Choosing the Right Leadership
The content of this post was adapted from the Talk, “Choosing the Right Leadership,” authored and narrated by Keith Bozarth.
Selecting, evaluating, and preparing for the succession of key leadership positions, including the Chief Executive Officer (CEO) and the Chief Investment Officer (CIO), are among the most important functions of public pension trustees. These three phases of the chief executive life cycle – recruit, evaluate, and plan succession – depend and inform each other. As the average tenures for CEOs are about six years and for CIOs is six and a half years respectively, making the life cycle as vigorous, productive, and enduring as possible is critical.
Recruitment
There are four important questions trustees should ask during the recruitment phase:
First, do trustees know what they need? Trustees should understand their system’s specific needs and the qualifications, abilities, and temperament a candidate must possess to meet those requirements.
Second, would an outside recruiting resource be helpful? Recruiting firms can cast a wider net for candidates, offer a broader perspective, and help facilitate the review process.
Third, is recruitment receiving the necessary time and attention from trustees? Trustees are best positioned to know all factors that will directly impact the executive’s success or failure. The board should come to a consensus about those issues, based on extensive work and conversations with each other and the candidate.
Finally, what if the right candidate is not found? As painful and inconvenient as a prolonged recruitment process might be, a mismatch between an executive and the organization is often worse.
Evaluation
Evaluations are a critical tool in the ongoing communication between a pension plan board and key personnel. Boards should establish a policy of regularly evaluating top executives and should assure that time is taken to consistently execute the evaluation process. The setting of expectations begins during the recruitment process and continues throughout an executive’s tenure. Evaluations, early on and then at least annually, ensure that executives know what is expected, how the board perceives performance, areas where performance might be lacking, and any shifts in priorities. In addition to the review of executives, every organization should pursue a robust policy of evaluating all key personnel to set expectations, provide feedback, and maintain accountability for performance.
Plan Succession
All tenures eventually end. Trustees should be prepared to make the transition as smooth as possible for the organization to minimize productivity loss and reduce uncertainty of direction. While it is unusual for public sector organizations to have a designated successor identified in advance of a departure, it is useful for trustees to establish a succession planning process that helps assure ongoing leadership, board knowledge of the organization’s bench strength and an efficient method for selecting a successor. Issues to consider include: developing a search committee, hiring a search firm, updating the search criteria, revisiting compensation and other terms, and preparing for opening records and meetings according to legal requirements. By addressing these concerns in advance, a board can recruit, identify, and select the right individual and finalize the search in less time and more successfully.
Selecting key executives, including the CEO and CIO, is one of the most significant decisions a pension plan board will make. Trustees should think of choosing the right leader as a life cycle that includes recruitment, evaluation, and succession planning. Trustees need to know what their organization needs and take the time to conduct a thorough recruitment process. Setting expectations and providing performance feedback early and often is important. Finally, a succession plan ensures that the organization will transition smoothly from one leader to another.
The full Talk and the supplemental materials are available as part of the Board Operations and Dynamics Series of the Board Smart governance e-learning system. Click here to review the full curriculum. For more information about Board Smart subscriptions, please visit www.boardsmart.com or contact info@boardsmart.com to schedule a demo.