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How to spot a flawed CEO

Scott Beagrie

A leader who fails to deliver can have a profoundly negative impact on a business. Scott Beagrie looks at how to minimise the risk of introducing a bad leader into an organisation

It is all too easy to see the trail of destruction left by a bad CEO: poor performance figures, missed opportunities, a drop in share price, failed strategies and product lines, a disengaged workforce and low morale.
It is far harder, however, to predict the flaws in a future leader that might lead to such an unfortunate set of circumstances. Management consulting firm Booz & Company revealed in its 2011 annual survey of global CEO succession that the average tenure of CEOs had shortened by more than 18 months over the past decade. Meanwhile, the length of tenures in which the CEO departs on a date prearranged in agreement with the board has also fallen by one third from 10 to seven years over the same period.
This certainly indicates increased discontentment with chosen leaders, while Booz & Company’s equivalent 2012 survey found that CEO turnover rates in 2011 had risen back up to pre-recession levels. Although the heat may be on for poor performing CEOs, no organisation wants to find itself in the position of having to replace their CEO over increasingly short timeframes.
Determining whether an individual is fit for purpose presents a number of challenges, not least as there are myriad reasons why a CEO might ultimately fail to deliver. Executive teams involved in the search for and appointment of a new CEO, therefore, must ensure they are alert to certain warning signs that will at least minimise the risk of bringing a badly flawed leader into their organisation.

 

Predicting potential

Most organisations, particularly large ones, undertake considerable research to compile their shortlist for a vacant CEO, basing their decisions on track record and achievement. This won’t always reveal the full picture though.

A CEO may have flourished at a particular company because of a top-notch executive team below them, favourable economic conditions, a focus on buoyant emerging markets or indeed inheriting strong product lines or strategies from the previous incumbent. Recruitment teams must therefore focus on why and how they succeeded in previous roles as well as look at financial results. The stage that the individual has reached in their own career can also play a major part in how they perform: are they still as hungry for success? Do they have the necessary personal motivation to drive decisions?

Assuming that any underlying personality problems would have been ironed out by this stage in their careers, however, can be dangerous. These ‘dark side’ personality traits are often at the root cause of poor leadership and can be difficult to detect at the recruitment stage.
According to psychometric testing company SHL’s 2012 talent report, the greatest risk at leadership levels comes from lower decision quality and poor quality communication. “Traits such as being a poor listener and failing to seek out the views of other stakeholders are tell-tale signs,” says Melanie Long, SHL’s director of solutions consulting. “On the communication side, not being able to influence others, a lack of credibility or a failure to build relationships are obvious weaknesses.”

But it is not always straightforward to pick up on these during interview. Long recommends that prior to the interview the prospective leader should take an objective talent assessment so the interviewer(s) are aware of the candidate’s strengths and weaknesses around certain competencies specific to the role and culture of the organisation. “The interviewer should ask questions which give the candidate an opportunity to demonstrate evidence of their success across a range of experiences so they can then assess whether the candidate has the right commercial understanding to apply to different settings in the organisation,” she says. “It will allow the interviewer to hone in on how they’ve reacted in specific situations and also ask questions around certain challenges they may have encountered.”

Identifying leadership derailers

Once in position, the executive management team should monitor behaviour as well as performance. Certain skill gaps and personality defects may only come to the surface once the person is in the role. If the CEO seems more intent on promoting and publicising themselves rather than the company, it is a clear sign their ego could get in the way of organisational success.

Equally, forcing strategies, ideas and changes onto others could be down to an over-eagerness for company success but more likely an indicator that the CEO is unable to work collaboratively, which is likely to be a major problem.
In their book Why CEOs Fail, David L Dolitch and Peter C Cairo identified 11 so-called ‘derailers’ that can lead to failure: arrogance; melodrama; volatility; excessive caution; habitual distrust; aloofness; mischievousness; eccentricity; passive resistance; perfectionism and eagerness to please.

The authors point out, though, that some derailers can also be strengths as well as weaknesses and it is often the pressures of working at the highest level that can trigger their negative aspects. In such circumstances, a CEO’s judgment can be severely impaired and they can be more prone to making bad decisions and mistakes. Those closest to the CEO, therefore, need to be alert to them and to be able to speak out to right the wrongs.
 

Build in resilience

In some cases, there may be no other option than for the CEO to exit their position, but some leaders can be coached to manage the
more dysfunctional aspects of their character and to become emotionally stronger.
“While the organisation should offer opportunities and coaching to improve their performance, ultimately at a leadership level, it is also the individual’s responsibility for their own development,” explains Long. “People can shed these bad habits if they are self-aware and put steps in place to address areas of concern.”

She adds: “Building a network and learning from others is an important step to improve. Acknowledging their role on a project and building other people around them who have complementary skills will maximise team performance. Consulting widely before making a decision will also ensure the right course of action is taken.” 

 

Expert's view

Q: Does having a flawed leader in situ always translate into poor organisational performance?

Organisations acknowledge the risk of succession as one of the most critical factors facing them today. However, mitigating this risk requires the kind of intelligence about people’s potential that many organisations are missing or failing to use effectively.
From our research last year we found that almost half of UK companies have experienced an unexpected change in leadership in the last 12 months and of those, almost a fifth (19%) said that it had caused a loss of or slowed growth due to a lack of leadership or direction. One third (32%) cited that it had led to a decrease in morale.

Q: Are too many weak leaders tolerated rather than properly dealt with?

Weak leaders are tolerated less so now that organisations are becoming leaner. The hyper-competitive landscape is encouraging a laser-like focus on an organisation’s performance around customers, people, revenue and operations. This enables a more immediate spotlight on the impact of poor leadership including team morale and performance, regrettable churn and customer satisfaction.

Q: What is the role of other senior leaders in addressing the problem of a flawed leader?

Senior leaders have a duty to prepare individuals for their transition and set them up for success. Having a 90-day plan in place is crucial to ensure the leader’s focus aligns with organisational priorities. If the leader has taken an assessment, it’s important they have been provided with feedback so they can leverage their strengths and experience to make a positive impact while looking at the support and training they need to reduce any execution gaps.

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