Four Questions Today’s CEO Candidates Must Ask

The high rate of CEO turnover in the past few years is unusual given that the business climate is relatively strong. While most of the churn is through planned succession, many chief executives are being held to higher performance standards than in the past and are expected to meet or exceed them quickly. Another factor at play is that, according to PwC, more CEOs are being dismissed due to ethical lapses than ever before.

I also see the mindset of CEOs changing around tenure. Few expect a 10 or 15 year run any more. Some chief executives consider five to seven years the optimal tenure – long enough to implement major components of the strategy but not too long to outlast your stay. I recently had a president share with me, “It’s better to leave a year early than stay a day too long.”

Whatever your ambitions are, as you consider a CEO role it is important to ask – and get honest answers for – a few critical questions to set the stage for success. I advise CEO candidates to consider the following four fundamental questions:

1. What led to the transition?
   When our firm starts a CEO recruitment, every candidate wants to know the circumstances around the prior CEO’s departure. Ask the board chair for an honest and objective summary of the situation. Also ask for advice on how, if you were selected as CEO, to ensure you leverage the current situation and calm the organization. Whether planned or abrupt, transition causes uncertainty. You and the board would have to work to manage the transition well.
   If the circumstances are that a long-tenured CEO is retiring, questions still need to be addressed: Has the board committed to having the exited CEO participate in the organization in an official role? If so, what role and for how long? In my experience conducting CEO searches, I’ve learned that few good candidates want their predecessor looking over their shoulder, whether in an official or unofficial capacity.

   

   My advice to incoming CEOs: If the transition permits, reach out immediately to the previous CEO to forge a relationship. Understanding the organization through the eyes of your predecessor can be valuable intel. You may analyze the situation very differently, but the connect almost always pays off for the new CEO.

2. Does the board have a strategic plan, or would they want me to develop one?
   Most strong CEO candidates don’t want the organization’s strategy mapped out prior to their coming onboard. The board may feel that it is lightening the load on the new CEO by conducting strategic planning prior to their start, but in reality, they should expect to hire a chief executive who wants to put their own definitive stamp on strategy. If possible, CEO candidates should signal early in their interview process that they want to have a meaningful say in strategy from the get-go and not just carry out someone else’s vision.

   

   It is common in planned transitions for the outgoing CEO and board to develop a strategic plan for two reasons: the outgoing CEO wants to point the new team in the “right direction” and who better to tell them where to go; and the board wants to develop the strategy to inform the profile of the new CEO. If the organization recently completed a strategic plan, a would-be CEO will want to evaluate it carefully: Is that strategy feasible within current market dynamics, organizational resources and competencies? No CEO wants to enter a situation in which they’re locked into a strategy that they’re not 100% behind or is not feasible given the organization’s current capabilities.

3. What is the strength of the leadership team?
   Given the sheer volume of responsibilities that a new CEO must tackle, the strength of the surrounding team will be critical. Are they fairly new or long-tenured? Do they have contemporary skill sets? Are they diverse in the many ways that you define diverse? Do they have planned succession and backups? Are they a functional team whose strengths are complementary rather than conflicting?

   

   How do you do your due diligence on the team? As you interview, you should be granted access to speak with them one on one, to pick their brains to form your own assessments. In addition, the board should be fairly forthcoming about leadership team strength. You should have access to their bios and an understanding of their divisional priorities.

4. What is the risk tolerance of the board?
   As a new CEO you’ll be expected to champion new ideas, to innovate and, thus, incur risk. Is the board willing to take meaningful risks as well? One hypothetical that I recommend that candidates present to a board is: What is their risk tolerance on bond rating and their willingness to use cash and potential bond rating downgrades to execute a strategy? Some boards are so beholden to A ratings that they draw the line on spending cash; there are times opportunities need to be seized though they may, in the short term, diminish the organization’s bond rating. A corollary: When you play Monopoly and land on Boardwalk, you have to buy it because if you don’t, the person playing behind you will and you will be paying rent the rest of the game.

   

Raise questions around risk tolerance in your discussions with the board. Seek pointed examples of past instances in which calculated risks were taken for long-term benefit. Trust your gut as to whether your board will support risk-taking should you be their next CEO.

By getting honest answers to the above questions, you as a potential new CEO can set the table for success – whether that success is found in a few short years or a decade or more.

This report/news/ranking/statistics has been prepared only for general guidance on matters of interest and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, CEOWORLD magazine does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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