The Director: The challenge of choosing the CEO

Boards and chief executives need to be more flexible, adaptable and to be constantly thinking and re-thinking their strategies if they want to succeed in today’s increasingly complex global marketplace.
That means boards should put more effort into understanding the new leadership competencies required of effective chief executives. They should know where their organisation is headed and how they plan to get there before they recruit new CEO.
“Boards should understand their strategy, where they are taking the enterprise, where they want to be, what their challenges are and what competencies they are looking for in CEO before they hire him or her,” says United States-based Spencer. “They should map and match the individuals’ particular characteristics against what the organisation needs.”
Some boards know what they are doing. Many, however, are “all over the map”, according to Spencer.
It is not uncommon for Australasian boards to think their directors are strategically aligned, according to Sydney-based Conigrave. “But when asked to articulate what they mean by strategic intent, there is significant divergence in comprehension. Board thinking converges when there is good dialogue, but they don’t have common understanding as often as they think.”
Companies are now dealing with greater organisational and market complexity. Boards, therefore, need to adopt more multi-faceted strategies to meet increasingly diverse stakeholder and performance demands. return to shareholders, for example, is increasingly just one of many factors directors and CEOs must deliver on. “Shareholder return is price for entry, not ticket to success,” says Conigrave.
“Organisations are simultaneously pushing for strong business performances and social responsibility and community-based obligations and outcomes,” adds Spencer. “The trick now is to learn how to integrate these different considerations and to lead with purpose without annoying shareholders.”
Spencer has been researching the leadership qualities that boards should consider when they go to the market for new CEO. She has, for example, co-authored major Hay Group study on what western enterprise can learn from India’s CEOs.
The study showed that outstanding Indian CEOs have powerful set of specific competencies. The strengths lie in their socially responsible business acumen, team leadership, “inner strength” and ability to manage complex web of external stakeholders. Spencer thinks western leaders need to look more carefully at what trends are emerging, particularly in Asia.
“CEOs and senior executives must be more collaborative and less authoritative,” she says. “They must listen to, and take on board other view points. They must also be able to handle the diversity of stakeholder interests, make connections and understand the entire range of the organisational value chain. It is more about breadth of perspective than depth of knowledge, though CEOs still need to know something well to get there.”
Spencer thinks the competencies boards should be looking for in CEOs are entirely compatible with women. But she concedes there are men who are very strong on these competencies just as there are women who are not. There are few signs yet, however, that these new competencies are driving boards to appoint more women to CEO or senior management positions.
“I think they are too new to have had much impact yet,” she said. “We only started seeing this change and trend in 2004. In terms of the life of business, that is nothing.”
The global talent shortage, however, means boards can’t any longer afford to ignore half the world’s working population, says Spencer. “Boards need to understand the new competencies and skills required to successfully lead businesses in tomorrow’s world and, that includes gender and other diversities.”
The problem with many boards, according to both Conigrave and Spencer, is that they generally don’t know what they don’t know. And because the composition of most boards in Australasia is predominantly male, white and over 50 it is, says Conigrave, “pretty difficult for them to see success in any other guise than their own image”.
Boards increasingly need their preconceptions about what constitutes success challenged to keep pace with future governance demands. The emerging new leadership competencies identified particularly in India are, says Conigrave, reflection of the global power base shift from western economies to Asia.
“If we don’t build leaders and organisations to compete in markets that reflect this new world order, we will have major economic problems. If our boards and senior executives don’t have these competencies they won’t get it and know how to deal with these countries.
“Too many Australian and New Zealand companies tank when they try to do business in countries like India because they have not made the effort to understand and adapt to the differences. Australasian boards need to understand the relevance of the competency shifts our research is throwing up,” he adds.