By Peter Rabinowitz
Selecting a new CEO or other top executive is among the most important decisions trustees make. It is also one of the most misunderstood. Very often the selection process follows conventional wisdom, focusing on the characteristics of the exiting leader and then ranking candidates accordingly.
What’s wrong with that? Plenty. For one, this approach tends to obligate selection committees to a single candidate with no alternative if he or she doesn’t work out. Worse, because this approach typically proceeds with little reference to future strategic needs, it can saddle organizations with executives who can’t or won’t accomplish vital strategic goals.
There is a better alternative. It is a structured process that focuses on two things: first, objectively defining organizational goals; and second, preserving the board’s choices throughout the process. This gives the board flexibility to both keep the process on schedule and to select an executive who can meet the organization’s specific needs.
Below are six tips that will help you avoid common pitfalls and efficiently make effective executive selections.
1. Frame the selection process as passing the baton to a new leader. Boards tend to select a new executive in terms of the incumbent. “John Smith’s sterling abilities got us this far so we need someone with similar skills to take over,” the thinking goes. Often they even name the process after the incumbent—“We’re trying to fill John Smith’s job.” This is a mistake. Your new executive will face new challenges in a new time. Your need is for someone who can effectively move your organization forward. That person may be—often must be—very different from the incumbent.
2. Structure the process from back to front. Establish a timeline and budget for the selection process based on when you want your new executive to start. This sounds like a mere administrative detail, but it is not. It requires active planning and cooperation from selection committee members to stay on track. If you intend a November 1 leadership transfer, you may need your offer accepted by September 1. That means committee meetings in August, so schedule vacations accordingly. You’ll also need to set times to develop selection criteria and meet with candidates. The process usually takes 90 to 120 days. A good recruiter can help make the process predictable, efficient and effective.
3. Determine organizational goals and what you will sacrifice to reach them. This crucial step is often overlooked. It should take place before a search begins and should involve your recruiter so that he or she has a better understanding of your organization’s leadership needs. Think about where your hospital needs to be in five, 10 and 15 years, and what must be done to get there. Do you need to acquire physician practices? Merge facilities? Launch new service lines? Will you need to lay off workers, change physician payment formulas or aggressively negotiate new insurance contracts to do it? Are you willing to challenge established physicians, department heads, community leaders or government agencies to succeed? Answers to questions like these yield both tactical and strategic goals for your new executive. They also imply how much authority you will grant to achieve them. More importantly, identifying these needs gives you an objective basis for developing a job description and the requisite personal criteria for selecting an effective executive.
4. Drive the selection process by using ‘future perfect tense.’ When assessing candidates, it is natural to focus on what the individual has done. While this is useful, it may not be relevant in your search process. Rather, issues should be framed in the future perfect tense: After 12 or 18 months, what will the candidate need to have accomplished to meet your organizational goals? By focusing on specific objectives, you can then consider what kinds of tasks need to be done and which candidates are capable and motivated to do them. For example, if major restructuring is required, is the candidate willing to lay off staff or eliminate popular, but money-losing, programs? A good recruiter will identify what needs to get done and the candidate’s ability to get those things done. Operating from this perspective enables the recruiter and the search committee to preserve their choices to meet objective needs.
5. Don’t rank candidates—eliminate unsuitable candidates instead. Asking a selection committee to rank candidates by preference has a fatal flaw: It equalizes every individual vote from the committee. While that might seem to be the goal of the selection process, in fact, it is not. The goal is to preserve the choices of those included in the final selection process. Ranking the candidates eliminates choices because the top candidate becomes the only candidate. No one ever goes back for No. 2, and if you try, it doesn’t take long for the candidate to find out that he or she is the second choice. So, if the first choice falls through, you’ll probably have to start your search again because you’ll have driven off one or more highly qualified candidates. The better approach is to ask the committee if there are any candidates who they find, for whatever reason, unacceptable. This exclusion designation should be executed summarily. There should be no conversation about why remaining candidates are still “in.” The idea is to put the remaining candidates on equal footing, which gives the search committee chair several viable alternatives. This method preserves the committee’s choices: Whether the first offer is accepted or not, others remain from whom to make the selection.
6. Always present at least two finalists. Again, you need to preserve choices and those choices are not yours alone. The candidate has the last say, and anything can happen when you make a job offer. The candidate’s current employer could make a counter offer. Or another organization could swoop in with a better offer. When there is a second finalist, you have another candidate who is perfectly acceptable because they were determined to be so when the “cut” was made. It is always about the process and not solely about the candidate.
As the old English proverb goes, “There’s many a slip twixt cup and lip.” With so many potential areas for missteps when selecting a new executive, the way to mitigate potential damage is to initiate, pursue and drive a process that ensures you will maintain choices. With clearly delineated “deliverables” tied to shared strategic objectives, and following processes that maintain your options, you can identify and secure new executives who not only know what they are expected to get done, but also arrive motivated to do so.
This article 1st appeared in the June 2009 issue of Trustee Magazine.