CEO succession is one of a board of directors’ most important governance responsibilities, and mistakes in this area are extremely costly in terms of finances, time, competitiveness and morale.
The 2015 HR@Moore report, soon to be released by the Center for Executive Succession at the University of South Carolina’s Darla Moore School of Business shows that C-suite mistakes are far more frequent and expensive than commonly reported. For instance, some estimate that CEO succession failures in large firms can cost more than $50 million U.S. in direct costs.
This does not include lost competitiveness, reduced customer confidence, the required additional time and energy necessary to identify, select and onboard a replacement, and other costs. Additionally, the wrong CEO likely means a substantial decline in employee morale. Yet, few firms systematically use all of the practices that lead to selecting the best CEO candidates.
As reported by the Center for Executive Succession, the largest mistakes in hiring senior executives result not from a new hire’s technical deficiencies, but rather from personality and fit issues. These problems, however, are difficult to identify in many current selection processes, as senior executives and board members rarely have the training designed to identify such issues. Further, board members and senior executives may subconsciously take it easy on potential candidates to find a reason to hire, rather than to reject him or her as a candidate.