Assembling the right leadership team is arguably one of the most critical decisions any CEO or executive will make during their tenure. A strong team is essential for driving organizational success, but selecting the ideal candidates can be a daunting task.
CEOs often choose their leadership teams based on personal preferences and chemistry, frequently hiring individuals they’ve worked with in the past. While trust and rapport are crucial, relying solely on personal connections—while ignoring a strategic approach—often results in a stale-and-pale leadership team that’s not fit for its purpose.
Our five-year research study of CEOs and leadership teams revealed that a five-step analytical selection process, grounded in a clear understanding of the company’s strategic priorities, leads to better outcomes.
Step 1. Clarify strategic challenges and chart a path forward.
Before selecting leadership team members, CEOs and executives should identify the challenges their teams will face and establish a strategy to guide the team’s formation. Will team members need to lead in a turnaround? Will they be tasked with building up new business? Or will they be faced with running a complex, multinational organization?
For instance, when Benedetto Vigna was appointed CEO of Ferrari, it was evident that success at Ferrari would require a robust team with fresh thinking to develop and implement a new strategy for the company, necessitating a change in the top team’s composition.
Step 2. Align leadership roles with strategic priorities.
Many leaders assume that core roles, such as CFO and COO, are nonnegotiable, while other functions are merely optional. They often view people, legal, procurement, and supply chain functions as administrative in nature—without any representation at the leadership team’s table. Only recently have organizations started to include non-mainstream roles in their leadership teams, such as chief sustainability officer or chief digital officer.
Case in point: When Jan Jenisch, the CEO of Holcim, a global leader in the cement industry, embarked on a corporate sustainability initiative, he appointed a chief sustainability officer to his leadership team to give the topic sufficient weight in the group’s decision-making.
Step 3. Weigh the pros and cons of internal promotions versus external hiring.
When deciding who to promote or hire for the leadership team, CEOs and executives must balance countervailing forces.
Hiring from the outside brings new ideas, signals change, and allows organizations to tap into others’ industry knowledge and expertise. But the learning curve is often steep, and outside hires may not fit the company’s culture.
In contrast, promoting from within sends a clear and positive signal to the talent within the organization. Still, internal promotions may not be suitable when a leader’s mandate focuses on change, and it may be difficult to do when the internal talent pool is shallow.
Given these trade-offs, most leaders aim for a mix of internal and external hires when selecting new members for the leadership team, unless the need for change dictates that fresh blood is required.
For instance, in the radical transformation that Jonathan Lewis led at Capita or that Jan Jenisch led at Holcim, most members of the leadership teams were recruited from the outside to flag a departure from the past.
Step 4. Establish clear role mandates and profiles before seeking candidates.
A central concern in selecting executive team members is how CEOs can avoid being blinded by a candidate. All too often, leaders are lured and swayed by individual characteristics and skill sets, such as operational proficiency, sales prowess, public speaking, or simply raw ambition.
To avoid this pitfall, create a detailed position profile, one that’s derived from a leader mandate and complemented by general criteria for senior leaders. Leadership team members should only be hired if they meet the majority of the criteria for the position.
Step 5. Resist the urge to settle for the first viable candidate.
When hiring is in full swing, new CEOs and executives often feel intense pressure to fill the position quickly. As a result, they often settle too easily on the first candidate they feel comfortable with and may not take the time to search with sufficient breadth.
As a golden rule, the more important the position, the more time the leader should take to find the best possible candidate since mistakes are extremely costly.
The success or failure of an organization is determined by a combination of factors: the allocation of roles within the leadership team, the quality of talent brought on board, and the personal chemistry and trust established among team members. By adopting a strategic approach that balances these aspects, CEOs can assemble a dynamic and effective leadership team to drive the organization forward.
Written by Prof. Dr. Thomas Keil.
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