Managing partner of Kontakt InterSearch Russia, Marina Tarnopolskaya talks about what mistakes owners make when looking for a CEO and what to do to prevent them.
Owners often have problems finding a CEO. A business needs a professional CEO, but today there is a shortage of specialists on the market who can act successfully in a complex economic situation and rapidly changing trends. However, owners themselves often make mistakes that do not allow the company to develop freely.
Don't rely solely on the background
Owners expect a CEO who has implemented a great project in another company to be just as successful in their business. However, before hiring a manager with a successful case, it is important to understand that almost no one can repeat the same success twice. When a specialist changes companies, everything changes: the work environment, the team, the strategy, the financial capabilities, the market situation. The CEO himself must be aware of this fact in order to make decisions in the future, taking into account the number of resources and the current situation.
Don't forget the manager's competencies
Almost half of the owners pay attention first and foremost to the competences of the candidates when selecting CEOs. The CEO will be required to have leadership qualities and an understanding of the business, that is, the ability to look at problems in costs in terms of financial analysis, EBITDA, value added, and margins. Other character traits and skills may be necessary in meeting the objectives set by the owners. For example, strategic vision – so seemingly necessary for a CEO – may not be needed if he or she is hired for operational support. A CEO's creativity and innovation are important when launching a company. The ability to build relationships with the team and flexibility will be needed to retain the team. A credit-conscious organization needs a CEO who can work effectively and remain calm under pressure.
Hogan and Talent Q competency interviews and testing can help identify the necessary qualities in a CEO candidate. Before the interview, the owners approve the characteristics necessary for a CEO, and then there is a discussion with the candidate, which lasts for 2-3 hours. The Hogan testing assesses the CEO's potential and fit with the firm's culture and helps to select the manager with the greatest reserve of capabilities. Talent Q is a personal online survey that determines how an employee perceives his or her behaviour at work in three key areas: task management, relationship management, and self-management. Modern techniques make it possible to select the right candidate for the role of CEO, but first it is necessary to define exactly the goals in the company.
Learn to set goals
You can't invite a CEO to join your team if you haven't defined a strategy, set goals, and formulated objectives. A specialist will certainly be able to do this for the business owners, but until they themselves don't understand what they expect from the firm and what will be required from the CEO, the company will not be successful. Do the owners want to increase EBITDA? Or expand market share? Or to increase the volume of business? All these goals need to be articulated when drafting a brand development strategy.
There are about two hundred general directors in Moscow who are willing to consider offers from owners. However, most will not be suitable for you because they work in a different segment or with a different volume of business or are not suitable in terms of age. There is a risk that there will be no one left on the list of candidates because of restrictions.
When looking for someone to be a CEO, you don't have to narrow down the boundaries because of existing stereotypes. CEOs become representatives of top management from different areas. According to Kontakt InterSearch Russia, almost 40% of CEOs are former financial directors, 45% are commercial directors and "sales people", and 15% come from all other areas, such as security directors, human resources and marketing directors.
It is always possible to hire a CEO from another industry. For example, the retail chain did this when there was a need to increase online sales. The retailer, which traditionally hired a general director from the offline sphere, hired a person who was one of the key figures in the e-commerce market, but knew nothing about off-network sales. Also, if your company has no direct competitors, it would be most effective to look for a CEO in other areas, but at firms of a similar scale.
Trust the CEO
Mistrust and a desire to hide business details from the CEO will force the CEO to act blindly, which can lead to huge mistakes. In order to accomplish his goals, he must be perceived as a business partner and disclose all relevant information.
The problem of distrust of the CEO is particularly acute in family businesses. A classic case: a hired CEO proposes innovations in the company, but the top managers can present a united front against the enterprising manager, at that they have more influence on the owner. As a result, the owner takes their side.
Know how to engage
Motivating employees is good for the business. It is important to specify in the contract that the CEO's remuneration depends on the results of his or her work. If it is necessary to increase the company's income, specify the percentage of profit that the CEO will receive if the task is completed. You should not forget about the option program. To prevent the CEO from leaving the firm at the first opportunity, he should be rewarded with options and shares.