How to choose a new CEO

Choosing a CEO is one of the more difficult decisions a Board has to make - especially when it is an ASX listed company or a high profile industry. While there will be many external candidates, sometimes there is an outstanding internal employee who just needs their chance to showcase their credentials.

Qantas recently chose Vanessa Hudson, the company’s CFO as its new CEO, after a long search that extended around the globe.

They might have already exceeded in their current role but taking the step to overall leader is another momentous challenge.

How do you know how to choose the right candidate?

“Selecting a CEO from within the company is a strategic decision that requires a thoughtful and well-planned approach that starts implementing thorough succession planning throughout the organisation, ensuring a talent pipeline for future leadership roles,” Dr Zivit Inbar, founder and CEO of DifferenThinking, says.

“This includes assessing the existing talent pool at various levels, identifying individuals who demonstrate exceptional leadership potential, and creating development plans tailored to their growth. During the selection process, we look at the candidates

 performance, alignment with company values and vision, and the cultivation of essential skills in leadership, culture, operations, and industry dynamics.”

Leadership is important

Standout qualities such as leadership are also very important, as the CEO becomes both the internal and external face of the company.

“When looking at whether an existing staff member has what it takes to be the next CEO, there are a number of things I look for,” Lois Andrijich, Director, Life at Work, says.

“The number one, most important thing, is their ability to lead. You must have someone who is able to take staff on the journey to where the organisation needs to go strategically. If the person doesn’t have this ability, it’s challenging from the beginning. Having a genuine interest in people and their wellbeing is also a sign of a good leader and is something I look for. 

“Whether in the NFP or for-profit space, a good level of financial acumen is also important. They must understand how to read and interpret financial information, and how revenue is generated - or lost - for the organisation.

“An ability to listen and take on feedback is also important – this is key for managing board relationships, but also in taking on staff feedback and making the best decisions for the organisation. “

Is there a formula?

Assessing a candidate’s suitably for a CEO role will encompass many factors including skills, industry knowledge, cultural fit, success in previous roles and relevant experience. Whether someone internally can rise from the ranks remains to be seen but all internal candidates considered worthy should be given at least an interview.

“When selecting a CEO internally, we seek individuals with leadership qualities that align with the company's objectives,” Dr Inbar said. “These qualities include visionary thinking, strategic acumen, the ability to inspire and motivate others, strong decision-making skills, effective communication, and a track record of driving results.

“We also value a collaborative mindset, leading change, a passion for innovation, and a commitment to personal and professional growth. Last but not least, we look for people with high self-awareness who take the time to reflect on their actions.”

The other end of the scale

There may qualities that you don’t want in a CEO too. Certain companies require a delicate company fit and some personalities may be just too big and therefore unable to adjust, or they be too adventurous in their decision making to deal with the role.

“Selecting a CEO is one of the most crucial roles of board of directors, as it significantly impacts the organisation's success,” Dr Inbar said.  “While each organisation may have its specific requirements, there are qualities that we generally recommend avoiding in a CEO selection process.

“We caution against individuals with manipulative tendencies, excessive ego, or a dictatorial leadership style, as we value collaboration and a team-oriented approach. Additionally, we consider the ability to balance risk-taking with prudent decision-making, integrity, emotional intelligence, mental complexity, and an aptitude for handling ambiguity as essential qualities to scrutinise carefully.”