Finding the CEO's Successor

Happy Friday,

Why is it so hard to find a successor to the CEO? Two reasons:

First, good leaders are rare. Gallup conducted a 40-year study (The State of the American Manager) analyzing 2.5 million teams and 27 million employees across 195 countries. They concluded that just 1 in 10 is a natural-born leader. Another 2 in 10 are pretty good, with leadership characteristics that could be developed, and 7 in 10 people don’t and won't possess the fundamentals needed to lead.

"Organizations fail to choose the candidate with the right talent for the manager job a whopping 82% of the time." - Gallup.

Second, low expectations define the leadership pipeline. Leadership titles are commonly handed out for reasons other than leadership aptitude (i.e., necessity, retention, loyalty, technical skills, longevity, friendship, to avoid hurt feelings). No other job does this. The relatively low threshold to be named a leader and the dearth of clear leadership expectations mean when the time comes, even those with lofty titles may not be candidates. The low bar and low expectations narrow the field when it counts the most.

Then, all of a sudden at the CEO level, leadership excellence becomes essential. So much so that the Board often begins the selection process 3-5 years in advance in publicly traded companies.

In privately held organizations, finding the right CEO is commonly motivated by the value of the departing leader's stock, meaning, ‘Who has the leadership skills to keep this ship afloat long enough to pay me out?’

Here are some of the most important and perhaps less obvious leadership attributes CEOs and Boards greatly value in a successor:

1.     A first-principles, reductionist mindset (Questions everything, asks why and looks for better alternatives)

2.     The ability to quickly earn people’s trust

3.     Emotional intelligence and situational awareness

4.     The ability to inspire and motivate

5.     Storytelling skills

6.     Excellent listening and communication skills

7.     Comfort with ambiguity and risk

8.     Financial acumen, macro and micro

9.      Willingness to make unpopular and difficult decisions

10.    Emotional resilience (every CEO is a punching bag)

11.     Moral courage and inspirational integrity

12.     Poker experience

13.     A big-picture, long-term perspective

14.     An entrepreneurial/innovators mindset

15.    Willingness to prioritize the organization above essentially all else in life.

·      The CEO must speak the 'business of engineering' fluently but absolutely need not be an engineer. Happy to debate this.

Your organization may not explicitly expect its leaders to have any leadership skills. But when the time comes to select the next CEO, it will definitely be leadership, not management, that the CEO and Board will demand in a successor. If you're ambitious and want a shot at that seat, there's your list.

Have a terrific weekend!

Dave

Feedback and blowback are always welcome: dave@goodnewsfriday.com

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