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03/7 2014

Why Are Failed CEO’s Able to Land New CEO Jobs?

We all know the stories — CEO’s who have led companies into poor performance and/or disrepair, who not only depart with “golden parachutes” of lucrative severance packages, but who  are also suddenly hired by new companies in C-Level jobs.   Why does this happen?

According to writer David Brookmire, commenting on the website, the reason for the frequent “recycling” of CEO’s is due to factors associated with the following:

  • The selection process for CEO candidates
  • The candidates for CEO positions themselves
  • The Boards of Directors that are responsible for selecting new CEO’s

With regards to the selection process itself, many companies are unwilling to hire CEO’s who have not had prior CEO experience.  Obviously, this shrinks the pool of eligible candidates quite dramatically.   In addition, the internal succession planning and leadership development pipelines in many organizations are suspect, at best, which means that there may not be any internal candidates that are given strong consideration for the CEO role.

With regards to the candidates for the CEO role, many are socially skilled, and are capable of coming across well in an interview.  Due to limits on information-sharing and possible liability concerns, many previous employers are hesitant to provide full disclosure about the performance of the CEO — including whether he or she was abusive to staff, showed good judgment, acted ethically, or any other leadership deficiencies.

Finally, with regards to the Boards of Directors, many Boards who are responsible for CEO hiring are not skilled evaluators of talent, and may not follow standardized interview or other assessment protocols.   Some Boards are so dysfunctional that they may not meet to share information about prospective candidates, or may not even be able to schedule a full round of interviews with potential CEO candidates.  In addition, most Boards are disconnected from the day-to-day reality of company operations, and as such may not be the best evaluator of the overall “fit” of a specific CEO candidate.

But perhaps more than anything, the reason that “failed” CEO’s get such a pass — and end-up being placed in a succession of CEO roles — is that in many organizations, financial performance (often short-term financial perfomance) gets more attention than does a CEO’s style, or how they go about achieving results.

To avoid making mistakes when hiring a CEO, it is recommended that companies focus on the following:

  •  Pay more attention to the internal leadership development pipeline (internal CEO successors are often more successful than are outside hires)
  • Provide executive coaches for the CEO (these coaches can help on-board the new CEO, and can also help the CEO improve any poor leadership skills or other deficiences that need to be addressed)
  • Improve the CEO selection process — working to improve upon selection procedures ahead of time can help avoid the rushed hiring that can take place when a CEO vacancy occurs unexpectedly
  • Educate and develop the Board of Directors — take steps to prepare the Board of Directors for the selection decision that they will have to make

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