The Cost Of Hiring The Wrong Executive

If we all accept that the success of an organisation comes from strong leadership then why is it that Boards manage to get this wrong time and time again? Well, because they look for a simple answer rather than the right one. When a company is suffering from dysfunctional leadership, the fallout can be severe.

I have seen the aftermath of Boards hiring the wrong CEO or Senior Executive many times over the years and more often than not, that person was hired because there was a connection to the Board and not necessarily the right person for the role. Boards that are risk adverse and hire who they know, end up creating a greater risk when they hire the wrong person for the job.

We’ve seen this happen quite a bit in many industries but the best examples and the easiest for most people to relate to, is in sports clubs. We see often, particularly in recent times where a CEO will be appointed because they were a star player or an ambassador for the club. Boards think that popularity or familiarity will deliver success instead of the real needs of the business. Make no mistake, sport is a business and they need to hire someone who will get
the job done. As we continue to see many times over, a standout player or friend of the club, doesn’t necessarily make the cut for an outstanding CEO.

Appointing the wrong CEO doesn’t just affect the bottom line, it affects the entire business. Team culture, productivity, client relationships and in the case of sports clubs the support of loyal fans all have a huge impact to the performance of the entire organisation and once the damage is done, the cost of recovery can be very expensive and everyone associated is affected.

Selecting a new Chief Executive Officer is a transformation opportunity, and the very first step of a planned organizational change effort; it is an intervention into the company and its culture which, when executed correctly, can enable serious growth.

Unfortunately, we’ve seen time and time again in a number of organisations, where boards tend to overlook critical steps like selecting the right person for the role, creating a transition plan, building a coalition of support for the change and conducting an impact before, during and after the decision. They almost always focus instead on the impact the decision will have on other potential successors, market perceptions, investors and even customers and
supporters. What was the definition of insanity again? Where this becomes an even bigger issue is when it is clear that the decision wasn’t the right one, the impact it has on the broader stakeholders is profound. Consider the sporting club that hires a club legend into a key role who then needs to be removed because of their performance. No one wins in this situation.

While the approach of choosing what seems to be safe might be defendable, it can lead to tunnel vision. The assumption that Boards tend to make is that the right CEO will just “make it work” once they are in the role. This is even more so a misnomer when Board members step into the CEO role. Boards ought to be considering the impact a hiring decision will have over time, and across a broad set of internal and external stakeholders. Boards also need clear
metrics so they can monitor the transition is going as planned. Start every CEO selection process with a clear profile of success for the CEO, the senior team, and the business. Done properly, this can lay the foundation for the leadership team change plan, aid decision-making and inform other key leadership decisions.

Boards that ruminate over questions like, “Will an outsider or insider drive more change?” or “Do any of the successors have the right amount of experience?” may be at risk of looking for some heroic individual leaders instead of building a change-ready team. What is ultimately required, is the right mix of experience, capabilities and change orientations to launch and deliver transformation. Then under the right leadership, the development of organisational culture comes into play, which will see the changes required implemented correctly and the boards strategy executed accordingly.

Boards need to look beyond the individual being hired and also consider the team they will inherit, build, or bring with them. Any CEO succession process should include a review of all the roles and leaders on the executive team. The challenge here is that most Boards are not aligned and therefore making the right decisions becomes even more challenging as ego’s tend to take over.