"The quality of the CEO is the #1 predictor of future success in a venture-backed company."

CEO is the most critical individual in a start-up (you need a special kind of individual who brings specific value and experiences relevant to the evolution "life cycle" of a company)

"The perfection of your decision is less important that the process of your decision." Mark Leslie, formerly of Veritas CEO and Chair.

You know that what you're about to do is critical. This background can help you regardless of whether you're looking for a CEO or any other potential hire. There are ways to get deeper than just the feel-good interview.

Scenario: Your board interviews a number of CEO candidates and settles on one whom everyone is excited about. He is personable, knows the industry, listens closely to what you say you need, and says all the right things. None of you knows him, so you call the references he provides. They all say wonderful things, and you hire him. A couple of months later you start hearing disturbing stories about him from the marketplace in casual conversations, and notice that some key people are leaving the company. After six months you realize that you made a mistake and have a real problem on your hands. The person you interviewed and the person you hired are very different.

Hiring the right CEO is one of the most important jobs of a board, and one of the most difficult. Most directors interview CEO candidates by asking questions to get to know the candidates and relying upon their "gut feeling" to determine whom they like the best. Unfortunately, whom you like is often not the best predictor of performance. One well-known recent example was the selection of John Walter as president of AT&T. As is common in situations in which a long-time CEO helps the board choose his successor, Walter was selected largely on the basis of CEO Robert Allen's preference. Walter was on the job less than a year when Allen recommended against giving him the CEO job. Directors said Walter lacked the "intellectual leadership" to head the telecommunications giant. How could such a mistake occur, one wonders.

Globalization, competition, and market-driven efficiencies demand a higher vision of a CEO. CEOs who fulfill this vision are strategic thinkers and leaders who guide the company through an increasingly complex and dynamic business environment. They focus the organization on meeting short-term objectives while changing and growing to meet the market needs of the future. These CEOs create and maintain a high-performance culture, one that fosters customer orientation, quality, efficiency, teamwork, and employee development. Masters of communication, they open channels up, down, and sideways through the company to maximize creativity, innovation, and alignment. They are strong analytical and conceptual thinkers who identify, analyze, and address the company's crucial problems and issues. Aware of their own strengths and weaknesses, they build outstanding management teams that compensate for their weaknesses and help leverage their strengths. Finally, they are visionaries who lead and inspire employees to become their best.

Evaluating CEO candidates with respect to these capabilities is a daunting task. Research has shown that the traditional interview has little correlation with actual job performance. It is usually inadequate because it is based on emotional attraction - "Whom do I like best?" - rather than an assessment of the traits and characteristics that actually predict performance. Interviewers using the traditional "get to know you" approach tend to pick candidates who interview well, rather than those who will be successful at the job. We all have a tendency to like people just like ourselves too. The problems with the traditional job interview are magnified in a CEO selection process, because many CEO candidates have mastered the art of telling people what they want to hear. While being able to wax eloquent on any subject is a potentially valuable skill, it is relatively unimportant compared to other traits and behaviors that will determine the company's success.

Behavioral Competencies: A brief history
In 1973 David McClelland published a landmark article, "Testing for Competence Rather Than Intelligence2, " launching a new field of investigation that is transforming the way businesses hire and develop their workforce. The article made the compelling case that there exist better predictors of performance than the aptitude tests being used at the time to make selection decisions. Over the last twenty-five years, hundreds of studies have been conducted to determine what traits and characteristics, known as competencies, best predict performance. It was found, for example, that the competencies of influencing others and results orientation differentiate superior from average performers in almost every position.

The key question for boards and you is: What competencies most differentiate outstanding CEOs? CEOs should be hired based on these competencies, assessed on these competencies, and helped to increase their proficiency on the competencies. Having this specification clearly defined will work towards getting the end outcome you desire.

Gathering Competency Data:
A pragmatic approach to candidate due diligence The most practical way to assess CEO competencies is to conduct historically based behavioral interviews. This interview approach is based on a simple premise: The best predictor of future performance is past performance. By determining the extent to which candidates evidenced these competencies in the past, you can help predict how well they will do so in the future.

To conduct behavioral interviews, ask candidates open-ended questions that provoke stories that illustrate their ability and mastery of the competency. These kinds of questions get beyond the superficiality of most interviews and will open a window through which you can see who candidates really are and how they are likely to act if they become your CEO.

How do you determine the accuracy of the candidates' stories? By going for detail. By getting into the details of the story, you can more clearly identify their precise role and their proficiency in the competencies essential to leadership success.

Measuring competence: How to objectify the assessment process
Behaviorally anchored rating scales provide an effective means of measuring and comparing candidates' degree of competence, and have the advantage of being usable with very little training. By associating a rating with specific observed and described behaviors, you can more effectively and objectively assess candidates' proficiency and compare them against each other and against your needs. We have tools, which help encapsulate and concretize this process.

In the behavioral interviewing process you will elicit candidates' stories related to the key CEO competencies. You will then be able to rate them on the relevant scales, comparing their behavior to the behavioral description associated with a specific competency rating. Having an interview plan is important. Too often, we go into interviews and chat versus having a clearly defined set of questions and areas of exploration.

You will discover, if you haven't already, that there are no perfect leaders. Every candidate has flaws. By utilizing a rigorous assessment process, you will be better aware of what those flaws are, and can develop a plan to compensate for the weaknesses of the CEO you hire. It does go back to specifications. There are some areas on which you either will not or cannot compromise, but there are also somewhere there is some leeway. Knowing these, as much as possible, in advance, makes for a better and more efficient process and outcome.

Conclusion
Hiring the right CEO is one of the most important jobs a board member is asked to perform. Board members need effective interviewing and selection tools to determine which candidate will most positively impact the business. Competency-based behavioral interviews clearly differentiate superior candidates. By eliciting detailed behavioral examples of what candidates have done in the past relative to the competencies critical to success, interviewers can more accurately predict how candidates will perform in the future. Using this method reduces the risk of making a costly hiring mistake, and increases the likelihood of identifying and selecting a CEO who will help accomplish the organizational mission and maximize shareholder value. What can this process look like in real-life? This is a brief case study.

The CEO That Wasn't: The Anatomy of a Successful Non-Hire
An auto parts manufacturer with annual revenues of $250 million was looking for a new CEO. The company had been referred to a candidate who had once been the CEO of a competitor and was now an independent consultant. Several directors had met with the candidate and were enthusiastic about him. The references he provided had spoken positively of his capabilities. The head of the selection committee asked a consultant versed in competency assessment for assistance in the evaluation process.

The consultant first interviewed one of the directors to form an initial picture of the business, its culture, its strategic position and issues, and the specific needs. Based on that meeting a preliminary CEO competency assessment form was drafted. The board discussed the company's issues and needs and was trained in the selection methodology discussed in this article. The preliminary assessment form was reviewed and revised. Directors were each assigned several competencies on which to assess the candidate, receiving a set of behaviorally based interview questions designed to illicit the competency data they needed. After the round of interviews, the results were compiled in a spreadsheet and discussed at a special board meeting. Each director spoke about the competency strengths and weaknesses that the candidate exhibited, with the strengths far exceeding the weaknesses. The candidate seemed to be strong in most of the CEO competencies. One director, however, developed some serious concerns when exploring one of his assigned competencies: attention to communication. He got the feeling from the stories the candidate told that the candidate was not being direct and forthright. The director wondered whether as CEO the candidate would communicate openly and honestly with the board. An intense discussion followed, with several directors strongly supporting the candidate and the one director holding his ground about his concern. The board decided its next step would be to try to reference the candidate regarding his attention to communication by talking to people who knew him well but were not the candidate's chosen references.

After a number of phone calls, the chairman reached an attorney who knew the candidate well. The attorney told the chairman, "Hiring him will be a disaster for you. " He proceeded to tell the chairman stories that confirmed the director's judgment that the candidate was not a direct and open communicator, and that the board couldn't trust that what he told them was accurate. This information was enough for the board to decide to take a pass on the candidate - the need to trust the word of the CEO was too important to take a risk with the candidate.

It was clear to the directors that the candidate would have been hired had they used their traditional interview process. It was also clear that hiring this candidate would have been the wrong decision. Using a rigorous, competency-based methodology, the interview team uncovered an issue that would not have otherwise been identified and avoided a costly mistake.

The Sarbanes-Oxley Act of 2002 recent changes in Securities and Exchange Commission rules have increased the need for knowledgeable and involved Board Members.

These same circumstances have increased the workload and potential liability for Board Members making it more difficult to recruit experienced executives.

The procedure for board recruiting is similar with a few modifications, to the search process.

Understanding the Requirement
Consider the current and strategic issues facing the company. Determine the level of industry and functional experienced required. Review the companies strategic goals and their relationship to the Board of Directors.

Develop the Position Specification
Document the deliverables to be provided by this particular Board Member.

• Functional business experience
• Success in working with companies in this particular stage of development.
• Financial skills as it relates to Sarbanes-Oxley requirements.
• Is previous experience on a similar board necessary?
• Personal characteristics required to work with other members of the Board.
• Business acumen
• Objectivity
• Judgment
• Value system

Research
It is important to continually evaluate company progress and the Board's relation to the changing requirements of the business. Often, it is effective to have continuing research for prospective Board Members. This can be an assigned task of the nominating or development committee of the Board. While the research to find board prospects is similar to recruiting for other executives the resulting candidate slate of qualified, interested prospects is often smaller---perhaps 2-4 candidates.

Interviewing
Prior to the interview, the prospective Board Member should have an opportunity to review the position specification and the board policy manual. This manual would contain charter documents, the strategic plan, bylaws, board calendar, board committees, financial statements and organization chart. Prospective board members usually interview with the CEO and a committee of the Board. Candidates may wish to also meet with the management team and/or other members of the Board. Periodically, finalist candidates will be invited to attend a board meeting. Most often board candidate interviews concentrate on issues of "fit", with each party trying to determine the appropriateness of potential membership.

Reference checking
Again, board reference checking follows the procedure followed in other senior hiring. Perhaps there may be slightly fewer references necessary, but the process can be useful in confirming and validating a prospect's candidacy.

Background, Financial Review/ Drug Testing
If required these can be conducted by professional agencies.

Degree Verification
Degrees should be verified to protect the validity of the company's process. Candidates must be informed.

Integration into the Board
Prior to the first meeting, a formal board orientation may be useful to the new member in a assuring that the candidate has current knowledge of the business situation. In addition, the new board member may wish to meet privately with other members, before the first meeting.

In order to avoid potential difficulties, two areas of company policy should be reviewed:

The Conflict of Interest Policy
The business activities of new Board Members must be examined to determine if they violate the company's conflict of Interest Policy.

The Diversity Policy
A review of the organization's Diversity Policy may be useful in evaluating whether the board candidate's background is in accordance with the goals of the policy.

Murgence also has rich relationships with the leading private equity firms, and venture capital firms in the software industry. Boards of Directors and investors turn to us with the confidence that their decision will lead to a successful candidate that will impact their business. Chief Executive Officers turn to us because they know that we know software - the business, the market and the talent.

As today's software landscape changes rapidly and regularly, software capacity continues to grow at a dramatic annual growth rate. This increases demands for external software under centralized management. To properly satisfy these demands, a minimum of features, including continuous data availability, resource sharing, system scalability, and ease of management are all required. Software technology is where a high proportion of the newest ideas and approaches are being brought to better solve the difficult problems of building, and effectively being able to use networks, business systems, databases, and more in our world. Our experience in the software space allows us to move quickly to determine your executive team needs, where to source the best candidates that will have the most positive impact on your business.

Examples of recently completed searches:

VP of Sales
Storage processor (iSCSI and Fiber Channel) silicon company research and sourcing.

CEO
Embedded storage middleware, stacks, tools,OS (NetBSD/Linux) targeting iSCSI Host Bus Adapters and SAN infrastructure.

VP of WW Sales and VP of Marketing
(International company) automatic software data migration, legacy platform migration tools.

CTO/Software Architect [pending funding CEO and VP of Marketing]
Fabless silicon company with disruptive new technology, solves current performance and capacity problems, achieved by replacing root cause of the problems with an advanced, distributed switching matrix.

VP of Marketing
Networking and telecom high availability software, middleware .

Our firm thrives on bringing the best executive talent, expediently, to both mature and emerging technology clients so that they can maintain their competitive edge. There is a shortage of intelligent, sophisticated, proactive people who are technologically literate, globally astute and operationally agile. By working closely with venture funds and their portfolio companies all over the country, we are able to specialize in the critical executive level - the human capital of an organization. We also work with major companies either moving in new directions or redefining themselves.

Murgence becomes an extension, a voice, in the market for clients by partnering every step of the way in attracting only the best talent. We enable those with whom we work to realize that their strength in the marketplace is directly proportional to the caliber of the people they hire.

Our thorough approach facilitates understanding an organization's key business goals, objectives and challenges. In order to move forward one must insist on talented leaders. We find key executives who can blend easily into the client's corporate chemistry and culture - those who have similar values, operational behaviors, and who maintain positive attitudes. Our candidates possess stellar credentials and have a history of steady accomplishments. They are hands on, close to the action, have presence, and the ability to develop creative solutions with timely bottom line results.

Detailed research, coupled with creativity and hard work, provides the groundwork for delivering quality candidates with a track record of success. Serving as a successful business catalyst to national clients since 1982.

In Life Sciences our team has a proven track record of finding the right Life Sciences executive on a timely basis. Most have had a history of both clinical and managerial expertise.

Our projects include Board level recruitment and leadership positions in all disciplines, including R&D, clinical, commercial and general management and particularly medium sized businesses and emerging companies.

Murgence Life Sciences consultants possess expertise in a range of related fields, including:

• Pharmaceuticals
• Biotechnology
• Medical Devices

With over 25 years of industry experience and contacts Chuck Pearson and Lawrence Liakos have been extremely successful in building organizations and futures for our clients in the display, nanotechnology, optics and semiconductor industries.

We have been involved with the IEEE, and SID for that same duration. Currently Chuck Pearson is a Director of SID, the worldwide membership chair, audit chair, and one of the program chairs for the SID sponsored "Americas Display Engineering and Applications Conference" held yearly in October.

Some of the conferences we attend on a worldwide basis each year include Red Herring's ETRE, the two major SID events and several Fabless Semiconductor Events including ISSCC and RFIC. We offer an exclusive capability to access a global network to recruit successful entrepreneurial executives throughout the United States, Europe and Asia/Pacific. Armed with the knowledge and experience in the display and semiconductor industry, they know where to go in order to Recruit those World Class Candidates.

With as many years built up in the industry, we have developed a tremendous amount of industry relationships that can be and are utilized in securing business alliances. There is no one in the world with the amount of knowledge and time spent in the display industry as retained executive recruiters.

The reason you want us on your team is because we are familiar with your industry and organization, and will work with your organization to find someone who meets your technical standards and has the personality characteristic necessary to succeed.

Human dynamics are the key to an organization and individual's success in that organization.

We are very responsive, fast and knowledgeable. Murgence, Inc. is accustomed to signing non-disclosure agreements to facilitate intimacy required in building long-term relationships.

> view our latest projects

Analog and Mixed Signal Background
Over the past decade Murgence has set a precedence in the Analog and Mixed Signal IC design world by playing an intricate part in building and supporting the recruitment efforts of key technology start-ups and major players in the chip industry.

Our relationships and partnerships have included Analog Devices, Maxim Integrated Products, Semtech, Intersil, national semiconductor, Texas Instruments, Power One and Winbond Electronics along with many venture funded wireless startups. The technologies have included Analog & Mixed Signal ICs from DC to GHz: Fiber, Wireless, Power, Audio, Video, Microcontroller, Timing, Sensors, Communications and our client portfolios have included all of the following Product Families:

• Analog to Digital Converters
• Comparators
• Digital to Analog Converters
• Filters
• Hot Swap
• Interface
• Op Amps
• Power
• References
• RF & Wireless
• Amplifiers
• Audio and Video

We are a client driven team and our goal is to consistently increase our portfolio companies stockholders' equity by meeting all performance goals outline in our recruiting efforts. Analog and Mixed Signal IC Management talent is the key presence needed for Chip design companies to continue to have success in a growing competitive market.

Our strategy is based on core business practices. We establish goals and timelines and we ensure to minimize time-to-placement, and maximize our productivity on surfacing screened top tier talent.

Since we have remained loyal to this niche and particular practice area we have built a massive following. Our technical aptitude in understanding, our network and relationships coupled with our past and current success's have solidified us as the top recruiting team in the space.

Our unique approach of securing relationships with our Venture Capital and industry contacts along with our industry knowledge of building successful start-ups play a key role in the success of the individual and the company. In other words, we value and treasure the partnerships we have formed and because of this mentality, we perform at high levels. Call us today

Murgence has the largest nonprofit search practice. We have extensive experience in most segments of the nonprofit sector involving searches in:

• Human Services
• Health
• Performing Arts
• Visual Arts
• Education
• The Environment
• Government

Our firm has a background of recruiting outstanding national and local candidates to positions of leadership for over 20 years. Over the years, we have conducted assignments for a wide variety of nonprofit organizations. A representative list of these client relationships would include:

• Arizona State University
• Gompers Center
• St. Joseph Hospital
• Boys and Girls Clubs
• Arizona Opera
• Phoenix Chamber of Commerce
• Desert Botanical Garden
• Ballet Arizona
• Scottsdale Center for the Arts
• Arizona Museum of Science
• Town of Paradise Valley
• Arizona Chamber of Commerce

We have recruited CEO's, Presidents, Board Members, Executive Directors, Artistic Directors, Directors, Managers as well as other professional staff for our clients. Murgence is sensitive to the needs of nonprofit organizations and has experience working effectively with search committees and boards. We have a comprehensive understanding of the search process within the nonprofit world.

Murgence Global Financial CFO Practice provides our clients with a quality, well researched, timely, results-oriented search. Our dedicated Partners have the industry expertise, market contacts, customer knowledge and credibility required for the most demanding of clients.

We have well established relationships with some of the worlds largest Accounting and Financial consulting firms which add a level of depth and breath to our search practice that is unmatched.

When considering a CFO an organization should look at the role, mission, demands, organization, personalities, strategies and policies.

The role of finance depends on company's variables such as Type and Size of Business, Financial Health of Business, Personalities and Backgrounds of Senior Management and Directors, Speed of Change, Internationalization.

The minimal roles of finance are to meet legislated requirements, administer the company money and provide a language of finance as a common denominator. In a larger sense finance should apply financial skills to the broader context of the total business and be a business partner to general management.

The mission is to provide value to customers, appropriate return to investors, and responsible environment for employees, operate in partnership across all units and functions to further corporate goals, add perspective and match the organizations needs with capital sources.

The demands to consider are financial reporting (auditing) by government agencies (IRS, SEC) and investing public (Analysts); required is strong technical knowledge and the need to directly control the information released. They also set financial policies including the internal controls, measurement standards and benefits, financial administration of the business that includes annual and long range plans evaluation of major expenditures, evaluation of economic trends and capital structure.

CFO's interact with the board of directors, audit committee, compensation committee and the executive committee. Their organization most often consists of the following direct reports; corporate audit, accounting, management reporting and business analysis investor relations and the treasurer.

CEO's are increasingly turning to CFO's to influence decision making, craft internal and external strategies, communicate to and help manage the board, manage other functions, help manage operating companies, help corporate financial Literacy, add economic value, and help manage the CEO.

Some of the lesions learned are the importance of your team, technically and culturally, CFO's must become a functional confidant and know the bigger the ego, the more time you need to manage it, succession makes everyone crazy, and they must manage professional strategic growth.