CEO Jobs are Dramatically Hard: Grow Leadership Talent from Within

CEO Jobs are Dramatically Hard: Grow Leadership Talent from Within

About 40 percent of CEOs disappoint within 18 months. These probabilities, plus demands placed on leaders, have caused a recession in senior executives who want the top position (from 50 to 35 percent in the last four years). Furthermore, CEO turnover is at a five-year high.

Who will lead companies in the future? This question has caused a leadership succession and development agitation. Boards are more apprehensive about finding executive talent wherever they can.

In his book Searching for a Corporate Savior, Rakesh Khurana, professor at Harvard University, proposes that looking outside for a CEO successor is part of a growing “irrational quest for charismatic chief executives” (selection of outside CEOs has gone from 6 to 50 percent in recent years). Fearing boards may be concentrating on the qualities of presence, personality, and media appeal rather than character and competence, he gives seven guidelines for finding successors:

  1. abandon hope for a corporate savior
  2. translate company strategy into operational terms
  3. identify skills required for key activities (activity/competency mapping)
  4. assess internal candidates
  5. search for external candidates
  6. test and choose from a short-list
  7. calibrate goals, milestones, and compensation to drivers of success.

Khurana supports internal development of candidates, but admits that developing home-grown talent is not the only course.

After studying 276 companies that have decent track records at growing home-grown talent, The Corporate Leadership Counsel defined seven Hallmarks of Leadership Success:

  1. a culture of development
  2. enforcing development
  3. recruiting senior executives
  4. the power of meritocracy
  5. full business exposure for rising executives
  6. a focus on leadership skills in successor identification
  7. succession management.

Companies that are great at developing future leaders invest much time in fostering a candidate pool. As managers gain the essential training, coaching, on-the-job experience, they join an internal pool of high-potential candidates. But what divides the good processes from great ones is an emphasis on self-development.

Jeffrey Sonnenfeld, former Dean of the Yale School of Management, calls this “an unrelenting drive for self-improvement.” You spot senior talent not just from their activities, but how they attain them. When great companies search for talent, they look for certain qualities.

In his book The Hero’s Farewell, Sonnenfeld classifies executives as Monarchs, Generals, Ambassadors, and Governors. Each has distinctive exit behavior related to the manner in which they identify with the title and role of CEO. Of these, three of the four classifications cause problems for incoming CEOs.

  1. Monarchs stay on the job until they die or are overthrown
  2. Generals leave reluctantly and look for ways to return to active service
  3. Ambassadors leave gracefully but maintain active, low-key relationships in the company
  4. Governors leave and go on to serve in other areas.

Monarchs suppress internal talent development because they can’t endure contest for their roles. Generals and ambassadors often restrict with or undermine incoming CEOs. Unluckily, boards tolerate monarch, general, and ambassador behavior.

All this leads me to conclude: Work harder on growing internal talent. You can improve your odds beyond 50:50 by doing the hard, but rewarding, work of developing more leaders internally.

While companies must often look outside for talent, having an effective process for developing leaders guarantees that you will have great candidates when the time comes to add or replace executive talent.

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