Searching for a Corporate Savior: The Irrational Quest for Charismatic CEOs

A brutally honest look at what is wrong with how CEOs are chosen in America today. I read an advance copy of this book and could not believe it was allowed to go to press. Dr. Khurana certainly has put his professional aspirations on the line to be so bold, but this is the kind of book that makes a difference in the world. This book presents what I considered some amazing and enlightening information not normally available to ordinary people. We can read about the stupefying emoluments, titanic disasters, and spectacular firings of CEOs in the popular press, but it is hard to find out the inner workings of how these people got into these positions of influence to begin with. Many of the academic treatises on management I have read seem like distant observations from an ivory tower. Refreshingly, parts of this book sounded to me like the information came from furtive phone calls late at night. Of course, part of the problem is that the foxes are already in charge of the chicken coop. I, too, would recommend this book to members of corporate boards responsible for the performance of top executives. There are plenty of brilliant executives who should be promoted based upon sound character and true leadership ability. Everyone knows that in many cases this is not happening, but Dr. Khurana has identified the defective process that underlies the problem. It is up to boards of directors to learn about and correct their mistakes. The final page of the book uses an analogy from the Wizard of Oz about drawing back the curtain to shed light on the inner workings of power, and Dr. Khurana has done a good job of this. His book is to CEO succession as Sinclair Lewis' "The Jungle" was to the meat packing industry--it will turn your stomach and make you cry out for change if you read it.

The selection of a new CEO can be as mysterious as the election of a new Pope, the opacity raising questions about the efficiency and legitimacy of the decisions reached. Because external CEO searches are generally undertaken by companies in the throes of a real or perceived crisis, stakeholders hope the outside CEO will be their savior. Because single-handedly saving a troubled corporation is no ordinary job, boards bent on finding a corporate messiah are not interested in ordinary qualifications but a person who is thought to possess charisma. Enron's Skilling offers a dramatic and instructive illustration of the perils of charismatic corporate ladership. Corporations would do well to reconsider their models of leadership and ways of choosing leaders.In the decade following McCoy's appointment as CEO, Chicago's Bank One Corporation acquired over 100 banks, moved from 37th largest bank to fourth, and stock increased 500%. In 1999 Bank One began to falter, the stock fell, integrating First Chicago was more difficult than expected, the conservative style clashed with the entrepreneurial culture and McCoy's management style, which was included in the Harvard Business School's required general management course, was seen to be a liability rather than an asset. A revolt gathered steam and a generous separation agreement was negotiated. Stock jumped 11% on the announcement but became volatile with media coverage of the high-profile search for the best person in the US to lead Bank One back to the top with the leadership as the overriding principle guiding the search. Dimon was top of the short list. "In late February, Dimon flew into Chicago to deliver a two-hour presentation to the Bank One search committee. By this time, he had decided he wanted the job. Dimon's presentation seemed to leave his audience breathless. He talked about his philosophy of management, covering such topics as his leadership style and the importance of clearly articulating to people their roles and responsibilities. He also spoke about the importance of instituting a more extensive stock-option plan to better align the incentives of the executives with those of the shareholders. Dimon's bluntness and self-confidence impressed the committee." He wasn't afraid to lead, he said all the right things, he had a plan, he was prepared to make the tough decisions that others wouldn't make. In one brief appearance that Dimon himself largely orchestrated he met Bank One's high standards of leadership. Dimon was appointed over insider Istock and stock soared 30%.Bank One's CEO succession process followed a familiar script with little emphasis on the company's strategic position and whether the candidate's background was appropriate. If the new CEO is unable to deliver quickly, the wisdom of the selection is questioned. This is the first thread of irrational behavior in what should be a carefully considered process. The leadership school believes that CEOs play a critical role in a firm'

In this important work, Khurana focuses the spotlight on the high-risk dynamics of CEO recruiting - particularly in cases where a company has not been doing well, and its former CEO has been disposed of. He demonstrates that this drama is being played out with increasing frequency in the large corporations which play a major role in our economy.He finds that a pattern has begun repeating itself in such situations: Boards of directors don't usually take action until a company situation has been deteriorating for a while, so even when they begin the recruiting process, they are already under pressure to take bold and decisive action. This impels them to begin by rejecting any current inside candidates who are felt to be part of the problem, thus incapable of breathing new life into the organization. Underlying this "explanation" is the fear that the press, investors, and the media might not applaud a less-than-spectacular candidate such as any merely competent insider. Such lack of enthusiasm by all these onlookers might well lead to further erosion of stock which has probably already suffered. Thus the directors embark on a quest for some outside candidate who might possess the magic powers to provide salvation. The rejection of inside candidates and the quest for some superstar who can pull a rabbit from the hat are, Khurana asserts, the first steps down a slippery slope that frequently end in tragedy. The book describes the descent and how it has and will affect American business.This is a fine book that presents a number of fresh insights about a critical issue in the world of large corporations. It is written cogently, with erudition, by an author who is rightfully passionate about his subject. Of the hundreds of management titles published in recent years, this description wouldn't apply to more than a handful.It is interesting to compare Khurana's findings with those described in the book, "Good to Great" by Jim Collins. Collins reports on a number of companies that outperformed their competitors by huge orders of magnitude. According to Collins the CEOs of these spectacularly performing companies (a) were, with one exception, recruited from within and (b) were definitely non-charismatic leaders, selected for their capabilities with no expectation that they would perform miracles or provide instant cures. These findings certainly lend support to Khurana's assertions. The fact that one of Collins "Good to Great" companies, Gillette, ended up as a Khurana case when its CEO was forced out of his position in 2000 suggests that any generalizations in this field must take into account the rapid changes in the world.In a final chapter, Khurana attempts a description of some possible solutions to the problems he has identified. His main prescriptions are that the CEO job market be opened up and that some more professional recruiting and evaluation processes be created for CEOs. These are rather weak palliatives for the seemingly intract

Charisma and reputation have replaced management experience and industry expertise in the corner office. Certainly that's not news to anyone who has read the business press at any time in the past decade, but the trend is certainly important enough to warrant the comprehensive examination provided by Rakesh Kurana. Starting with an analysis of the increasing power of activist institutional investors, Kurana traces the process through which boards of directors have forsaken mature managers for media darlings in their CEO searches. In light of the spate of embarrassing and enraging CEO scandals, we from getAbstract recommend this book to all readers.

This is an excellent timely book about the culture of corporate executives who have more influence on American life than we previously liked to acknowledge. With CEO's from Enron, Worldcom, GE, and Tyco in the news and affecting our 401k's they are imporant force in our economy that can't be ignored.Mr. Khurana takes the reader through how these leaders are chosen, what makes them unique including his analysis of the charisma factor, and why everyone should be concerned with this process. He does this in a readable fashion that makes this one of the more enjoyable business books I've read in a couple of years.