How To Evaluate A CEO from Starbucks CEO and a Top Silicon Valley VC
There is no more important role in any company than the CEO. So much has been written about what it takes to be a leader and there are different kinds of CEOs – big company, start up, technology, services and many more. (You can see an interesting Wharton study of Founding v Professional CEO analysis here) If you are building a company, investing in a business or thinking of hiring (your) CEO replacement, what criteria should be used to see if you have the right person?
Many CEOs are very good and what they do yet many aren't sure how they stack up. According to Starbucks CEO Howard Schultz, many CEOs are in fact a bit insecure that they don't know it all. Several founding CEOs I know have said they couldn't be hired for their job if they applied for it today. That insecurity is a strength if its anchored with humility and vulnerability so they can show their human side. Being the "smartest guy" in the room and know-it-all is a turn off to employees, partners and customers. For vulnerability to work, there must be trust on the team and that is built by candor within the team. My formula for building strength by leveraging vulnerability is – Candor + trust = growing respect.
These are subjective criteria and there is no CEO Olympics. We can measure a variety of outcomes, performance, stock price, M&A success however picking a good CEO is still an art. Silicon Valley VC Andreessen Horowitz partner Ben Horowitz posted their criteria for evaluating CEOs – its a very good read and I suggest checking out the full article – the key questions he raised are:
- Does the CEO know what to do?
- Can the CEO get the company to do what she knows?
- Did the CEO achieve the desired results against an appropriate set of objectives?
If you are the CEO and being evaluated from the outside, what can you do to be more effective? Being open, curious and respectful of your people and incoming market information can help you insure your goals are still the best target. If there has been a big market shift, it's your call how to react. A key component in that process is being able to use your vulnerability and ask "what is it I don't know I DON'T know?" (See my earlier post on this topic)
Working with top people to discuss tough decisions is a great way to help CEOs get perspective. An outside director, business adviser or coach is a big help. I found it very useful as the cliche "its lonely at the top" was very accurate for me and other CEOs I know, especially in new technology fields where the rules are being written and rewritten all the time.