The Practice of Leadership: Developing the Next Generation of Leaders

Chapter One. Best Practices in Leader Selection

Ann Howard

Getting the right leader in the top position stimulates organizations to prosper and grow. Chief executive officers (CEOs) account for 14 percent of the variance in organizational performance,^[1] which means that there is a huge payoff if selection is done right. Moreover, it can cost millions of dollars if it’s done wrong.

Unfortunately, there are a lot of CEO failures; estimates range from 30 percent to 50 percent.^[2] A Booz Allen Hamilton study found that the rate of CEO dismissals in the world’s 2,500 largest public companies increased by 170 percent from 1995 to 2003. Nearly one-third of the CEOs departing in 2003 (3 percent of a total of 9.5 percent) were fired for poor performance.^[3] Given these failure rates, it is not surprising that confidence in leaders is often shaky. In one national survey of public opinion based on 1,300 interviews, the average level of overall confidence in business leaders was 2.78 on a 4-point scale.^[4]

The problem of poorly selected leaders could worsen as the Baby Boom generation retires, the supply of quality candidates dwindles, and the competition for talent heats up. Surveys have found that human resource (HR) professionals anticipated greater difficulty filling leadership positions in the future. The higher the management level, the more difficulty expected: 66 percent of respondents expected more problems filling senior leadership positions compared to 52 percent for mid-level and ...