Boards: Choose a CEO for Long-Term Growth, Not Just a Turnaround

Christine Rivers

It seems a familiar story these days—a company on rocky ground for a few quarters suddenly finds itself rudderless as the chief executive is let go or departs for greener pastures. In the resulting vacuum, the pressure to make an immediate hire can be intense. But companies are well served to think carefully about whether they truly need a "corporate savior" who can devise and carry out a turnaround strategy in short order, or whether a long-term leader is better suited to lead the company back to market success.

Ultimately, it is the responsibility of the board to make this choice. Here are some key steps to follow to ensure the new hire isn’t part of the 13 percent of CEOs forced out of the top office every year for failing to meet performance goals.

1. Determine CEO role requirements—quick recovery or long-term performance? Hiring a new CEO from the outside who can bring the expertise, experience and relationships needed to enter new markets or launch new products is a common recipe for success following a period of poor performance. On the other hand, “home grown” executives have a leg up in providing the strategic continuity and consistency critical in today’s turbulent marketplace. In the end, what allows a leader to excel in one scenario—a turnaround—does not necessarily make that individual great in another scenario—planned growth. While boards are often faced with pressure to make a quick hire to turn around performance, they should spend thoughtful and deliberate time clarifying CEO role requirements of the future, keeping a focus on the trade-offs inherent in what is needed to achieve the long-term vs. short-term needs of the company.

“Better CEO hires often result from identifying and assessing CEOs against specific cultural competencies during the hiring and on-boarding processes.”

2. Keep culture a top priority. During periods of disruption, the right cultural fit can be transformative. Leaders brought on to drive short-term performance may focus more on “fixing the problem” than cultivating personal relationships and unifying the team in pursuit of long-term growth. Much like a body rejects a transplanted organ if the tissue is not a good match, organizations routinely reject mismatched leaders. Whether examining internal or external CEO candidates, we’ve found that better CEO hires often result from identifying and assessing CEOs against specific cultural competencies during the hiring and on-boarding processes. In our experience, if done well, improvements will be seen in CEO performance and reduced executive turnover rates.

3. Maintain transparency through performance reviews. Candid conversations about the CEO’s performance and how it is measuring up to role requirements are critical. Boards must assess whether the chief executive is evaluated against short-term turnaround goals or building company alignment on a long-term vision and then hold regular performance reviews to discuss how performance is measured against these objectives.

Sudden CEO departures can be some of the most disruptive corporate events. Yet with planned and strategic steps, boards can ensure the next hire is fit for purpose and poised to drive the change and results the company needs to move ahead and achieve market success.

Christine Rivers

Christine Rivers is a Vice President with Hay Group’s Board Solutions business in Boston, MA, where she partners with boards of directors and senior executives to create sustainable organizations and enhance the effectiveness of the board/CEO relationship. Her clients seek her guidance and coaching on a range of issues related to enhancing organizational effectiveness and optimizing leadership performance. She can be reached at [email protected] or 617-425-4500.