If your organization is considering hiring a CEO from the outside, I recommend everyone on the selection committee read Three and Out: Rich Rodriguez and the Michigan Wolverines in the Crucible of College Football, a new book by John U. Bacon. (Disclosure: Bacon is a friend.)
While the book focuses on the travails of the Michigan football program after hiring a head coach from West Virginia, a strong theme is what happens when the culture and values of the organization do not match those held and practiced by the head coach. The results are not pretty. Before coming to Michigan, Rodriguez was considered one of the hottest coaches in all of college football; after three years at Michigan, he was fired.This is not so unusual. One study of 193 CEOs at 176 large U.S. companies found the companies that hired from within had far more success, especially after the three-year mark. So what steps should an organization take before hiring a newcomer?
Arrange for meet-and-greets before hiring.
Michigan hired Rich Rodriguez sight unseen. His first time on campus was to sign his contract. No wonder he was many inside the athletic program pushed back on Rodriguez. The hiring committee needs to conduct more than interviews and background checks. It must enable the CEO candidate to meet and greet a select number of executives and employees. Soliciting their feedback is essential.
Look for a cultural fit.
Rodriguez, a native of West Virginia, sought to emulate the Michigan tradition but didn't do so convincingly, as Bacon says in an interview. He wanted to be known as a Michigan Man but his often-clumsy public person gave him the appearance of being clueless. An outsider need not worship at the altar of tradition, but he or she should respect it. During the interview process, meet-and-greets with staff will reveal how the candidate feels about the things the organization holds dear, including the culture.
Keep a close eye.
Rodriguez was fired after three years; but in retrospect, the organization might have prevented a lot of pain if they'd let him go sooner. Likewise, if the top executive is not producing results, and is not responding to coaching or is unable to connect with stakeholders, consider it a mis-hire and move on. Easy to say but too often egos get involved and those who hired the person fear looking foolish. Better to bruise the ego, however, than ruin the organization.
Be clear about expectations from the outset.
The final thing to remember is that the CEO serves the stakeholders, including the board, the shareholders, and the employees. The man or woman in charge need not be the most likeable or the most friendly, but he or she must be the best for the job. Best for the job in terms of competency and deliverables should be defined clearly so that the CEO knows what is expected.
An outsider will undoubtedly shake things up, and that is to be expected. If you want someone to keep the seat warm, you promote from within. (This is not meant to imply that internal candidates are only placeholders; most are not, but a few may simply want to maintain the status quo.)
But if you want real change, going outside may be the best solution. And when that happens the leadership of the organization must do its part, maybe even bend over backwards to support the new person. Failure to do so can cause serious breaches. Any doubts pick up Three and Out. It shows what can go wrong when leader and organization are out of step with each other.