September 19, 2014
By Keith Meyer and Morten Nielsen, CTPartners
While it often goes unrecognized, the quality of work done by the board of directors’ search committee can make or break the success of any CEO transition. A competent and effective search committee is a strong asset in attracting top CEO talent to the organization. Conversely, an unprepared or disorganized search committee has the potential to undermine the process.
When addressing a matter as critical as a CEO transition, the search committee can’t be expected to operate in lieu of a retained executive search consultant, but the committee will serve as a valuable ally to the consultant. Boards, therefore, should be well versed in the best practices for establishing and utilizing a CEO search committee. They are as follows:
Setting the Search Committee Charter
There should be no ambiguity around the search committee’s role. After the full board and executive search consultant collaborate to delineate the critical leadership and experience criteria for the next CEO, the search committee will be charged with developing a rigorous, systematic process to identify and evaluate CEO candidates. Top finalist candidates will be presented to the full board, which retains the ultimate responsibility for CEO selection.
Determining the Search Committee Size and Membership
There is no “right” size for a search committee. Some boards utilize standing board committee chairs along with the chairman of the board or lead director. In other cases, search committees may include a few of the most experienced directors paired with one or two of the least tenured directors, who are expected to rotate into more visible board leadership roles after the CEO transition. Search committee members play an important role in attracting highly qualified, but potentially reluctant, candidates to the organization. Committee members must be prepared to answer all candidate questions and provide detailed financial information, inclusive of potential risks and challenges facing the company.
One particularly sensitive issue is how to include the incumbent CEO in the search process. Depending on the CEO/board relationship, the circumstances surrounding the transition decision, and other factors, the board may choose to include the CEO on the search committee, have the CEO play an ex officio role, or exclude the CEO from the search process. An experienced executive search partner can offer valuable advice at this juncture.
Selecting the Search Committee chairman
The chairman serves as the field general during the search process, coordinating activities while keeping the search committee engaged and on track. Committee chairmen typically build strong relationships with the lead CEO candidates during the process. It is important to select a committee chairman with the right personal attributes and operating style to effectively attract high-potential candidates while also facilitating the search process with all directors.
Setting Time Commitment Expectations
While rewarding and important, the search committee member role is also time consuming. Having search committee members move in and out of the process is a poor practice. Communicating to prospective members what is involved during each step of the process may help ensure that all committee members are able to put in the necessary effort.
Everything related to the attraction, evaluation, and selection of the new CEO must be confidential. The principle of “primum non nocere” or “first, do no harm” must be applied throughout the process, especially when conducting candidate references. A breach of confidentiality typically results in the candidate immediately withdrawing from the process with a negative view of the company and board.
Developing Comprehensive Candidate Assessments
A search consultant can play an important role in preparing search committee members for probing, structured discussions with candidates. Additionally, it is imperative that 360-degree references, full risk assessments, and background checks are completed for each finalist candidate.
Preparing and negotiating the offer
The final step of the process often falls solely on the shoulders of the search committee chair. Yet there can be great value in involving another committee member who has developed a close relationship with the preferred candidate to assist with the offer. Agility during the offer negotiations and frequent communication are critical to closing the deal in a timely manner. The worst outcome is having a finalist CEO candidate walk away to pursue another opportunity or disengage because the board’s decision was progressing too slowly.
Establishing and properly utilizing a search committee is critical to attracting and appropriately evaluating the best candidates during a CEO transition. CTPartners’ Global CEO and Board Practice serves clients as a trusted independent adviser to ensure the optimal search outcome.
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