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Finding the Right CEO: Why Boards Often Make Poor Choices

October 15, 2001 | Rakesh Khurana | Strategy

Although identifying and hiring the most appropriate CEO is critical to an organization’s success, the succession practices of many large corporations often result in poor outcomes, as recent brief CEO tenures at Coca-Cola, Gillette and Xerox testify.

To better understand the dynamics affecting such a complex selection process, from 1995 to 2000 Harvard Business School professor Rakesh Khurana interviewed scores of directors, executive-search consultants and job candidates about the methods that large corporations use when hiring a CEO. In the process, he discovered several common pitfalls that derail efforts to find the right CEO. He observes that a variety of practices are nearly institutionalized in many companies, and he explains ways to avoid them. Khurana also contends that boards can actively manage the following aspects of a CEO search and greatly improve the likelihood that the survivor who emerges is best suited for the challenges of the job.

Search-committee composition. Khurana recommends that the search committee consist of a diverse group, not only in terms of age and functional background but also concerning knowledge of the company and its culture.

The “CEO as panacea” syndrome. Boards must be sure to consider the contributions of other executives in company success; failure to do so will raise expectations about the performance of the incoming CEO to an unsustainable level.

Adoption of outcome-oriented practices. According to Khurana, the practices most relevant to a successful outcome are discussing the company’s strategic direction explicitly and early in the process; recognizing and defining search participants’ roles and responsibilities (in particular, limiting the roles of the outgoing CEO and the executive-search firm); and evaluating candidates in light of the position’s requirements, rather than in relation to one another.

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