CEO Success Factors

We've been re-evaluating a bunch of CEO hires and looking at patterns. Who made it, and who did "just OK?" Early results are surprising. Bottom line? The up and comer, first timers seem to be performing right in line and possibly better than the "veterans." For example, I'll take Larry Page over Carol Bartz any day of the week. I'd even take Zuckerberg over a turnaround, slash and burn "operator" in the digital media world, any day of the week.

A big hit for us was Frank Slootman at Data Domain ($2B exit). He was a first time CEO and the two things he has really going for him: incredibly smart and incredibly competitive. Isilon exited at $2B recently, same story. Smart, intense guy running it, wouldn't strike you as a "usual suspect" CEO type. CEO of LoopNet, Rich Boyle, was promoted from head of engineering and sold LoopNet recently for $850M or so. The list goes on and on.

Boards need to think long and hard about risk. How do you define risk? At what point do you say "I'm betting the company on this person?" As opposed to, "how do we avoid a shareholder lawsuit if we get it wrong?" The risk aversion in public company Boards is shocking, disappointing and yet another handicap to US company competitiveness over the long term. That culture of risk aversion needs to end, yesterday.

As for startups, the "usual suspects" orientation really needs to change in my view. When will a return to inspired hiring occur? There are only so many usual suspects running around, many with very questionable "leg drive" after coming off a nice exit, and it's time to re-think the qualities that make up excellent CEOs. Every situation is unique and custom. But the basic thinking should be "who" and not just "what" are we looking for?

Building a Board

I've built a nice Board practice over the last couple of years and have clients ranging from $1B public companies to startups with 50 people. Technology, energy and even health care clients. What have I learned? That it is terribly important to pay attention to building your Board. If you get it wrong, tearing it down could tear down your company. Here are five tips for CEOs and Directors to consider:

1. Don't focus on celebrity Board members. It's not worth the headaches and they'll hijack the dynamic half the time while the other half, not adding any real value. Focus on people who are level headed, focused, will follow through, really WANT to be on your Board and who have reasonable chemistry with others (not too much chemistry, see below).

2. Focus on people with real experience in the domain in which you're operating, either functionally or with industry experience that will move the needle for you. Otherwise they're wasting space and time.

3. Compensate Directors properly. Don't be penny wise and pound foolish. Being a Director isn't as sexy as it used to be, it's not easy money and it needs to be taken seriously. So compensate people accordingly.

4. Make sure no one individual has too much control over the selection of a candidate. Boards are about constructive debates and healthy critiques of a CEO and their management team, etc. Don't hire "yes people." Hire someone who will shoot straight, first and foremost, but do it with class and tact.

5. Take your time and do it right. Be thoughtful. Don't be impulsive and "fall in love with people." Be dispassionate and objective. Treat the hiring of a Director as you would any key executive, including a CEO. Remember, you have to live with this selection and it's nearly as hard to fire a Director as it is a CEO, possibly harder...