, about people, about business, about the world? As CEO, you need to stand for something, and people need to know what you believe in.
Looking back on your own career, especially with a coach, is a very rewarding exercise. It’s a path to appreciating the values that have shaped you and made you who you are today. What difficult choices have you made, and why? What challenges did you face and how did you overcome them? What prompted you to do the difficult thing even when no one was looking? If you aren’t sure, work with your coach or advisor to explore these career and personal stories.
This will be helpful not only in interviews but also if you are asked to go through psychological assessment with an outside firm. In these interviews, consultants are seeking to understand your suitability as a person for the role. They evaluate candidates for qualities such as mental toughness, self-awareness, intellectual acuity and emotional honesty, because these are factors in a CEOs success. Sharing stories of your life and career and connecting these experiences to who you are as a leader can truly set you apart as the right candidate.
Final thoughts on who will be the next CEO
As it must now be clear, the CEO selection process is arduous and that is a good thing. It is a momentous decision for those responsible for the company and for you. The time is now to consider what your reasons are for becoming a chief executive. It is also never too early to consider what experiences you need before the process begins. If the 7 strategies have brought to light areas you want to develop, actively seek these experiences.
Surround yourself with people you trust who can help you develop and talk with people who have been there. Don’t forget to seek the advice of your CEO. He or she probably has the clearest lens on your gaps and strengths. And, take note of what CEOs you admire do now. Become a student of great leadership. Live the best practices of great CEOs and you may soon be a chief executive.