CEO’s recruitment process needs fundamental change

Selecting and retaining a right candidate for CEO/s have really been a challenge in Nepal or anywhere else in the world. As a consultant I have been giving some thoughts on it which I have documented and which I am sharing with you. I know the write up needs further refinement, but what I have here is first hand thoughts copied from my mind.

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Nepal’s CEO’s recruitment process needs fundamental change”

(Basic flaws and their remedy in recruiting right CEO in Nepalese organizations- a new perspective_

The prevalent conventional methods used by most organizations in Nepal to recruit Chief Executive Officers (CEOs) and other strategic positions have become nearly obsolete. They need a lot of refinement to attract and retain genuine candidates, with ability and skills to meet multiple organizational challenges and complexity of the millennium.

By CEOs, I mean not only the heads of the organizations such as Managing Director, General Manger of business organizations, and Country Director of international agencies, or principals of large public schools. It also means other strategic position/s in the organizations such as marketing managers, finance managers, operation chief and etc that have very important role in any organizations.

The success (or failure) of any organization depends entirely upon the capability of the person/s managing it- CEO and his/her close allies. They can make big differences to the organization they manage and all the others who are concerned – staff donors, consultants, investors, consumers, government and all the stakeholders.  There have already several of cases where wrong selection of CEO has lead to organizational disaster. The wrong selection damages the both- organization, which hires CEO, and the person who is hired as CEO. There are more than dozen of such recent cases in Nepal.

CEOs’ actual role is not only to supervise day to day activities, but also to lead organization towards more prosperity, growth and its long-term vision. A CEO has more of a coaching role- an ability to foster championship/leadership within the staff, rather than just running an operation and managing budget.

Therefore CEOs need different kind of skills and knowledge than the ones that have been understood until now. The conventional selection process is not sophisticated enough to test these skills and therefore needs fundamental change to make it more responsive to the actual need and the present environment.

A quick review of present approach:

The general mindset that works behind the traditional selection process is finding a person with highest academic qualification and longest experience. It does not give attention to the specific organizational needs as well as several other variables such as creativity, energy, appropriate mindset and learning ability that a CEO must have in order to succeed. Even the international organizations have fallen into this trap, which follow the same old rule. The selection process is not as transparent as need to be and most of the decisions are made behind the closed doors.

The common methods used by majority of organizations in Nepal for selecting CEOs or senior executives involves 3 stages: advertising position/s, short listing the candidates, and conducting one or few rounds of interviews.  There is nothing wrong in this process except that everything else has changed- the technologies, management philosophy, the people to be managed, and most important of all, the role of CEOs, which needs to be redefined, in the new organizational need and context.

The first flaw in the conventional method is the style of presentation in the advertisement, which has become quite standard and stereotype. They usually fail to communicate the unique needs of the organization in question, and expected skills of position/s advertised. While, on the one hand such advertisements tend to encourage wrong candidates to apply, on the other hand, they fail to attract right candidates who may not have as obvious formal qualifications as advertised. The conventional advertising format places heavy emphasis on work experience and high academic degree, which do not sufficiently reflect candidates’ ability to manage in the given context.  As a result of this, advertisements almost always attract only mediocre candidates.

The second flaw is that usually selection process is not designed professionally. We hardly give required level of importance and thinking to the selection criteria and process.  Almost usually, a committee is hastily formed, on the basis of their seniority and political consideration than their professional expertise. It is not common to seek external technical assistant in designing selection process due to political and vested interest.

For the senior positions such as CEOs, the only process used are 2-3 rounds of interviews. Usually, questions are not usually pre-designed and are left at interviewers’ whims. The information received during the interviews are hardly analyzed and evaluated and assessment compared within the interviewers.  In the absence careful design, these interviews turn out simply to be lucky draw events where candidate’s selection depends more on luck, or favoritism than their ability to manage the company in the given context.

The third flaw is that although the CEOs’ are hired for a period of 4-5 years only, although their role is identical to a management coach, they are compared and treated like other staff including how they are paid. Their salaries and benefits are only marginally higher than other staffs whereas their job can be considered a permanent. It is also a fact in the Nepalese context that they have to satisfy the stakeholders and their unreasonable demands of their personal interest to keep his/her job. All these make CEOs career insecure and fearful specially when they are selected on political background. Under such circumstance it only natural that CEOs focus more on protecting their job, than making professional decision in the best interest of the company. The low salary together with low sense of security followed by extremely low self esteem compel most CEOs, to resort to corruption.

The fourth flaw is failure to establish requirement for correct experience, skill and quality of CEO that the hiring organizations actually need. While public organizations hardly use any written job responsibility description (JRD), other types of organizations develop conventional JRDs that spell out, only day to day activities, with heavy emphasis on compliance rather than on true leadership role for which they are hired.

Selecting a CEOs is a most critical and important task needing considerable level of professional expertise to design, advertise and select. Some of the best CEOs are those CEOs are who are self-employed and have clear cut personal and organization vision.

Fundamental change in our assumptions needed:

To overcome these flaws, we need fundamental change in our perception, assumptions and process to select CEOs. Some of them are as follows

As opposed to being able to give “right answer”, candidates for the post of CEOs should be tested to ask “right questions” which should reflect in our interview.

The conventional selection process focuses on judging candidate’s ability almost entirely on the basis of past experience and maturity. The underlying implication and message behind it is that the selected CEO is expected to repeat what he did in the past. It does not work that way, because it fails to address the unique needs of the hiring-organization.   There are barely any tools designed to understand candidate’s potential ability to manage in the future. But the fact is that the candidates’ capability to successfully manage the organization depends not on the experience or knowledge only, but more importantly his/her learning ability. This is indicated by ability to inquire, link, and draw insight to apply in the new situation. It is different than the experience.

Such learning ability of a candidate can be measured / evaluated not from their ability to give correct answers, but from his/her ability ask correct questions. A CEO needs to be able to ask correct questions all the time in order to be successful.

If we accept this logic, then our selection process needs a drastic change. For example: instead of saying in the advertisement that candidate’s inquiry in any form about the organization will not be entertained, we should be saying that the candidates will have access to basic information they need about organization.  The interviewers also need learn new skill to evaluate candidates not only from answers the candidates provide but also from the quality of questions they ask.

Transparency on the both sides: Potential candidates have right to know the real situation of the organization they are being hired to manage.

To test the real ability of the candidate, the candidates must be allowed to understand the real situation he/she has to handle in his/her new position.

Usually, CEOs are revealed only rosy picture of the company, not the real situation. That is why they end up facing problems /issues for which they are neither prepared, nor skilled to handle.

The only best way to overcome this flaw is to make the actual situation of the organization as far possible transparent to potential candidates during the selection process. This will eliminate the possibility wrong people being selected, because only people capable of handling such issues will dare to apply.

We should test candidates to evaluate their capability to handle real issues they are likely to face in the organization they are being hired to manage. To do that- we need to provide them honest information and real issues faced by the organization and in return, ask them to present real strategies/approach they propose to address them.

Focus on testing candidates’ potential and learning ability as opposed to testing their established assumptions and past experience.

The candidate’s professional experiences alone do help to evaluate their ability to manage a particular organization at its particular phase.  An organization faces different challenges at different phase. The candidates’ real potential ability to manage successfully is directly proportional to his learning ability. Finding out the learning ability is one of the most difficult jobs, which people even have not thought about.  Its need is not yet recognized which is self evident from the fact that hardly any organization seeks professional assistance in the selection process.

Organization can not go ahead without creating new innovative ideas or programs. Donors always wish that their grantees proposed some new innovative program. Yet this attribute is not sought in the candidates during the selection process. This desire must reflect in the selection process also. Creativity itself in isolation will prove useless until it makes sense in the real world; the best way is to test a serious creativity is to allow the candidates to propose creative solution to the real organization issues/problem.

Help candidates generate their self-commitment to the problem they are likely to face as a CEO.

From the time immemorial, the power  (sometime also considered as burden) of selection has remained with the hiring organization or its committee. Conventionally it sounds as logical.  But the selection process would have been a lot more genuine, if candidates also had opportunity assess the situation, propose strategies, self -define their role, and propose fee, which would generate self- commitment that will lead to the success.

The general premise behind this method is to test the candidate’s capability in terms of real problem they have to solve, their potential, learning ability,

New frame work of selection process

There can not be any best or hard and fast rule about how a genuine candidate can be selected. So many factors or variable affect it. The organization needs to develop their own process as per their needs, vision, mission as opposed to following a standard rules that assumes over generalized ideal situations.

However the following broad guidelines or few basic checklist provide a broad framework of new selection process that may help minimize nepotism, favoritism and politicization as its happening in most if not in all organizations in Nepal. It is recommendable to seek professional help, if necessary to carry out these processes.

The process basically should involve the following steps: conducting a quick internal need assessment, developing a terms of reference for CEO, getting management proposals from potential candidates, evaluating and selecting 3 best proposals, inviting them to make presentation before a critical mass of people that may include donors, selection committee, lead consultants (if applicable), and few senior staffs, and award the contract to the best proposal. The final step can be one or series of interviews to evaluate candidates personality traits and attitude and to make a final negotiation on the terms of reference, including salary/benefits.

Assessing organizational needs.

The organization should first make an internal assessment to establish the exact kind of CEO it needs to manage the organization at its present condition to achieve its vision mission and goal. This is the most important and foremost step that determines the correctness of all the other process.

Assessing the present capability will prevent duplication and friction in the organization. The whole ideas is finding the gap between what is needed and what is missing and fulfilling that in form of CEO. Such assessment should not be a long formal process. It may be completed with a quick brainstorming session, interviews with key staff, board members, stakeholders (for example donors, governments and clients of that organization) and study of company’s long and short plan. It should not take more than a week and should not be more than 2-3 page documents with bulleted points.

Developing terms of reference.

Now that we know what kind of CEO we need from the above findings, we are ready to develop a terms of reference (TOR) for CEO. It should describe present situation of the organization, the issues to be addressed in the organization and CEO’s expected role and the purpose of being in that organization, and his/her performance indicators. This is an alternate to the traditional Job responsibility description (JRD) that merely describes day to day activities, and focuses on compliance than on the CEOs real role of leadership. On the other hand, a TOR would be more legally binding and more specific than JRD because it will become the part of the contract that CEO would be signing with the organization. The TOR should be prepared before the advertisement for distribution to potential candidates.

It is more or less similar to Request for Management Proposal (RFMP) from individuals willing to manage the company on a contractual basis.

Advertising the position.

With the terms of reference ready, we are ready to advertise the position, which should reflect the facts, presented in the terms of reference. It should include- brief profile of the organization, what kinds of issues /challenges it faces, brief description of selection process, expected profile of the candidates and a clear-cut instruction. The important part is – we should avoid putting limitation on age, gender, formal degree, salaries, which usually drive away, right kind of candidates and attract wrong ones. For example- mention of Phd as minimum formal degree, or salary as per the company’s rules, or gender preference prevent many candidates who may otherwise be able to solve actual organizational problems. Such information should be presented with as much flexibility and less technicality as possible.

A sample advertising that reflects the total selection process involved:

An unique opportunity test your management capability:

The Blue Heaven company, a social marketing organization promoting health products in Nepal since the last 22 years is looking for a enthusiastic management and marketing professional to manage the company for a initial period of 5 years on contractual basis.

The interested candidates are required to submit a management proposal to manage the company for another 5 years, based on a detail term of reference available at the office. The proposal should contain the following information in a briefest possible way.

Introduction- who you are?

Situation analysis- the present organizational issues and  challenges that as you understand, needs to be addressed

Objective to be fulfilled- what needs to be changed/ improved?

Strategies- how you propose to improve.

Proposed deliverables and indicators.

Condition of satisfaction including proposed fee/salary, benefits and other facilities to carry out the proposed strategies.

Proposed performance evaluation and indicators.

Candidate should pick up the terms of reference from the Blue heaven’s office at Baluwatar. They are encouraged to make an appointment with Chief administrative officer and inquire further about the organization, partners, and present situation in the process of developing the proposal.

Candidates are required to submit a management proposal by August 30,2000 or within the next 3 week for which they will be paid a reasonable amount of money.  Each of the candidates will have to make presentation of their proposal within 10 –15 minutes before a group of people including key staffs, selection board, donors and partner organizations. The best three will be interviewed and one of them awarded to manage the company. Other two may be considered for hiring for some specific jobs as a consultant.

The issue of Salary/facilities:

The general policy regarding the salary of CEOs should be based on negotiation, market value and, directly linked to the terms of reference, deliverables, financial size of the project, and candidate’s previous salary history.

Some important traits, qualities, to be seen in the candidates:

There can be an unlimited list of traits or qualities that make a CEO successful. But there are very few basic qualities that sufficiently indicate or determine success or failure of any CEO. It should not be difficult to evaluate that from the proposal they submit presentation and the interview.

1, Minimum Technical competence:

CEOs must have minimum technical skills and knowledge to manage the organizations. It may range from very basic general skills such as computer skills, professional writing and presentation skills, and a good working language skill, to any specialized technical skills such as marketing/sales, financial, health, medical, engineering, etc depending upon the nature of organizational business.

For example, a marketing organization may need a person with marketing background; same as a construction company may need person with engineering background, and etc.

2. Soft skills or people skills.

It is very important to assert that CEO has a sound ability to manage his colleagues, donors, consumers and other stakeholders. The success of any company depends largely on these attributes than the technical competence. It is really important to note- if the candidate is polite and cultured? Does he listen well? Does he wear good expressions and (clothe)? Is he assertive enough to politely express his difference of opinion? Does he look amicable?  Has he got some kind of charisma? How well he manages his ego and self esteem? Has he got some sense of humor? Is he tactical? The list can be long, but candidates must be evaluated at least on some of these areas. Many CEOs have failed entirely because of lack of such attributes despite their unquestioned talents, and integrity.

3. Emotional skills and attitude:

Although intangible, the attitude of any person is more observable than the cloth he wears. It is really important to know if he is emotionally balanced? Has he got a balanced view of the world around him? Is he positive, over positive, negative or just down to the earth guy? Is he a visionary, dreamer or a hard core technician that believes only in what he can prove? We need different types of CEOs to lead an organization at its different phases. Sometimes, it pays to understand their internal communications if they have enough sense of security; self-esteem, self-respect, enthusiasm drive and energy that will have direct impact on their productivity.

4. Learning ability:

One of the most important capabilities that make a CEO successful is his ability to learn in the new environment, which manifests in his inquisitiveness, readiness and adaptability to new ideas. The physical manifestation of the learning ability is the habit of asking questions and ability to say I don’t know when he does not know.

Most often, the main cause of failure is over self -confidence, which is the manifestation of inward low self –confidence.  Therefore we look for learning ability in the candidates or at least to avoid with learning disability.

5. Creative and innovating ability:

At some points every thing comes to a dead end. The ideas loose their value, relationship loose interest, suddenly old strategies stop working, market saturates, and suddenly we find we are middle of nowhere with any solution. At that time, neither our experience nor our wisdom works, and that is when we need to do look for creative solution which requires us create something that did not exist earlier, something new. Every organization comes to an end and will die, if we do not recreate it in new way to revive it. That is when we need creative CEO who can create new vision for the organization and lead us to reach there. It is very important attribute to look in CEO.

One of the best books I read that gave me fairly good ideas about how to evaluate seniors executives is “ the Anatomy of a great executive (how to spot one and how to be one) authored by John Warhead. You may want to read it.