The Most Dangerous Hire

For years you've crowed about the company you built. Now it's time to hand over the reins. Here are answers to some questions you've asked -- and some you haven't even thought of.

How do you hire a CEO when you're not even sure what a CEO does?

That's the query we received from an anonymous letter writer, an angst-ridden company founder who had tried and failed -- and tried and failed again -- to replace himself. One sleepless night he finally realized why he was floundering: he'd led his company by instinct. And it had worked, for a time. But now, when he wanted to grow his business to the proverbial "next level," he realized he didn't even know how to write a job description for the professional CEO he needed.

For most entrepreneurs, the notion of replacing oneself is an unsettling, deeply unpleasant concept. It's like looking into a fun-house mirror and seeing no reflection at all. How can your company continue to exist without you? What kind of a person could possibly work as hard as you do or have as much passion? Who can nurture your baby? The answer often is that whoever you ask to take over enters as a hero and winds up as the devil you wish you'd never invited in.

To help you avoid that scenario, we asked several experts to share some lessons about what a skilled CEO does -- and if, when, and how you should hire a new leader for your business.

So what does a CEO really do, anyway?

Ridiculous question, right? Hardly. If you think you know what a CEO does, you're probably wrong, says Eric Kriss. And he ought to know. As a longtime entrepreneur and two-time Inc 500 CEO, he's made the transition from passionate company founder to professional chief executive. Kriss's basic premise: many entrepreneurs believe that CEOs are über-administrators who handle all the details of running a business. (If you share that belief, examine your own tendency to micromanage your company.) What a CEO really does, Kriss says, is lead, not manage.

"The quintessential entrepreneur is someone who wants to put his hands around the whole ball of wax," says Kriss. At a certain point in a company's growth, the entrepreneur who wants to control everything can no longer keep up. And so he or she mistakenly looks for a better manager and calls that person a CEO. "They look around and say either 'My company is failing' or 'It's not achieving growth,' " says Kriss. "They are getting overwhelmed because they don't know how to manage a sales force or understand a balance sheet. They say, 'I need a CEO.' They think that means they need someone to handle all the administrative tasks, but that's incorrect. It's a cry for help. What they're really saying is, 'I no longer know how to lead the company.' The basic job of a CEO is a leadership job. By leadership, I mean the pursuit of a coherent strategy and the marshaling of all resources to be able to pursue that strategy.

"A CEO is someone who's good at prioritization, who can handle complex environments. There are lots of different tasks: you need an individual who is capable of strategic thinking, who can encompass that into team building, and who understands the language of business and how it works from an economic, legal, and managerial point of view. It's someone who can marshal all those things.

"The number one job qualification is prior experience. It overrides everything else. You want someone who has run a company successfully before and has a track record. I wouldn't put an age bracket on it, but there's a hell of a lot of scrutiny. You have to ask the hard question of someone who's 28. How many years of experience could they have had?"

What psychological barriers will I face in hiring my own replacement?

There are two significant ones, says clinical psychologist Dr. Steven Berglas. You will have to first recognize the need for a skilled CEO's brand of leadership and then develop the fortitude to cede control to a newcomer. As a management consultant, Berglas, author of Reclaiming the Fire: How Successful People Overcome Burnout, helps entrepreneurs deal with such challenges. Most founders have a tough time recognizing when it's time to go, he says. Sure, they may have become miserable. Yet founders are often the last people to take their own misery as a serious sign that something needs to change. And that lack of insight may make things worse. "They may have acted out or are abrogating responsibility," says Berglas. "But the key is to understand that you're not having fun, that you're not excited. Being successful and competent has myriad problems associated with it, one of which is you don't think you're going to have problems."

But wait! Is "How do I hire a CEO?" even the right question?

Maybe not, says Dr. Ichak Adizes, who goes so far as to say that if you're suddenly hiring a CEO to replace yourself instead of having spent years nurturing a successor, you're abdicating responsibility. Hire a chief operating officer first, and slowly promote that person into your job, he says.

Adizes, who founded the Adizes Institute, headquartered in Santa Barbara, Calif., has spent decades studying the life cycles of businesses. There are predictable stages, and understanding them, he says, can teach you when it's time to make such decisions as when to hand over power. Sadly, most founders wait until they're in crisis. Then they want to hire a CEO "because they are desperate," says Adizes.

"Entrepreneurs love their work. They love their companies. But the style of the entrepreneur is to start a company but not sustain its success," he says. "They don't know how to manage day-to-day issues. When the dream is becoming a nightmare, they don't like the people they're working with, they refuse to go to meetings, they don't want to hear about it. That's when they think it's time to go, and that's when they make the mistake of hiring a CEO.

 1 | 2 | 3  NEXT