This book is answering such questions as: 1) Why many companies fail to select the right CEOs 2) How the wrong selection can ruin your company; and 3) How to pick the right person. By Joseph L. Bower, major companies constantly make decisions that carry enormous consequences: money investment, new product/service launch, markets to penetrate, etc., but the most important is selecting the right CEO.

Inside Advantage
The fact is that 6 of 10 companies lack a formal CEO succession process which ideally should begin at least five years before a CEO steps down. The CEO and the executive management team are responsible for identifying and cultivating future leadership candidates. As well a CEO?s most important decision is selecting the most qualified person to become his or her successor so to make company?s future at state. Input from boards of directors is valuable and their final approval is necessary, but they have limited power in the selection process.

The position of CEO has become more demanding and a bit less attractive now than e.g. 20 years ago. CEOs now serve an average of seven years, two and a half years less than before; they are under pressure from several directions ? companies now have to worry about global competition; investors are less patient and expect impressive returns in a shorter period of time. Despite impressive salaries and attractive perks, the stress that fills CEOs? lives can have a negative impact on their families and their health.

CEO?s job is a terribly challenging position to fill, organizations are advised to look for ?Inside Outsiders? ? experienced individuals who know the company and have paid their dues, but who aren?t afraid to set their own course. Inside outsiders honor the traditions of their companies, but are not bound by them.

Jack Welch ? CEO of General Electric, was the prototypical inside outsider. The engineer who became amazingly successful was considered too young, too truthful and too brusque. In two decades under Welch, General Electric enjoyed explosive growth.

A Mixed Bag
According to statistics that measure total return, corporations that promote from within are more successful. In 1992, Ogilvy & Mather named Charlotte Beers as the first outsider to become CEO in the advertising agency?s long history. Beers defined strategies and objectives and, most importantly, boosted morale. Beers succeeded because she understood the business, knew how to run an agency and didn?t hesitate to make difficult decisions.

Entirely different matter was about John Sculley?s tenure with Apple Computer. In 1983, Steve Jobs hired outsider Sculley, a highly successful executive of Pepsi. He was expected to provide administrative leadership and marketing expertise. Two years later, he was at odds with Jobs, who abruptly left the company after Sculley was named CEO. For the first seven years of Sculley?s tenure, Apple?s sales and profits increased dramatically, but he didn?t grasp the rapid, radical upheaval within the high-tech industry. Microsoft and Intel capitalized on strategic shifts in the market while Apple lost precious ground. Within a year, Sculley was gone. His failure illustrated that success in one industry is not necessarily transferable to another.

Tough Job
It is very difficult to find a qualified CEO. The job requires intelligence, skill, personality and many other traits. CEOs must be capable of building strong teams with responsive, motivated individuals and at the same time the CEO must be authoritative without being intimidating or too demanding. Otherwise if CEO cannot strike that balance, team members will not perform optimally and may even b e tempted to leave. The best CEOs excel in:
- ?Judging where the world is headed? ? they can sense future trends, and understand just where their industry is advancing and how they can position their company to capitalize on upcoming changes.
- ?Identifying talent? ? They can pick out individuals who are willing to go against the grain and support initiatives that may fly in the face of company tradition.
- ?Engaging talent? ? They can mobilize their management teams to perform.

Know It All
How much does the prospective CEO need to know about a company? - Plenty. That?s why inside outsiders have a big advantage over outside candidates. Insiders are familiar with a company?s culture and they understand its structure and hierarchy. They recognize the dynamics among departments, divisions and other business units. They know how employees are evaluated, compensated and rewarded. They?ve established solid relationships within the company and know where they can turn for help.

The CEOs may lack accounting expertise, for instance, but they need to have an overall understanding of the corporation?s financial operations. A chemical company?s CEO may don?t know molecular composition of every product, but should know if the company is losing or gaining market share, where and how is its money invested.

The CEO?s primary purpose is to articulate a vision and enlist employee support in implementing it. Strength of conviction is required because inevitably some top managers will resist and even leave the company.


Setting the Stage.
Many companies fail to formulate CEO succession plans because their energies are focused on daily operations. Competition in the marketplace is fierce and bottom line performance is paramount. Very often companies shuffle them into positions where they can help run the business, instead of grooming potential CEO candidates for top leadership. Ideally, though, companies should hire potential leaders, and shepherd their careers, including some moves up the ladder and some lateral moves, guiding them to cultivate leadership skills along the way.

Companies usually hire people with specific skills for specific jobs without assessing their leadership potential. The hiring process prioritizes experience, with little consideration given to the individual?s ambition or attitude. Recruiting young, well-educated people who possess integrity and drive is the key to building future leaders. One more important point is that horizontal movement is almost as important as vertical movement.

Mentoring is a vital component ? senior managers are obligated to help up-and-coming executives learn and succeed. Young managers who are placed in charge of struggling divisions require the advice and guidance of experienced executives. Conversely, managers who have mastered one challenge need fresh goals to expand their capabilities.

Succeeding at Succession
When CEO plans to retire a formal succession process should already be in place, since zeroing in on the best candidate sometimes takes two years or so. The candidates should be informed by the CEO that they are under consideration and , at least, begin an informal interviewing process. At this stage, closely monitor the candidates? accomplishments. The transition period between the announcement of a successor and when he or she officially takes over can be tricky, especially when an outsider is in this transitional phase. Some companies practice to have outgoing CEO move to the board of directors, or assume different titles and help the new CEO get adjusted, but at the same time incoming CEO may feel uncomfortable or intimidated if the outgoing CEO doesn?t leave immediately.

Family Matters
An orderly succession becomes even more challenging and complex in the context of a family owned business. The best way to avoid conflict is for family members to agree on a successor. The ground rules should be established long before the mantle is passed down. Keeping a business in the family is a tremendous advantage, but that may require making sure that your kid or your cousin is ready to be a capable leader.


By Joseph L. Bower
Copyright 2007 Harvard Business School Publishing Corporation
Summarized by permission of Harvard Business School Press
272 pages