Selecting the correct methodology for recruiting your next chief executive officer is undoubtedly one of the most difficult decisions that a board of directors will ever have to make. Horse races, promotion contests, and the extensive use of executive search firms have proven to be the most common forms of selecting company’s top executives. The fight to hold to the title of CEO between internal and external candidates is cut-throat and in most cases, a popularity contest based on reputation alone. Selecting the proper method of recruitment helps companies to eliminate these battles and pick the top candidate based on their qualifications such as their credentials, experience, background, education, and personal references.
Keywords: selecting CEOs, horse race, promotion contest, executive search firm
The Correct Methodology of Selecting CEOs
A chief executive officer is the highest ranking corporate officer of an organization and is responsible for the overall management and success of their company. A CEO is the face of their organization and is generally the person responsible for leading the company, managing the employees, communicating to the public and stakeholders, as well as acting as the primary decision maker for the company. The chief executive officer generally answers to a board of directors which is a group of men and women who are elected by the shareholders of a company to govern the company and oversee all of its major decisions. Each year, 10%-15% of major corporations in the United States change their chief executive officers with the majority of these companies selecting their candidates from an outside organization (Chung, 1987). A change in CEO leadership for a company can be caused for a variety of reasons, but most likely will be due to retirement, transferring to another company, or not meeting performance expectations (Southerland & Mackey-Ross, 2006). In most cases a CEO succession plan has been put into place long before the current CEO leaves a company, but in some instances, quick decisions must be made by the board and the results of that one decision can immediately affect the company at stake. According to Southerland and Mackey-Ross (2006), a thorough search for a new CEO can take anywhere from four to six months from the beginning of the search through the final negotiations with the selected applicants. Whether the company chooses to promote from within or search for an outside candidate, following a defined process will help to ensure a successful outcome. The decision to hire, fire, and select and new chief executive officer for a company is undoubtedly one of the most difficult tasks that a board will ever have to face and selecting the correct methodology for this decision is crucial to the success of their organization.
Horse Race Approach
When it comes to the leadership selection process, some companies choose to conduct a “horse race,” which is a leadership succession that takes place over a specific time frame between at least two internal or external candidates (Citrin, 2009). These candidates are directly competing with one another through a series of interviews to determine which of them will be chosen as the company’s new CEO. According to Citrin (2009), if there is an internal candidate as well as an external candidate, the competition for the CEO position is no longer considered a horse race. A horse race usually takes place over a six to twelve month time period once the board of directors hears that the CEO position will be vacated within specific time frame. During this allotted time frame, the selected candidates will undergo a rigorous application process consisting of multiple interviews by the board, in depth reference checks, and various scenarios in which the candidate must make quick business decisions. Horse races between external candidates are more likely to occur than horse races between...