Signing on as a new CEO or CFO is an exhilarating and hopeful moment for senior executives who often articulate ambitious visions, set clear financial goals and seek to achieve a measure of finesse blending prior successes at a firm with a series of new initiatives.
Hiring a team of supporting personnel is perhaps among the most significant or impactful elements of this new beginning for a CEO.
With this in mind, newly appointed CEOs and senior executives would be well-served to resist the immediate temptation to surround themselves with friends and known subordinates with whom they may initially feel more comfortable. Experience has shown that CEOs are best served by making carefully considered, informed, merit and experienced-based hiring decisions when it comes to acquiring a team with proven talent at the outset of a new mission.
There is a modicum of comfort that people have in selecting the known quantity, however when it comes to achieving the requisite financial performance goals or established benchmarks, especially in private equity markets, it is essential to have people on the team who have a tested and proven ability to deliver much needed results.
It is much better for new CEOs to hire the executive who has demonstrated that they have had success getting to the growth goals and the turnaround goals desired — rather than hire someone they are comfortable with. Naturally, CEOs need to have the right leadership around them is so that they don’t miss milestones or key financial targets.
The tendency to hire known, comfortable subordinates often displaces the necessary rigor or thought process essential to filling key executive slots in a firm which needs to achieve specific growth-oriented financial benchmarks.
If the new executive hired is a known quantity that has not achieved a specific target or hasn’t demonstrated comparable abilities in the past, what are they going to tell the CEO he or she doesn’t already know? Where is the evidence that they might all of sudden come in and completely surprise the new leadership with effort or unknown skill not yet seen or heard? How does one mitigate risk while at the same time find the right leaders?
Essentially, there is some danger associated with picking someone a CEO is comfortable with regardless of capability. A new CEO or CFO really needs to have somebody who has hit key targets and demonstrated needed abilities before in other settings.
Along these lines, a deliberative process on the front end –even one using a score card to account for various needed attributes — can yield effective results when it comes to finding proven candidates to fill key roles. It is important to distill the process down to the establishment of some key essentials needed in the desired candidates.
As part of this process, it might prove relevant to ask a series of key questions such as what are the non-negotiable experiences, skill sets and characteristics that I need to find in someone?
A score card approach can also provide the added benefit of helping decision makers, board members or investors coalesce their perspectives around the right candidates and reach needed consensus.
There is a timeless adage which, if a little reductive, might come close to capturing the sentiment needed to execute this strategy — “I’d rather reign in a stallion than push a nag.”
Also, while performance is of course highly valued across the broad range of industries and business, investor-led private equity markets have a way of creating unique pressures upon CEOs and CFOs to achieve financial results in the short and long term.
When a firm is private equity owned, the investment community is closely associated with the business all times. That places an onus on the CEO to pay special attention to building the right team on the front end.
A merit-based approach to hiring subordinates, however, does not diminish the business value of long-term relationships, as those always remain important. The challenge is to be sure to use proven experience achieving desired results as an essential ingredient in the decision-making calculus.
Relationship-building techniques with whoever is hired will place a new CEO in the best possible circumstances favoring success. For instance, when it comes to executive search, It is not the database that makes the magic but the approach. Are new leaders transactional animals or do they build relationships? That is the reason we have an advantage at Northwind Partners.