If your CEO was unable to continue employment for any reason starting tomorrow, would you have a plan? Unfortunately, not all companies will have the luxury of taking several months to hire a new CEO. Organizations need strong leadership, even if that leadership is temporary. CEO search committee best practices will ensure that there’s a plan in place for hiring an interim CEO and that there’s a more extensive plan in place for finding a permanent CEO. Best practices also require identifying the search committee ahead of time that will command the drive for a new leader.
CEO search committee best practices begin with succession planning and with identifying the organization’s needs before the search even starts. The search committee’s work isn’t complete until a new CEO has been hired and they see that individual through the orientation and onboarding processes.
CEO Search Committee Best Practices for Succession Planning
It probably seems ironic that boards would be looking for a new CEO shortly after they’ve hired one. The value in beginning succession planning early is that even a newly hired CEO may have to step down due to health issues, a tragic accident, personal issues or some other unforeseen issue.
It’s the board’s responsibility to hire, fire and manage the CEO, and that’s what succession planning is all about. The process for CEO selection can take from four to six months, but there is much that boards can do in the meantime before the need to replaces the CEO becomes evident. A study of over 2,500 of the largest public companies showed that those that failed to manage their succession planning lost $1.8 billion in shareholder value.
Taking Stock of Candidates and Reviewing the Role
The needs of the organization today may well be very different from what they were at the time that the last CEO took the position, especially if the CEO has been leading the organization for a very long time. To make the best use of time, it’s prudent for search committees to consider the types of critical capabilities that will likely make or break the organization within the next five years or so. These are the essential qualities that the search committee should prioritize in selecting the best candidate.
At this point, it’s a good idea to review the current CEO job description and modify it as necessary according to what the organization needs in the future. Craft the new job description according to what the new candidate can do, what responsibilities should be transferred to others and what skills the new CEO can develop over time. Don’t promote the idea that the new CEO will fix all issues on the first day, because it could send a message that’s impossible to live up to. This is also a good time to take stock and perform a strategic review of the organization.
Establishing a Search Committee
The ideal number for a search committee is around five to eight members. The group should not include the current board chair, staff or the incumbent CEO.
The person who holds the job of the search committee chair is extremely important. This position requires a strong and compassionate leader who is skilled at building a consensus, who communicates effectively, and who has the time and dedication to see the process through. Ideally, the new committee will have a mix of past and future leadership. Some organizations find it helpful to hire a search firm for the job.
The goal of the search committee is to narrow the search down to one to three of the best CEO candidates. First, search committees may want to explore the possibility of any current board directors who might be interested in the position. There may also be other internal candidates who are either interested in the position or who may be interested in being trained for the position.
Search committees will usually find plenty of talent if they’re regularly monitoring internal and external search pools. Committees have the option of choosing between two or more promising internal candidates or recruiting an external candidate. Another approach is to conduct internal and external searches simultaneously and pit finalists from each category against each other.
Screening the Candidates
Screening for the candidates should be set up to discourage subjectivity as much as possible. The best way to do this is to formalize and structure the screening process in an objective way. In reviewing resumes, search committees can easily prioritize them against the critical capabilities, or “must-haves,” that the organization will need in the coming five years. This is also the best time to review compensation for the candidates. It’s prudent to benchmark the compensation against levels for the same position at organizations with comparable operating budgets.
Hopefully, the first round of interviews will yield about a dozen candidates. From this group, the search committee should whittle the group down to two to four of the best candidates for in-person interviews. Some experts suggest using structured behavioral event interviews instead of informal interviews. A structured behavioral event interview is one in which the interviewer asks the candidate to describe past experiences that are similar to what they’ll face if given the position and discuss how they’ve handled them. If the choice is to do informal interviews, it’s best to structure them as much as possible.
It’s crucial to conduct pre-employment background checks and reference checks from former employers or former peers. Of course, confidentiality must be a top priority throughout the interview and selection processes.
Closing the Deal and Onboarding
Offering attractive compensation is important to bringing new talent on board, but it’s not the only thing. When the committee is ready to present a job offer, they should explicitly set out the expectations for the role and advise the candidate about the expectations for the role and how the board will monitor and assess their effectiveness over the coming year and at the annual evaluation time.
It’s important to leave candidates with the assurance that the board is committed to their success if they should be chosen for the position. Search committees should follow up and ensure that the new CEO has the benefit of orientation and onboarding.
Best Practices for Boards Suggest Using Board Management Software
New and existing board directors share the experience of increased pressures and scrutiny compared to what they’ve faced in the past. Boards of today need to take advantage of all the help that technology can provide them, starting with Diligent Boards and the other software solutions that make up Governance Cloud. Diligent’s board succession planning tool can also be used to gather research on potential candidates and to also expand your recruitment pool.
Search committee activities provide a prime example of how committee members can streamline the CEO search process by allowing Diligent’s fully integrated software platform to monitor internal and external candidates for readiness and store resumes and other documents for group review. The platform allows for secure communication and secure file-sharing so there’s never a worry about hacks or leaks during the search process or at any other time. Diligent Corporation is an industry leader that’s committed to innovation in governance software.