The search and selection of a CEO is among the board’s most important foundational duties. While sometimes boards are rushed to find a successor (due to an unexpected incident), the succession process is most often a planned event, which entails the board’s creation of a CEO search committee to embark on the intensive journey of finding the right company leader. As seasoned board members would agree, it’s hard to truly appreciate the challenge till you’ve gone through it yourself… Yet, there is plenty to learn from those that have.
Sara Hays, veteran chair of the CEO search committee (Apogee Enterprises Inc.), recently visited our show to discuss key considerations of any board’s next CEO search. Afforded the luxury of time, the Apogee board had nearly a year to identify the best candidate to replace its retiring CEO. Yet, even those boards with no CEO transition in sight should begin discussions around what succession looks like—both planned and unplanned.
What led your board to form a CEO search committee? How did the committee approach this task?
According the Hays, several key considerations governed the formation of a CEO search committee, as well as the committee’s approach:
- A CEO that was reaching retirement age
- A cyclical business (i.e., commercial real estate market), where outperformance in good times is critical for carrying the company through any market slumps
- The board’s recognition that the company needed a leader and timing was important
Given these considerations, the CEO search committee (comprised of Hays and two other board members) knew that communication with the front line would be essential to selecting the right candidate.
“We decided we needed to talk to everybody: the management team, the board members, but also the business unit heads,” said Hays.
The search committee drafted a script and interviewed each person in depth (about 20 interviews total). The goal was to emerge from these conversations with a list of company priorities that would guide the CEO search.
“The process was great in that it involved everyone from the outset,” said Hays. “The outgoing CEO had been there for 15 years… it was important to have that kind of involvement and transparency with the business units and with management so that the process would be credible.”
What were key challenges faced by the search committee? By the committee chair?
Internal vs. External Talent: Sometimes the CEO talent a company needs could exist internally. Yet, this is always a hard decision for small- and mid-cap companies to make. Through her interview process, Hays and her committee learned that there was interest for the position internally.
“We, as a committee and as a board, decided that we needed to be very clear with the work we did to identify characteristics,” said Hays, “[That process] made it very clear that the person [we were looking for] was not inside the company, which allowed us to move forward without leading someone on along the way.”
A Meticulous Process: The CEO search process is one of great detail and significant time commitment. Hays’ background in project management and governance, along with her attention to detail, made her an ideal candidate to chair a CEO search committee.
Even with her committee moving quickly, the entire CEO search process took six to seven months. The first six weeks were devoted to the in-depth interviews, followed by interviews with external search partners. Toward the end of the process, the board must also design the right pay package to attract the candidate.
What tips would you offer to other boards embarking on this process?
- Be clear on your “must-haves” versus your “nice-to-haves.” No matter how clear you think you’ve been, you’re not going to find someone who meets everything on your list, said Hays. Know what is negotiable. Listen to the advisors you’ve engaged.
- Choose your search firm wisely. The communication between you and your search partner is important, but so is the cultural fit. You also have to understand the conflicts that a search firm may have, particularly related to any hands-off limitations.
- Don’t skimp on communication. It’s important to communicate clearly with everyone involved, including the retiring CEO. The transition of leadership is going to be disruptive, so the CEO search committee must focus on how to minimize that.
- Select the right candidate. In the end, you’re looking for a leader. The committee and the board must select the candidate they believe is right, and then they must attract him or her with the appropriate pay package. Don’t let a Say on Pay vote scare you away from choosing the right candidate. In the case of Apogee’s board, making the right CEO decision has served the company very well in the long run—something investors have come to see.
Don’t miss the full episode with Sara Hays. And stay tuned for more on CEO search committees.