Designating the right person to lead a company in the CEO position is perhaps one of the most critical roles of a board of directors. Second most important is monitoring that leader's performance on an ongoing basis to ensure consistency. The right CEO, says Forbes, is someone who can assist the board in developing and implementing strategic and business objectives while driving performance to achieve those objectives in a sustainable way. At the heart of it all is collaboration. No board wants to hire a CEO that goes his or her own way, with little input from others as to which direction to take the company. Rather, the ideal situation is when both parties work in conjunction to stay the course.
This doesn't mean there aren't clear roles between the two. By nature, a CEO's role is to manage, while the board's role is to govern. Board members also known as directors, are elected by the corporation's shareholders. Their role is to provide guidance and strategic planning to the company’s top officers, who are often busy running the daily operations of the business. Another main role is to hire, oversee and, if necessary, fire the company’s top officers, including the CEO.
The CEO's role is to determine and communicate the organization’s strategic direction, balance resources (capital and people), foster the corporate culture consistently, make the final call on all decisions, and oversee and deliver the company's performance, points out Entrepreneur.
What's the connection between the two entities?
Built on a foundation of trust and honesty, boards expect their CEOs to achieve two things: apply skills, industry knowledge and experience to fulfill company objectives; and commit to an open yet constructive relationship with the board. These objectives are all well and good, but how can they be quantified? What happens during the scouting, recruiting and hiring process whereby a board decides on the ideal candidate?
Checklist for a CEO
Boards often have a checklist of sorts for hiring the right CEO that is willing and able to lead the company in a forward-thinking direction, enhancing the bottom line and fostering an atmosphere of growth. There are several must-have qualities that a board seeks out in a CEO candidate. Generally, they ask themselves if the person is:
- A solid strategist: Being a good leader of strategy means more than just making key decisions about assets and markets. It's about balancing several competencies in one, as well as engaging others on the team, communicating issues, and articulating what the goals are for the good of the company. Anyone can keep a company moving, balancing daily requirements that add fuel to the machine. It's a special kind of person that can do all that while formulating a future for the organization.
- A smooth operator: Long-term performance built on experience of mobilizing companies to display consistent results is a key to success. This requires analytical skills but, perhaps more importantly, a track record of setting it all into action. Being too analytical on paper can cause a candidate to miss those critical decisions that are a big part of operational execution.
- A good fit: This is hard to quantify but important nonetheless. Sometimes you just feel this. In looking at a particular candidate, it's necessary to dip deep and determine if he or she will blend well with the company's culture and value system. Poor cultural fit is, unfortunately, one of the biggest reasons boards have to fire a CEO. It's also one of the hardest qualities to pinpoint at the hiring level because it's not easy to put on paper. Two things to consider are the current culture and the future culture necessary to perform. Where these two meet is a critical junction in determining where a CEO will impact the culture overall. It's a fine line, to be sure, but one that's critical in evaluating where to change the culture, where to challenge it, and where to leave well enough alone.
- A builder of followship: What we mean by this is, can this person inspire and motivate different groups of people within the company? This requires the ability to communicate effectively, set a clear vision, provide people with a sense of purpose, pursue a mission and, ultimately, give people a reason for coming to work every day. A CEO who can't connect with individuals, show concern for others, and provide a certain level of authenticity to look up to won't last long. This is where passion with a purpose comes into play. People want to trust their leader, and so a CEO who can infuse followers with that same passion will gain the confidence, respect and trust necessary to thrive.
Everyone can agree that the CEO is responsible for a company’s performance. But to lead successfully, one must take an active role in driving that performance. Boards should have a set process in place for vetting and choosing their CEOs to act as a guide in making positive decisions that will ultimately benefit the entire company. A good CEO will reflect the culture, strategies and mission of the company. And sometimes that just can't be measured on paper.