How does a company choose a CEO?

The article concerns the question – How does a company choose a CEO? When choosing a CEO, the company should have a clear picture of what is most important to the shareholders, and what the board expects from a chief executive officer. The goals will be different for a company who just fired their CEO than a start-up company.

How does a company choose a CEO

Before hiring a candidate, the board should compile a list of quantifiable goals that must be met. In addition, the members should write down those personality traits that best describe the type of person for whom they search. Further, the board and shareholders should decide what educational status they require for the position, as well as any other certifications or professional abilities they believe to be requisites of the job.

Typically, a company will choose a CEO based on past accomplishments. Again, depending on the size and maturity of a corporation, a seasoned CEO may be affordable, but in the case of the start-up company, a recent graduate may be the right person. Particularly companies who have had some form of recent trouble, the new CEO will have to exhibit the talent to move the company into a more favorable position. Likewise, the company may need a stronger personality to make some rather unpleasant decisions.

Additionally, in regards to older companies, the idea for shareholders is not necessarily to be bigger, as they have already reached economies of scale. In a sense having more locations or more franchises does not add greatly to shareholder earnings. But product development and launching new products throughout the existing franchises may provide considerably more to the bottom line. In this instance, the board and shareholders are going to look for a CEO who completely understands this concept. That expanding the product lines rather than buildings is key.

But there are common traits that all CEOs possess and those are important when choosing a chief executive officer. The CEO is the most senior person, and thus must be a leader. He/she must motivate everyone in the organization in order to met the required goals. He/she must also have the respect of the managers in order to move the company forward. A competent CEO is one who spots opportunities, grabs them, and takes them to fruitful results. Identify and execute.

In addition to short term planning, the CEO must look at long-term goals and see the vision, not just for immediate profit, but for stability and future earnings. And he/she must be able to forge positive relationships with the board of directors, shareholders, potential investors, the employees, and the company’s bankers.

A real CEO is not one who necessarily can do all the little tasks himself/herself, but one who can put the whole puzzle together to achieve something great. He/she can move the components of the organization in the same direction. Also, the CEO needs to understand which areas are a form of weakness and then hire those individuals to meet the challenge. He/she knows how to keep good people, which ultimately results in improved profitability.

Granted, when choosing a CEO, it is difficult to know whether he/she fits all of the above criteria, but ideally, the CEO must be the right fit in terms of past experience, recent achievements, salary expectations, and the ability to get the job done.

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