The marginal chief executive.

• Author: Hall, George E.

Try as it will, even the most highly motivated board of directors sometimes chooses a chief executive who turns out to be less than qualified. Mistakes happen, for example, when the board doesn't really understand the skills required for success in the business. Or, the wrong choice can simply reflect a lack of continuity in management succession. In some cases, a board has a mistaken estimate of the ability of the chief executive to adapt to his new role.

Where the board strongly identifies with the company as an ongoing institution, the chance of its making an error is much reduced. It is a fortunate company where continuity of board membership over a long period has instilled a shared sense of identity. But, especially in the absence of that continuity, mistakes will happen. When they do, managers trying to keep the company alive will face the necessity of coping day by day with shortfalls in the chief executive's ability.

The following organizational and management devices have proven, in the experience of several executives I have spoken with, to be reasonably effective as a way of keeping the company afloat. While each may be a reasonable response to the problem of the marginally performing chief executive, when they appear board members should ponder their deeper significance for the future of the enterprise.

1. Raise Decentralization to the Level of Religious Creed. Adopting the assumption that "a good businessman can run anything" offers a particular hazard in selecting a chief executive. Mastery of important economic and structural factors in a particular business is difficult at best. It can take a lifetime devoted to one business, and frequent contact with competitors in that business, to give managers a deep understanding of it.

   Even the most successful operating manager may be unprepared to make valid generalizations about his business to a new chief executive. Conversely, to expect a new chief executive to understand a variety of different businesses sufficiently well to make basic decisions about each is unrealistic. For example, in a mobile communications business, the CEO's non-appreciation of the crucial importance of skillful lobbying in selling police departments was fatal. When the company was taken over, the failure to continue this lobbying led to rapid loss of market share to foreign manufacturers.

   When the company is faced with a CEO's lack of understanding of a wide range of different businesses, it has no choice but to delegate a broad scope of management autonomy to the general managers of the businesses, and to accept the status quo as the only realistic strategy. If delegation is coupled with adequate measuring tools and some insistence on performance, the company will be handicapped, but for some period it may be able to survive.

   There are risks, however, if the general manager makes mistakes. For example, in the interests of "simplifying the business" in an industrial products company, the general manager sold a German subsidiary, without considering that the technology it had mastered was vital to the future of a Brazilian subsidiary. The Brazilian company soon foundered. The same manager would have sold a Canadian subsidiary on the eve of a valuable research development's growth into a six-figure business.

   At the same time, in a different part of the same company, disinvestment clearly was an appropriate strategy for its calculator and typewriter businesses, where electronics had destroyed all assumptions on which the businesses had been built. In this case, failure of the general manager to take action led to dangerous problems of adjustment and timing.

   A board is fight to expect a chief executive to possess a broad enough view of the company's businesses to ask the right questions about this kind of operating decision.

2. Make Certain that Problems Are Dealt With in Regular Meetings. Many executives are...