The board's role in wooing top talent to the corner office.
Following a massive cyber attack at credit-monitoring behemoth Equifax late last year, the company's long-time CEO retired, an interim chief was installed, and the search for his successor began.
Given the public relations fallout and congressional scrutiny into the security lapses, filling the position with a top chief executive seemed daunting.
In March, however, the company announced Mark Begor would be taking the helm. He spent 35 years as an executive at GE, was a board member at Fair Isaac Corporation (FICO), and most recently was the managing director at private equity firm Warburg Pincus.
How did Equifax land Begor? The Wall Street Journal reported that Russell Reynolds Associates was the headhunting firm behind the placement, but a company official would not confirm or deny the story.
That said, Russell Reynolds' Constantine Alexandrakis, leader of the firm's U.S. business and its global leadership & succession practice, did agree to talk to Directors & Boards about how boards of troubled companies and beyond can attract the top C-suite talent.
“The fundamental rule is that no strong and dynamic leader wants to be a caretaker CEO. He or she — it's in their DNA — will inherently want to go into a situation and drive growth, change, transformation and disruption,” he explains.
Directors should not be discouraged by the size of the challenge a company may be facing when trying to find top talent for the corner office. They must focus on an organization's opportunities and the challenges, Alexandrakis stresses, “that a CEO with the right toolkit would be excited to take on.”
The key is figuring out how to get the right CEO excited, and that includes promoting the company, the culture and the board of directors themselves.
With the average tenure of a CEO clocking in at six years, most directors at some point will have to deal with the hiring of the top manager, says Lisa Blais, co-head of board practice with Egon Zehnder leadership advisory firm. But while there will always be people who want occupy the CEO seat, boards can't just call up an executive recruiter and say: “Send me a Mary Barra [GM CEO].” Leaders who have experience with disruption and change are scarce, she explains.
“There aren't enough CEOs that meet that requirement,” she adds. “There's a shortage of transformational leaders.”
This puts top CEOs in the driver's seat, she maintains. That means boards will have to “do as much selling as the candidate.”
Here are some best practices:
Strong search committee
Create an executive search committee that has solid and respected members who understand the gravity of the role they've been given.
“I think where some companies get it wrong is they have wrong people on the search committee,” says Dennis Carey, vice chairman of Korn Ferry executive search firm.
The committee should have three or four members, including former CEOs. Edgar S. Woolard Jr., who took a leading role as an Apple Inc. director when Steve Jobs was wooed back to the company, says it's important to have members who were not CEOs who can bring diverse perspectives.
It's also critical for the board to be pretty united and specific before they even start talking to candidates, stressed Russell Reynolds' Constantine Alexandrakis.
“No new CEO wants to be in situation where the board talks about need for change, but at the end of the day doesn't have the stomach for actually allowing it to happen,” he continues. So the board should be united around the strategy for the company, and capital expenditures, he adds. “It doesn't have to have specifics but having an agreement on the board on what they're willing to entertain, those are the first things a candidate is going to ask for during the interview process.”
Directors adept at picking top talent work hard to clarify what the company needs are and what qualities are necessary to meet that need, says Ram Charan, an expert in board governance and CEO selection.
“Know what you're looking for,” counsels Sandra Beach Lin, who is a director of PolyOne Corp., WESCO International Inc. and American Electric Power.
Be open and objective
While boards engage in succession planning as part of their duties, evergreen lists of internal and external candidates can have their limitations.
Today's business environment can shift so rapidly — what was good six months ago could not be what's needed today and tomorrow. It's crucial to look for talent within your four walls, but the search should also expand to include diverse candidates with different skills and backgrounds, says Julie Kampf, CEO of executive search firm JBK Associates International.
Beach Lin explains that the boards she serves on want “exposure to a wider array of management talent.” That includes looking at women and minority leaders, she says.
“Certainly, the boards that I'm on all want to look at a diverse slate for key roles, including the CEO,” Beach Lin says.
Boards should also look beyond the loud-mouth heroes.
“Our data shows that boards and others tend to gravitate to leaders that demonstrate the loud characteristics; that heroic approach to business and being able to galvanize the troops,” Alexandrakis explains, while shying away from the quieter person. But directors need to balance the disruptive with the pragmatic.
He suggests finding a leader who is heroic and vulnerable, someone who is able to balance galvanizing the troops with taking a back seat to the team, letting them drive things. “You want someone to bring everyone together, drive energy and new thinking for the company, but you also want someone who can empathize with people and be thoughtful of the bumps in the road.”
Look for potential
In the past, many boards would look at a candidate's track record as a gauge of whether a candidate will be a success, according to Blais. Today, some organizations might look at both past performance and current capabilities.
Directors should look for elements exhibiting an individual's potential in the future, she says. One of the best predictors of a candidate's potential for success is curiosity or the desire for continuous learning through new experiences, ideas and knowledge, according to a study by Egon Zehnder. Another trait that predicts future competency is insight, or the ability to absorb information and recognize patterns, the study found.
“An insight into where things are going is critical,” says Beach Lin. “It's the ability to ‘see around the corner.'”
Engagement or connection on an emotional and logical level with people is also key, according to Egon Zehnder study. Beach Lin, for example, ranks listening skills as one of the qualities she looks for in a CEO.
Finally, determination is another indicator of future potential, the study reports.
Nobody's perfect
Recognize that no individual will have all the qualities desired for the CEO job. Trade-offs will have to be made.
Shortcomings can be overcome by other team members who possess the abilities the candidate lacks.
“Any weakness needs to be complemented by members of the leadership team,” Blais says.
Still, the key strengths of a prospective CEO must match the critical needs of the company, Charan says. Any deficiencies must not be a fatal flaw.
One good example of that was Steve Jobs' return to the company he co-founded, Apple.
The company was in deep crisis in the late 1990s, when then-board director Woolard took a step that is now considered one of the most brilliant masterstrokes in business history. He asked Jobs, who had been forced out in 1985, to return to the company.
“I told Steve if you don't come back the odds are very, very high the company is going to go bankrupt,” recalls Woolard, who was essentially Apple's board leader.
It was a bold and risky move that has become leadership legend. At the time, Jobs had a reputation for being “mercurial, abrasive and prone to scheming,” a 1997 New Yorker article says. Woolard says he never saw that person. Jobs, he says, had proven himself at Pixar and NeXT as a passionate and visionary leader who could attract and motivate talent.
“He learned how to lead,” he adds.
Maureen Milford is a Delaware business writer focused on corporation law and corporate governance matters.