Leadership

[Astroboy]

What Boards Look for in a CEO

by Jim Citrin

I recently spent two days with the board of a major global company interviewing candidates for the position of CEO. As the directors were seated around the boardroom table, the chairman gave a warm welcome to the candidate and set the stage for the 90-minute discussion.

In a process repeated eight times during the course of the two days, he kicked off the interview by posing a question he'd posed to every other candidate: "How would you assess the state of our industry and the company's position within it?"

The discussion flowed from there, with every director asking different questions to probe the key areas as they saw fit.

The Key Factors

It was a remarkably clarifying experience sitting through all the interviews and seeing through the eyes of the directors how different candidates came across, what resonated, and what did not.

It was equally noteworthy observing the dynamics of the board in its various modes of evaluation, probing, selling, and decision-making. What became clearer than ever was what boards really look for when they assess CEO candidates.

In order to get to the table as a serious candidate for an important position, of course, you have to have a sufficient amount of relevant experience and a demonstrated track record of success.

However, in the majority of cases, it's what goes on inside the boardrooms during the live conversations that determines the candidate around whom the board coalesces and who is ultimately selected for the job.

So what are the ingredients that determine the winners from the losers? The basic attributes that separate the best candidates from the rest are:

• Intellectual prowess: Don't underestimate the importance of sheer gray matter.
• Having a well-founded point of view: Boards look for someone to stake out a sensible position with firmness.
• Superior communications skills: This is the ability to unlock that gray matter and articulate that point of view in a clear and compelling way.
• Values: There must be a strong match between what the individual stands for, and what the directors and the company stands for.
• Executive presence: This is the intangible ability to inspire confidence in a group setting.

Trust Is Essential

Beyond these qualities, however, there's something even more important -- a capability that underlies these essential attributes and that ties them all together. It's the ability to think clearly.

When boards are looking to put their trust, fiduciary responsibilities, and reputations behind a new leader, it's largely a game of confidence. Once they've selected a new CEO, the directors will leave the room and go back to their own day-to-day, pressure-packed lives until the next board meeting.

They'll be passing the baton of responsibility to the new leader to carry the company forward in a way that they can feel secure about. The board is therefore looking for someone who both understands the situation in a deep way, and who can develop a specific plan of action for leading the company through the maze of issues and opportunities to optimize short-term and long-term results.

Clarity Gets the Job

Across the two days I spent in that boardroom, the divergence among candidates along this dimension was astonishing. The most successful were those who could:

1. Explain the key competitive dynamics in the industry, i.e., what was driving change, who was winning, and who was losing and why.
2. Clearly describe what the company should do to thrive, i.e., what the top priorities should be, what strategies should be pursued, and what acquisitions considered.
3. Present a sound and specific organizational "architecture" that would enable the company to move forward in a decisive and effective way, i.e., how the company should be organized, what positions should report directly to the CEO, which functions should be centralized and which pushed into the business units, and how to align incentive systems to reward the desired behaviors.

The least successful candidates were, by stark contrast, muddled in their thinking, generic in their diagnoses, unclear about the company's priorities, rambling about what strategies to pursue, and generally all over the place as to how they would organize the company going forward.

The Secret Ingredient

The technical term for what the strongest candidates displayed is "executive intelligence," a concept coined by Dr. Justin Menkes in his best-selling book of the same name.
Menkes, a Ph.D. who trained under Peter F. Drucker, is a managing director of the Executive Intelligence Group, a leading provider of executive assessment services to global corporations (full disclosure: EIG is affiliated with my firm, Spencer Stuart).
Based on a decade of research on intelligence tests and management performance, Menkes found that the distinguishing characteristic of the best chief executives in the world is a set of aptitudes and cognitive skills that are at the heart of business acumen.

This takes the form of an executive who asks penetrating questions, maintains a rigor in his or her thinking, and skillfully works out the best answers to tough problems by identifying and using the information that has value for that purpose (and by resisting irrelevant or unreliable considerations, however tempting they may be).

Just as great mathematicians share an exceptional facility for computation and deductive reasoning, great CEOs share these skills, which enable them to create solutions tailored to suit each situation that arises.

Charm Only Takes You So Far

What about inspiration and charisma, you ask? Inspiration, indeed, is important. But there are two ways to inspire. The first is through charisma, that personal attractiveness that enables someone to influence others

It has, of course, allowed some of the most effective leaders in business and public life to inspire others to achieve greatness. On the other hand, charisma has also enabled others to lead companies, even entire populations, in disastrous directions. So charisma is not the most trustworthy attribute for creating inspiration.

On the other hand, the leader who inspires on a sustained basis, especially in business, is the one who:

1. Establishes a clear direction that makes sense and that people genuinely understand.
2. Structures the organization in such a way that enables people to do great work with a minimum of barriers.
3. Reinforces all of this with effective incentives and information.

This can all be accomplished just as readily by the chief executive who has a deficit or an abundance of charisma. However, it only can be done, as was so evident in that boardroom, by the leader with superior executive intelligence.

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