In Pursuit of a CEO

What is the responsibility of the Board of Directors in selection of the right CEO?
Tharuma Rajah

India is now an engine for growth for many global organizations, whether they are top manufacturing companies or providers of outsourced business processes. Global corporations are investing in the country, transferring or building operations, establishing service centers and finding new partners to merge with or acquire. With its educated, hard-working population and entrepreneurial spirit, India is an exciting and thriving place to do business. But is the country living up to its promise? You would agree with me, the success - or otherwise - of India Inc. is dependent on the nature and skill of its business leaders and CEOs. RESPONSIBILITY RESTS WITH THE BOARD The choice of a chief executive is probably the single most important decision any board will make. Given the high stakes, the price to be paid for making the wrong choice can be staggering. India's Best Boards are not only demanding a significant role in the CEO selection process, but they are also looking for tools that equip them with rigor in this critical decision. Ironically, while many boards retain top strategy consultants to review corporate strategy plans, investment bankers to review acquisitions, and adopt many other rigorous processes in their decision-making, in the board's most important decision - the selection of top corporate leadership - rigorous processes have been notably lacking. So what are the expectations from India's Best Boards? We find that they are using a range of leading-edge practices with respect to CEO selection that are helping them make the best possible choice when it comes to it. ROLLING UP THE SLEEVES Boards typically recognize that the first step in a CEO selection process is gaining agreement on a job description for the future CEO. They also know that industry experience and a clear track record in addressing relevant strategic challenges are important. But there is often more to defining the demands of the CEO role than what is immediately apparent. A business in the midst of a dire turnaround places distinct demands on CEO capability in contrast to the demands of a CEO of a financially sound business requiring long-term growth. In Hay Group's experience, we have found that it is particularly useful for Boards to understand and act upon the key competencies that make a CEO effective in India's volatile environment. This provides the board with insights on key capabilities and characteristics that are both objective and research-based as input into fleshing out the profile for their new CEO. WHO IS THE INDIAN CEO? Under the aegis of India's Public Enterprises Selection Board (the body that is responsible for

choosing CEOs and top executives for India's public sector enterprises), Hay Group and Bharat Petroleum conducted research with a view to identify the competencies required of 'The Indian CEO'. In the process, we undertook in-depth interviews with 32 CEOs across India's public and private sector, as well as consulted with more than 50 experts from the government and academia. The results of our research - which were published in a book titled 'The Indian CEO: A portrait of excellence' - helped in creating an understanding for better CEO selection and development, and also work as a guide for Boards to consult with during the process. The best CEOs in India have four unique qualities, which are unlike those found in similarly excellent business leaders globally. SINGLE-MINDED FOCUS ON GROWTH The best Indian CEOs focus almost exclusively on issues directly related to business growth: turnarounds, launching new products or operations, or improving their existing businesses. This was in clear contrast to our international sample, which focused as often on other matters (reorganizations, internal politics, succession, public image, etc.). WORKING TO MAKE INDIA GREAT The best Indian CEOs exhibit a strong and consistent concern for the country's welfare, be it as an argument that they make to others, or as the thinking behind some of their most difficult or risky decisions. Although leaders in other countries have shown various kinds of social responsibility, Indian CEOs were unique in their focus on the country. ADAPTING IDEAS AND TECHNOLOGY TO INDIAN CONDITIONS The most high-performing Indian CEOs are able to consistently describe how they adapt or modify technologies and business practices learned abroad to better serve India, or to take the best advantage of the local materials and markets. Sounds familiar, doesn't it? ENTREPRENEURSHIP: ADDRESSING THE LOWER HALF OF THE ECONOMIC PYRAMID In the most successful stories of Indian CEOs, they generally focused on providing quality goods and services for the middle and lower parts of the economic pyramid, be it through online farming data, trucks or tractors adapted to the Indian roads and fields, reliable watches, or salt that would retain iodine under Indian cooking conditions. This strategy is driven by a combination of good business sense and the leaders' focus on improving conditions in India. WHERE DO WE GO FROM HERE? As company boards start to take a far more hands-on approach to CEO selection, the competencies identified by our research (as showed in Table 1: The Indian CEO's Competency Model) will help those at the helm make better decisions. This model, developed as an outcome of the research, lists the strengths of the best Indian CEOs into 11 competencies, which are thematically grouped into four clusters. This model entails detailed discussions with the full board about specific capabilities that will be required for future leadership, in light of the company's strategy and business model. It also requires them to undertake efforts to constructively gauge the capabilities of internal executive talent against these competencies; ensuring that comprehensive plans are put into place to develop internal talent. With the findings of this research in hand, boards now have the potential to make better person-to-job matches for CEO positions by providing greater clarity on just what kind of a CEO

is needed for different challenging business situations in India. In turn, this will help in focusing leadership development internally as well. WHERE THERE'S A WILL Failed CEO selection decisions destroy shareholder value, deplete employee morale and embarrass the board that made the "bad decision," are only a few of the negative outcomes. India's Best Boards are intent on reducing that risk not only by making CEO selection and succession a key item on the board agenda, but by bringing a level of rigor to the process that provides the level of due diligence shareholders deserve and will increasingly come to expect, after all, it is the board's most critical decision. The author is Regional Managing Director ASEAN, India, Pacific, Middle East and Africa, Hay Group

Tharuma Rajah

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