How Microsoft can find a new CEO

The clock is ticking for Microsoft (MSFT) to name a successor to CEO Steve Ballmer, who plans to retire later this year.

Apart from recognizing that this is the single most critical issue facing the software giant, what should Microsoft be doing?

Don’t search for headlines. Big name appointments have a habit of backfiring, not least because headlines about individuals tend to make the workforce jealous and suspicious. J.C.Penney’s (JCP) recruitment of former Apple (AAPL) executive Ron Johnson amply demonstrated that skill in one sector isn’t automatically transferable -- Johnson lasted less than two years at the department store chain. Headline names usually come with  doses of narcissism the company doesn’t need.

Look inside. For all that it has been punished publicly for its lack of innovation, Microsoft is still full of highly energetic, smart, creative people. Its single biggest weakness may be its failure to celebrate them. Internal CEO appointments have a higher success rate and the learning curve is a lot faster.

Ask inside. Leaders aren’t found – they’re made by the people who choose to follow them. So who inside the company has credibility? The workforce always knows who’s really capable, but they’re almost invariably never asked.

Keep an open mind. Listen to the candidates who believe in breaking the company up. Pay attention to the ones that would like to sell off big chunks of the business. Exclude no options. Leadership is not the only problem Microsoft faces, and this is a great opportunity for divergent creative thinking.

Avoid "golden handshakes." Microsoft is an important business. Nobody should need a bribe in the form of excessively high executive compensation to run it. 

Try to ignore Bill Gates. Everyone involved in the search for Ballmer's replacement acknowledges that Gates, a founder of Microsoft, is part of the problem. His calendar is holding things up and his persona takes too many ideas off the table, critics say. For the company to outlive Gates means it must learn to flourish without him.