The following questions will help applicants for CEO roles make balanced decision about whether they will be good fit for particular role and, if so, increase their chances for success at the top.
Where does the organisation sit in its business life cycle?
Develop clear understanding of whether you are joining an organisation that is in its initial high-growth phase; reaching maturity; declining; or kicking into its second growth cycle. Most importantly, determine whether there is widespread recognition and acceptance by individual board members of the business’ life-cycle stage.
Is the company’s strategy built on long-term sustainable competitive advantage? How do you know?
Do not rely solely on information provided by the organisation. Complete your own SWOT analysis. Talk with competitors and current and former customers. Search the internet. Analyse industry trends. Look at benchmarked data for both domestic and international markets. Form your own opinion.
Has the business model passed its use-by date?
Aggregators, e-commerce, new competitors or technology may have had major negative impact on the business. It is important that you know if the board truly recognises this or is still in denial. Ask whether the board has considered Greenfields approach to the development of its business plan. If not, the board should have directed the development of business plan recognising: industry trends, new technology, competitors, factors impacting on the business model, geographic factors related to sales and support; and traditional and non-traditional competitors.
Has the board emerged from cost-cutting phase or is it locked into ongoing cuts?
No one ever downsized to greatness. During the process of downsizing trust and morale are often destroyed. Unless the board is focused on re-growth strategies and not further cost cutting, your tenure as CEO may be short-lived as you will not be demonstrating additional profit from new customer acquisition and revenue growth.
Is the board focused on the short or long term?
While the board may talk about being in for the long haul look at what shareholders and board members have done in other situations. Consider specifically, whether they are long-term players or just looking for quick return.
Is there business reinvestment strategy? Or is there single-minded focus on shareholder returns right now?
So far, there may not have been calls to reinvest in the business. Flush out boardroom thinking by asking about members’ reinvestment track records: either in this or other business interests.
Is it public or private company?
If private, evaluate the key shareholders. Meet one on one with each of them. Consider:
• Whether there is dominant personality;
• To what extent they are likely to let you do your job without interference;
• Whether the board has been stacked or if there is the appropriate blend of disciplines to take the company forward;
• Will directors do what is right for the company or do some board members pursue personal agendas?
• Will primary shareholders continually second-guess the CEO by calling in regularly at offices or taking staff to social events etc?
• Is the owner or dominant shareholder an entrepreneur?
Does the board truly understand its role?
Especially when considering taking CEO role in private corporation, work out whether the board will stick to strategy design and evaluate the CEO on their execution of that strategy. Be wary of boards that spend too much time debating operations. This often does little to ensure the long-term profitable operation and market superiority of the business.
Is the organisation’s governance charter just wall hanging or code to live by?
Quiz board members on their knowledge of the charter. Their answers will provide the first clue.
Do board members seem tenured or does the composition of the board change to reflect the mix of skills needed at particular point in the organisation’s life cycle?
It is very easy to see for how long each board member has continuously served. Check out whether board members have to retire by rotation and offer themselves for re-election, or whether, after set number of terms, they have to stand down for complete term.
Does the board go through formal evaluation process? If so, does this include the whole board, just the chair or individual board members?
If there is no formal evaluation process, why not? Perhaps it has never occurred to them. Perhaps the board is too new. Or perhaps individual board members consider formal evaluation process too threatening.
What are the sacred cows?
In most cases there are none. However, understand whether there are any sacred business processes, unprofitable or low-profit customers that you are ‘requested’ to retain, or any ‘untouchable’ personnel or managers. Consider to what extent this may hinder you in your role.
Why did the organisation consider making the job offer to you?
Job descriptions are broad. So front up and ask which specific points in your background led the organisation to consider you. Is the board looking for celebrity CEO or someone who will build leadership team, for example? consensus builder or CEO to drive change? Roles are broadly characterised as growth navigators; execution maestros; turnaround surgeons or business model transformers. Think hard about whether the board is likely to require your skills over the longer term or will transition to someone else once this initial goal is met.
Has the organisation structured your proposed compensation package for growth or stability? Does it want you for the long term?
An easy way to determine the answer to the first question is to look at what percentage of the package is at risk. Twenty to 30 percent probably means they are looking for high growth. Even so, make sure you can control all KPIs. For example, if there is percentage related to EBITDA growth and you are in service business will the board let you change staffing ratios to improve profitability?
A balanced approach is to weight portion for sales and customer growth, net profit improvement, plus percentage for business reinvestment. BP Energy is the best example of this balanced approach to senior executive compensation.
Is there stock option component?
If so, find out how it will be triggered. Options could include: after KPIs are achieved, after set time period, or at the discretion of the board. Are they just holding out ‘future promise’ or is it genuine offer? What is their track record in this area?
Finally, what is the board’s attitude to people? Do members believe that ‘people are the most important asset’, do they view staff as ‘cost of business’ or some point in between? Do they believe in investing in people?
Unless you have the ability to hire, motivate and retain the strongest team the business is likely to remain ‘me too’ company with higher than average staff turnover usually accompanied by low customer satisfaction.
Staff retention is demonstration of the right culture, values and at least being in the top one third in compensation bands for your industry.
Success as CEO is not totally dependent on positive answers to these questions. In addition to being experienced, well-educated, intelligent and articulate CEO must be able to inspire others. This involves the ability to move quickly and successfully in complex, multi-layered and fast-paced environment. So it is now time to hone your skills of empathy, integrity, stamina and flexibility in variety of business and social situations.
After all, the CEO must become the passionate torch carrier for their new organisation.
Right From the Start
The first 103 days following your appointment are the most critical. During this time you will need to signal the culture from the top. Us
