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2. Hiring A CEO
With CEO churn higher than ever before, recruiting for the top job is a
difficult challenge. People Matters brings you the definitive roadmap
for Boards facing the daunting task of selecting their next leader.
By Vikram Choudhury

3. Over 44% of Indian companies hire CEOs who are external
to their organisation. This is the highest in the world. CEO
turnover in India (and other BRICs countries) has steadily
increased year on year from 10 per cent in 2010, to 13.8% in 2011
to 15% in 2012 according to Booz & Company’s annual study on
CEO succession.

4. So when is the ideal time to start looking for a CEO and what are the
signs that Boards should look for?

5. 5 warning signs Boards should watch out for
•Consistent performance issues: If the CEO’s performance shows a steady
decline over months, the Board should investigate the key reasons behind
it. An unsatisfactory explanation qualifies as a cause for worry.
•Risk aversion: When the CEO becomes uncharacteristically risk averse, it
may indicate a short-term focus and lack of commitment.
•Ethical slips: When the CEO shows signs of ethical slips, the Board should
take up the matter even if the slips appear to be harmless water cooler
conversations.
•Excessive “action” focus: Often, when the CEO loses vision from the
bigger picture and starts focusing excessively on action and processes, it
indicates a lack of clarity and purpose.
•Lack of follow through: A disengaged or demotivated CEO may stop
following initiatives through their completion. It is important for the Board
to periodically discuss the stage of completion of the several
initiatives of a CEO.

6. Once you decide that it is time to hire a CEO, how do you ensure that
the search is focused and aligned to the organisational goals?

7. Seven questions your external advisor should have
answers to
•Do you understand the cultural nuances within the organisation?
•Do you understand the context of hiring and its background?
•Do you understand the present and future business position of the
organisation?
•Do you have a fair idea of the future business goals of the
organisation?
•What are the relevant criteria for shortlisting candidates?
•Do you understand the purpose of why the organisation is hiring the
CEO?
•Do you understand the unique context of hiring the leader?

8. Pitfalls to avoid when hiring a CEO
Star Power Seduction: Hiring a star performer may not necessarily
work for the company. The value that a candidate brings to the
organisation and his her or her alignment to the organisational
context is a more critical metric to look out for.
The Principal Agent Problem: In order to ensure good client relations,
the consultant may refrain from providing objective assessments and
the right judgement about individual candidates or put forward
realistic timelines.

9. Cost of hiring the wrong CEO
•Fixed costs: The CEO hiring process is lengthy and elaborate, often
requiring the Board members to travel to different locations.
•Compensation costs: The CEO is among the highest paid employees
of the business and most of the compensation costs for the initial
months come without returns.
•Buying costs: On many occasions, the Board has to take tough
decisions about paying out career transition costs of a new CEO while
bringing him on board from another organisation.
•Cost of litigation: If the CEO leaves on a sour note, the Board also
needs to factor in the likely costs of litigation.
•Cost of losing other leaders: The most impactful blow to an
oragnisation with hiring the wrong CEO is the cost of losing other
important and valuable leaders in the organisation.

10. Six components of a fair CEO hiring process
•Document: Irrespective of whether there are any disclosure issues,
document every stage of the hiring process.
•Appoint a separate hiring committee: Chairman of the Board and
Chairman of the hiring committee have to be different.
•Identify process owners: Every component of the process should
have dedicated owners carefully selected and documented as part of
the process.
•Assign individual roles and responsibilities: Make every member of
the selection committee responsible for specific outcomes.
•Lack of follow through: A disengaged or demotivated CEO may stop
following initiatives through their completion. It is important for the
Board to periodically discuss the stage of completion of the several
initiatives of a CEO.
•Be bold: Ask difficult questions on the organisation culture and
discuss them honestly.

11. To read the complete story click here “Hiring A CEO”

12. For Further Information
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+91 (124) 4148102
info@peoplematters.in
www.peoplematters.in
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August 2013
www.peoplematters.in