The CEO of your company is a very important position and finding the right candidate is not easy. I wanted to tell a story about the “Penny-Pinching Company” and how their low compensation packages caused them to lose two CEO candidates.
The “Penny-Pinching Company” had just lost their CEO to what he called “an offer he couldn’t refuse”. The board of directors decided that they needed to start their search process immediately. The board was very familiar with this process since they had done it three other times in the last ten years. This would be their fourth CEO in that time frame!
Since they had done this process before, they decided to do it on their own and not engage an executive search firm. So, they did some advertising, and then the resumes started to come in. Then the board narrowed it down to the top five people to bring in for an interview. After the interviews, the board decided on their top two candidates, and chose their top individual, Jane. They confidently extended an offer to Jane, and she immediately turned it down.
Jane gave a reason for refusing the offer and said that the compensation package was not up to par. She said that she is currently at a smaller company where she is making more money than they offered her, with better benefits and perks. Since the board had their second candidate on the line, they decided not to negotiate with Jane and just extend the same offer to the second candidate.
The second candidate also refused the offer immediately stating that the compensation package was not a good offer. Instead of negotiating with this candidate the board decided to restart the executive search process all over again.
Issues in This Story
So when you listen to this story, what are some of the issues that immediately pop up for you?
- High Turnover. This will be the fourth CEO for the company within 10 years. Why did the board just accept the high turnover in the CEO position and not investigate why their CEOs were all leaving?
- Poor Compensation Package. After they heard what Jane had to say about the offer, why didn’t they consider that there may be something with the total compensation package?
- Negotiations. Why didn’t they negotiate with the second candidate after they didn’t negotiate with Jane? If they had negotiated, they likely would have gotten that person in the end and not had to do another search.
- Turnover Affecting Employees. How does the high amount of turnover in the CEO position affect employee morale and retention at the company?
What You Can Do
After listening to this story, are you running into any of these issues? If your board is considering doing a CEO search and you don’t want to be seen as a Penny-Pinching Company, here are some things you can do:
- Ensure that you understand what a competitive compensation plan would be for a CEO at your organization. There are experts in compensation design that would be able to help you put together your package.
- Implement a CEO succession plan at your company. Make sure that you are developing internal successors for the position. This way you don’t always have to recruit from outside the organization.
- Contract with experts in succession planning or executive search to help you find your next candidate. These experts will help you find the right candidate with the right package so that you can stop the cycle of turnover within your organization.
The CEO of your company is a very important position – make sure that your company isn’t a “Penny-Pinching Company”.
Do you have bench strength at your organization? Download The Bench Strength Builder™ below and ensure that your organization is never unprepared for turnover again!