The most critical decision a Board will make is appointing a CEO, yet several high-profile failures show how challenging it can be to get this right.
We all understand the need to prepare for C-suite and Board succession, but it is often more complex and delicate than it appears. Many of our clients admit that they know they should be ready when they actually are not. Another crucial point to consider is that as of January 2025, the Code of Corporate Governance mandates that all boards must conduct a formal annual assessment of its effectiveness and individual directors. This practice is crucial not only for CEO succession, but also for ensuring the overall effectiveness and preparedness of the entire C-suite and Board.
How can firms mitigate the risks involved in selecting C-suite and Board members?
The straightforward answer is to rely on rigorous assessment data rather than assumptions or instinct. Despite the flaws of intuition, high-stake decisions related to CEO and executive selection are often made this way. In reality, strategic decision-making under pressure leads us to use cognitive shortcuts, resulting in less than optimal outcomes. Research also indicates a significant disconnect between what boards believe makes for an ideal executive and what truly drives high performance. Board members and selection panels, just like anyone else, are influenced by cognitive biases.
How do these biases impact selection decisions? They include:
- Stereotypical assumptions about what a C-suite executive should look like, how they should act and sound, and the type of background, education or personality characteristics they need, elements which are often irrelevant.
- ‘Similar-to-me’ bias, which makes Boards favour candidates who resemble themselves, in ways unrelated to job performance, perpetuating a lack of diversity.
- Confirmation bias in interviews, where they seek information that supports their preconceived notions about who is right or wrong for the job, and disregard information that contradicts these notions.
Additionally, what makes an effective executive varies between organisations and even within the same organisation at different stages. A clear picture of the desired executive must be based on a deep understanding of the business, its current state, and its future direction. As a company grows, the skills required of its leaders expand significantly, often beyond the abilities of its founders. Consequently, most founders don’t make it to initial public offering (IPO); four out of five are forced to step down from the CEO post.
Mitigating selection risks also involves recognising the darker aspects of leadership, which may not be evident until it’s too late. Just as every bright light casts a shadow, leaders have ‘shadow side’ characteristics that emerge under pressure. A bold, fearless go-getter might become a brash, overconfident fantasist, while an adventurous, limit-testing self-starter could turn into an impulsive, manipulative rule-breaker. These darker traits are hard to identify without robust assessment, as impressions from informal conversations with Board members or investors are prone to bias and impression management. Even when Boards and investors know what type of person they need, failing to carefully identify the person can lead to suboptimal choices.
Since our founding in the early 1970s, Kiddy & Partners has helped clients reduce the risk associated with these critical decisions. Our clients appreciate our rigorous, insightful and straightforward approach, which gives them greater confidence in making these vital choices. Combining strong commercial experience with business psychology expertise, we understand what is genuinely required of C-suite executives. Our proven method gathers key data on future performance, alignment with business needs and challenges, capacity to handle the pressures and isolation of the role and the time needed to be effective. We deliver prompt reports with clear recommendations, outlining risks and onboarding advice if the candidate is appointed.
A recent evaluation of 111 Kiddy assessments at BU Exco and Exco -1, indicated that 100% of Kiddy clients reported that the assessments proved to be good or excellent predictors of subsequent performance; 80% reported that they were good predictors of subsequent candidate behaviour and performance and 20% reported that they were excellent predictors of subsequent behaviour and performance.
When identifying potential internal successors for C-suite roles, our process involves:
- clarifying the business’s future challenges through conversations with senior leaders and reviewing business plans, analyst reports, etc.;
- testing candidates against these requirements, as well as general commercial and leadership skills through business simulations;
- conducting in-depth interviews, complemented by personality assessments to understand key experiences, learnings and motivations;
- providing detailed feedback and development recommendations in a report, which is discussed one-to-one; and
- engaging the line manager to develop and gain approval for a detailed development plan, supported by senior HR.
Our approach ensures candidates take ownership of their development, understand how recommendations were made, are clear on the business experiences they need to be credible contenders, and focus on personal growth while maintaining high levels of performance.