The costs of leadership failure, especially at the CEO level, can be high. Here’s what CLOs can do to help prevent it.
The failure rate for C-level leaders has increased to an alarmingly high level in the past decade.
Last year, The Conference Board reported that 28.6 percent of CEO successions since 2008 were due to dismissals. Moreover, in 2008 Nat Stoddard and Claire Wyckoff, authors of The Right Leader: Selecting Executives Who Fit, estimated the costs to replace a CEO at a large company to be as high as $52 million.
The cost of such high-profile dismissals to the U.S. economy, according to Stoddard and Wyckoff, is nearly $14 billion per year.
In most cases, there is a combination of internal and external factors that has led to costly leadership mishaps — and, in turn, dismissals. Some leaders may develop poor habits and fatal flaws prior to a downward spiral. Some might believe they’re so powerful that they’re “exempt” from company rules, ethics and even the law.
CLOs can help organizations avoid such disastrous outcomes of CEO failures. Here are some steps to take.
Improve leader selection processes and criteria. Typically, decision-makers don’t spend enough time considering the critical competencies for leadership success. Determining the future requirements for the CEO means decision-makers must consider a strategic plan and identify new competencies required to lead in the future.
Improve talent assessment. Assess the leader’s propensity to engage in certain behaviors — are they egotistical, inflexible or demeaning? Considering derailing behaviors should be part of the hiring process. Keep in mind that it can be difficult to accurately evaluate senior leaders’ skills and abilities from an interview; most senior leaders have developed presentation skills and excel in interviews. There are valid assessments that can, however, detect a leader’s potential derailing behaviors.
Improve evaluation skills. Many companies’ top brass are ill-equipped to select CEOs because they aren’t always experienced, skillful talent evaluators. They rely on their own experiences and biases when appraising talent. Properly training board members and other decision-makers should improve the CEO selection process.
Improve leader development. Many CEOs may not take advantage of leadership development programs. They may sponsor and kick off training programs, but rarely do they get the benefit of the associated assessments. CEOs should not be let off the hook. Insist that they participate in training, create a leadership development plan and hold them accountable.
Consider external opportunities. If internal training programs are too threatening, send the CEO to an external program — such as executive education programs at Harvard, Wharton or Yale — to get valuable feedback for positive growth.
Strengthen board and committee leadership development. Most public company boards have a compensation and leadership development committee that’s responsible for CEO succession and leadership development. However, these committees aren’t always effective.
Hire an external coach or consultant. Sometimes an objective, outside source can provide CEOs with ongoing development and serve as a neutral sounding board. An external coach can also provide objective advice and insights to a CEO’s development.
David Brookmire is an executive adviser, researcher and author on leadership effectiveness. He can be reached at editor@CLOmedia.com.