You can’t risk everything on a CEO who hasn’t proved themselves - Sunday Times

They need to have done it, need to be able to do it and need to convince that they will be able to overachieve

No matter your degree of success, you will have undoubtedly experienced failure. I know I have, many times. It’s an almost-inevitable part of busines but the failure is sometimes less important than how we learn from it.

Today, as a chairman and investor rather than chief executive, I view failure through a different lens. When public companies aren’t performing well — profits down, growth stunted, shareholders twitchy — the instinct is often for the chair and his or her board to blame whoever’s running the show. But
instead of just pointing fingers, boards need to face up to failure themselves because they put the chief exec there in the first place.

Considering it’s one of the board’s most important duties, it’s extraordinary that they get it wrong so often. Sometimes the problem lies in the self-defeating way in which they recruit leaders, with narrow selections, misguided criteria and poor judgment of leadership qualities.

So, for example, when I read about retailers losing their way because a chief exec with little knowledge of the sector doesn’t understand the market well enough, or a financial titan losing its crown after bringing in a successful banker who’s never run a business before, my immediate reaction is: “Well, what did you expect?”

If you hire people without the right experience, cross your fingers and hope for the best, then maybe the CEO shouldn’t be shouldering all the blame. And the same principle applies at every level. If someone in your team isn’t delivering, some fault might lie in you over-promoting them. Take time to consider things before apportioning blame.

As chairman, my first instinct is to ask why we’re making the appointment. What’s the ambition, the change we need to make, where we need to reinvigorate to get to where we need to be, what are the skills that will define a successful tenure and the mission that will bring the company together?

Then, I adopt the timeless Procter & Gamble recruitment mantra to compile a candidate shortlist: Has done. Can do. Will do. You can’t risk everything on a chief exec who hasn’t yet proved themselves. The role and responsibilities of a chief executive have never been broader, so if their background and expertise is niche, built within a single company and one in which they don’t have to deal directly with clients and teams, they may not be the right candidate. They don’t always need industry experience, just relevant experience.

They need a proven track record of sustainable success that goes beyond short-term financials. And they need the right human skills to inspire an organisation. They need to have done it, need to be able to do it, and need to convince that they will be able to overachieve.

I take full responsibility for the CEOs I have hired into the businesses I chair, or am invested in. No pressure on Ross Clemmow at HomeServe, Jambu Palaniappan at Checkatrade, Jason Mahendran at Growth Partner or Adrian Burleton who Craig Waddington and I hired into Easy Bathrooms! When the CEO is the right one and the plan is agreed and executed well, success follows.

Sometimes the board gets over-clever by bringing in a complete outsider to shake things up without paying proper attention to how subsequent disruption will affect morale and loyalty. But when they do get it right, they need to have confidence and not bow to headwinds.

When Philip Jansen left BT earlier this year after almost six years as CEO, the share price was 50 per cent down and there was disquiet among some impatient shareholders. And yet. as a CEO with a proven track record, he had taken a series of tough decisions that took the company in a fresh, stronger and more focused direction. I’m sure the new CEO, Allison Kirkby, will be a success but part of that will be due to his groundwork. A case of the board appointing the right leader with the right long-term plan but shareholders focused only on the short term.

Avoid candidates who might become sidetracked by pet strategic sideshows, diverting them away from the core business growth. Equally, boards shouldn’t opt for chief executives who won’t challenge them. Consensus is important but not at the expense of making transformational decisions that a company might need. Boards need to hire leaders who are visionary and understand the long-term challenges, rather than protecting the status quo.

With that in mind, don’t allow a current CEO to bulldoze his or her candidate through without the board’s proper involvement, because they’re more likely to care about protecting their own legacy. But if there are one or more great internal successors then that is the best option. They will be stepping up to a bigger role but they know the company and its culture, and the market.

In external candidates, I look for a track record of revenue and profit growth, combined with their people plan. Do they bring in high-calibre leaders as well as developing internally? Add humility, curiosity (which is a passion for learning) and ambition for the company rather than their own career.

All of this is why professional recruiters who understand your business and sector are vital. Give them the right brief, with a full job spec that’s been properly analysed and debated by the board, an appreciation of the challenges and expectations ahead, and a precise profile of the character you’re looking for, someone with the right cultural fit.

I’m currently recruiting a chief executive for Business Leader, which inspires founders and CEOs to fast-forward their growth through facilitated learning and unique content. And my criteria is simple: they need to be a proven chief exec with experience of B2B membership. The more focused the criteria, the better.

In the early days of HomeServe, I relied on my black book of contacts I’d come across when it came to new hires but quickly realised how time consuming it was and that I needed access to a bigger pool of candidates. Professional headhunters are an investment worth making. Perhaps my biggest learning in this shift to chairman is that a chief executive who blames poor performance on things such as Covid, the cost of living crisis or Brexit is not the right hire. Great leaders find a way to find solutions and deliver results, regardless of external conditions.

So next time you read about a failed CEO who didn’t possess the requisite skills, was unsuited to the demands of the job or the specialism of the industry, look at who appointed them. Because that’s very often where the blame for failure also sits.

Richard Harpin is founder and chairman of HomeServe and Growth Partner, and owner of Business Leader magazine