Selecting leaders

Someone sent me a piece on selecting leaders. It's an interesting piece, as I took it, on different perspectives and expectations.

The nub of the paper is this:

… "boards and CEOs are perfectly willing to consider CEOs who have failed in past CEO roles as viable candidates for a CEO position. A CEO with a record for disastrous corporate results is an acceptable person to not only be interviewed, but to be hired as the best leader. The reasoning they cite is CEOs learn much by their failures and can bring these lessons to the new role and – ultimately – perform better.

Contrarily, the same board members or CEOs use exactly the opposite logic when it comes to CFO candidates. When a CFO candidate has a mark on his or her record for a failing experience, they say "absolutely no" and cut him or her from the list for consideration."

What the sender wanted to know (among other questions) was why an apparent double standard? Having just been discussing looking at organizations through different lenses and perspectives (see Gareth Morgan's Images of Organization) I wondered if the same kind of thinking was coming into play. Perhaps CEOs and CFOs look different if viewed through the same lens alternatively people may apply one lens to CEOs and another to CFOs.

Either way it's possible that CEOs are viewed as strategists and CFOs are viewed as operators or administrators. From this perspective making a strategy mistake could be more excusable than making an execution, implementation or operational mistake (because the latter are easier to track and measure, whereas strategy failure is a much more nebulous arena).

I came across an article in the Journal of Accountancy "What does it take to become a CFO?" that makes the point that:

Successful finance execs seem to agree that technology skills and breadth of vision are hallmarks of the CFO position. A viable candidate "has to be broad in many areas; being a CPA is only one of them," … "Two other factors have a terribly important impact … the computerization of information and the participation of the CFO in all forms of operations," he says. In other words, explains Meinert, you must understand "the technology behind the way goods and services are marketed" and "every kind of asset, including intangibles, property leases, negotiations, mergers and acquisitions and pensions and benefits."

The article continues:

Many CFOs have the information technology department reporting to them," he says. "You need a solid understanding of enterprise resource planning and e-business initiatives. You need to keep pace with emerging technologies and Web-based applications, especially those that coordinate front- and back-office operations."

CEOs, on the other hand, are not typically expected to have this hands-on knowledge of the operations (although it helps if they do). But they are required to take public accountability for their mistakes. An article in Chief Executive discusses this point, presenting a list of CEOs who, during 2009 recognized, and apologized for their performance:

Consider the numerous CEO apologies that have made the front page just in the past few months:
• Apple's Steve Jobs for presenting confusing information about the status of his health. Earlier, he apologized to its most ardent customers for slashing the price of iPhones two months after they stood in line for the high-priced item.
• Amazon's Jeff Bezos for not having a sufficient supply of Kindle readers for the holiday season.
• Whole Foods CEO John Mackey for writing anonymous posts on financial message boards.
• Steve Hughes, former CEO of tea-maker Celestial Seasonings, for poisoning prairie dogs on company property.
• General Motor's Rick Waggoner for failing to invest in small cars and other misjudgments.
• Facebook's CEO Mark Zuckerberg for heavy-handed tactics that many Facebook customers felt would threaten their privacy.

This form of visible and public apology is a damage limitation and reputational risk mitigation action, and seems to stand in the CEO's favor.

Sadly, CFOs who become publicly visible often do so as a result of legal action of some description. CFO magazine argues, for example, that

"The moment you have a fuzzy environment, … the more this [fraud] can happen." In finance, recessions are very fuzzy. "CFOs are on shaky ground," warns Ariely, "because they are [now] operating in very difficult conditions."

The different treatment of mistakes by CFOs and CEOs when they are being recruited is due to the recruiters perceptions of the very different roles the CEO and CFO play in an organization, the different outcomes of mistakes they typically make, and the different responses people have to the circumstances in which mistakes are made publicly visible.

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