Selecting your new CEO – the board pitfalls

If you are on a board that is selecting a new chief executive, you are on the most treacherous and swampy ground directors face. Most board directors have a very clear idea of their mandate, and all directors rate themselves able to recognise top management performers. So why do they so often get it wrong? 

The Waikato DHB case is one of the most notorious in recent memory. As CEO Nigel Murray was stepping down in October 2017 after first going on leave in July amid allegations of unauthorised spending running into several tens of thousands, it emerged that senior doctors and former Labour MP Sue Moroney had separately met with DHB chairman Bob Simcock in 2014 to urge him not to hire Murray.

Those pleas fell on deaf ears. The media fallout was agonising to watch, and Simcock has since resigned too.

The full story is still being told, but what we can be sure of is that any board failure to recruit the right CEO can be attributed to a lack of good process. In my 30+ years of talking to boards for executive search assignments, every good result has come from good process:

1)    The first step is the most important. Who will control the process? This is a no-brainer. It is the chair’s role as the pivot and the arbiter of good process. This is one task that should not and cannot be delegated.

2)    The job description and person specification. Boards can spend hours struggling with these, while forgetting the key requirement to define the outputs they want. Determine the latter first, and then assess whether the candidate can do it.

3)    Every candidate presented to the board should already have stood up under reference checks and background verification. Any doubts expressed by the initial interview panel must be checked, and answered satisfactorily. The chair must drive that good process. In the Nigel Murray case, the chair felt the objections raised by members of the Association of Salaried Medical Specialists were not serious enough to block his appointment.

More often than not, when things go wrong – evidence of overspending in travel, conference collection and non-essential items, for instance – it is likely because the reference checking was insufficient. Chief executives who like to travel and collect conferences develop the habit over years, and they leave a trail. Don’t skimp on the background verification. 

Simcock says the concerns raised about Murray in New Zealand were assuaged by referees from his previous role as the president and chief executive of Fraser Health Authority in Canada – where he earned C$444,000 a year and drew attention for his high travel expenses, something for which he had developed a reputation even earlier in his career.

It’s fair to say now, with the benefit of hindsight, that the Waikato DHB made a catastrophic mistake in appointing Nigel Murray, and the mopping up continues, at taxpayer expense. It’s not clear how Murray’s name first came before the board, but there should have been greater scrutiny of his history and that aforementioned trail, rather than what seems to have been an over-reliance on the word of referees. Chairs and boards do not like or need mistakes. Good process prevents them.