De-risking CEO appointments
Kiddy & Partners
The most important decision a Board will make is the appointment of a CEO, yet several high profile failures highlight that getting it right isn’t easy.We all know we must prepare for CEO succession but– often for complex and quite delicate reasons – it’s not as easy as it looks. As such, a surprising number of clients tell us they know they should be prepared but in truth aren’t.
So how can firms de-risk their CEO selection decisions? Intuition can be seriously flawed, so you’d think people would know better than to make high-stakes decisions such as CEO selection on this basis. But it’s in high stakes, strategic decision making where we tend to use cognitive simplification processes to arrive at complex decisions more easily – often with less optimal results. In fact, research reveals that there’s a fundamental disconnect between what boards think makes for an ideal CEO and what actually leads to high performance. Board members, just like anyone else, are affected by cognitive biases.
How do biases affect CEO selection decisions? In selection decisions this can include:
- Stereotypical assumptions about what a CEO must look, act, and sound like.
- ‘Similar-to-me’ bias, which predisposes us to favour people who are like ourselves, on characteristics completely unrelated to performance on the job (which in turn perpetuates a lack of diversity).
- Confirmation bias, whereby we look for information to support our preconceived ideas about who’s right (or wrong) for the job, and ignore information that refutes our preconceptions.
De-risking a selection decision also involves shining a light on the dark side of leadership, which otherwise might not become evident until it’s too late. The bold, fearless go-getter turns into a brash, overconfident fantasist; or the adventurous, limit-testing self-starter becomes an impulsive, manipulative rule-breaker. In ordinary circumstances, we keep a lid on these darker elements to our personality making them hard to identify without robust assessment. CEO selection based solely on informal conversations with Board members or investors is unlikely to identify derailer risks, as well as being highly vulnerable to bias.
At Kiddy we’ve been working to help de-risk these decisions since our firm was founded in the early 1970s. Our clients tell us our approach is more rigorous and insightful yet pragmatic and straight-talking than other providers, which provides them with greater confidence in these vital decisions. Our approach combines strong commercial experience, with business psychology expertise, and knowledge of what is really required of CEOs as they execute their roles.
It’s important to recognise that what makes for a good CEO in one organisation is different for another and, for that matter, even in the same organisation at different phases of maturity. This is why at Kiddy we avoid ‘off the shelf’ reporting and design our leadership assessments around a deep understanding of your business, where it’s at, and the type of leader(s) you need to take it where it needs to go.
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- Pissaris, S., Weinstein, M. & Stephan, J. (2010). The influence of cognitive simplification processes on the CEO succession decision. Journal of Managerial Research. 10 (2), 71-86.
- Botelho, E., et al. (2017). What Sets Successful CEOs Apart, Harvard Business Review, May-June 2017.