How to hire the right CEO.

• Author: Zwell, Michael
• Position: Role of corporate directors - Includes related article on a board's decision to reject a CEO candidate

Choosing a chief executive is one of the most important jobs a board member is asked to perform. Here is a methodology to assess and select CEO candidates based on the factors that best predict performance, known as behavioral competencies.

Scenario: Your board interviews a number of CEO candidates and settles on one about whom everyone is excited. He is personable, knows the industry, listens closely to what you say you need, and says all the right things. None of you knows him, so you call the references he provides. They all say wonderful things, and you hire him. A couple of months later you start hearing disturbing stories about him from the marketplace in casual conversations, and notice that some key people are leaving the company. After six months you realize that you made a mistake and have a real problem on your hands. The person you interviewed and the person you hired are very different.

Hiring the right CEO is one of the most important jobs of a board, and one of the most difficult. Most directors interview CEO candidates by asking questions to get to know the candidates and relying on their "gut feeling" to determine whom they like the best. Unfortunately, who you like is often not the best predictor of performance. One well-known recent example was the selection of John Walter as president of AT&T. As is common in situations in which a longtime CEO helps the board choose his successor, Walter was selected largely on the basis of CEO Robert Allen's preference. Walter was on the job less than a year when Allen recommended against giving him the CEO job. Directors said Walter lacked the "intellectual leadership" to head the telecommunications giant.

Globalization, competition, and market-driven efficiencies demand a higher vision of a CEO. CEOs who fulfill this vision are strategic thinkers and leaders who guide the company through an increasingly complex and dynamic business environment. They focus the organization on meeting short-term objectives while changing and growing to meet the market needs of the future. These CEOs create and maintain a high-performance culture, one that fosters customer orientation, quality, efficiency, teamwork, and employee development. Masters of communication, they open channels up, down, and sideways through the company to maximize creativity, innovation, and alignment. They are strong analytical and conceptual thinkers who identify, analyze, and address the company's crucial problems and issues. Aware of their own strengths and weaknesses, they build outstanding management teams that compensate for their weaknesses and help leverage their strengths. Finally, they are visionaries who lead and inspire employees to become their best.

Evaluating CEO candidates with respect to these capabilities is a daunting task. Research has shown that the traditional interview has little correlation - less than .2 - with actual job performance [Competence at Work, by L.M. Spencer and S.M. Spencer, 1993, John Wiley & Sons Inc.]. It is usually inadequate because it is based on emotional attraction - "Who do I like best?" rather than an assessment of the traits and characteristics that actually predict performance. Interviewers using the traditional "get to know you" approach tend to pick candidates who interview well, rather than those who will be successful at the job.

The problems with the traditional job interview are magnified in a CEO selection process, because many CEO candidates have mastered the art of telling people what they want to hear. While being able to wax eloquent on any subject is a potentially valuable skill, it is relatively unimportant when compared with other traits and behaviors that will determine the company's success.

This article presents a method to assess and select CEO candidates based on the factors that best predict performance, known as behavioral competencies.

A new field of investigation

In 1973 David McClelland published in American Psychologist a landmark article, "Testing for Competence Rather Than Intelligence," launching a new field of investigation that is transforming the way businesses hire and develop their work force. The article made the compelling case that there exist better predictors of performance than the aptitude tests being used at the time to make selection decisions. Over the last 25 years, hundreds of studies have been conducted to determine what traits and characteristics, known as competencies, best predict performance. It was...