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Rating: 
Summary: A landmark look at the Cult of CEO
Review: 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.
Rating:
Summary: Packed with Knowledge!
Review: 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.
Rating:
Summary: Important piece of work
Review: I really enjoyed parts of this book, but the broader points he was trying to make fell flat. The thesis, that we should be wary of charisma and value competency more, is welcome to most people-perhaps everyone sufficiently detached-and his anecdotes provide interesting and powerful support. For example, as a former banker I appreciated the point he made that big NYC bankers tend to be investment bankers, which is different than commercial banking, which is different than retail banking. It may seem like inside baseball to outsiders, but that's exactly the point: if you don't know the difference, you shouldn't be a bank director. Thus my conclusion would be that instead of telling current board members to be less foolish, it would be more practical to focus on reforming the way board members are chosen. In my experience, most bank board members were absolutely incapable of judging competence on the essential technical issues to sound banking (eg, how credit quality, spread, and volume are related), and choosing board members based on some objective criteria would seem to advance the search for a good CEO better than telling the current board members to not fall for the next empty suit. But more broadly, is the flawed method of picking a CEO worse than before? Khurana's own data suggests that new CEOs don't matter much, which mean they aren't worse either. And the issue of arbitrariness is somewhat overstated, compared to a platonic ideal that has never existed. Picking any manager, such as a head of IT, raises the same example of cliquish, suboptimal groupthink. The same could be said for how collectives choose politicians, pundits or professors. In the words of Flaubert, "our ignorance of history makes us libel our own times. People have always been like this." Lastly, he relies a lot on outdated sociological treatises (C Wright Mills, Weber, Whyte), and the idea of a WASP closed society. For example, at one point he mentions that in 1950 most CEOs where white, male, and Protestant, and the same is true today. But as pointed out it in Brook's Bobos in Paradise, you would be remiss not to mention the dramatic change over the past 50 years. For example, back then the Kennedy family were considered outside the establishment. Jews are now around 20% of Harvard's undergrad, and 13% of the Fortune 500 CEOs, even though 3% of the US population. The WASP elite have given way to a much more meritocratic elite, and the fact that it extends to the boardroom is partially a result of the new process for choosing CEOs. In predictable sociological fashion his straw man argument is the dopey institution-free economist, that conventional wisdom that Keynes and Galbraith effectively invoked, but which is now a tired parody of current economic thinking. In the end, there is nothing really deep here, just a fun book highlighting the current foibles of specific group of people trying to deal with incomplete information and coalition building.
Rating: 
Summary: fun but flawed
Review: I really enjoyed parts of this book, but the broader points he was trying to make fell flat. The thesis, that we should be wary of charisma and value competency more, is welcome to most people-perhaps everyone sufficiently detached-and his anecdotes provide interesting and powerful support. For example, as a former banker I appreciated the point he made that big NYC bankers tend to be investment bankers, which is different than commercial banking, which is different than retail banking. It may seem like inside baseball to outsiders, but that's exactly the point: if you don't know the difference, you shouldn't be a bank director. Thus my conclusion would be that instead of telling current board members to be less foolish, it would be more practical to focus on reforming the way board members are chosen. In my experience, most bank board members were absolutely incapable of judging competence on the essential technical issues to sound banking (eg, how credit quality, spread, and volume are related), and choosing board members based on some objective criteria would seem to advance the search for a good CEO better than telling the current board members to not fall for the next empty suit. But more broadly, is the flawed method of picking a CEO worse than before? Khurana's own data suggests that new CEOs don't matter much, which mean they aren't worse either. And the issue of arbitrariness is somewhat overstated, compared to a platonic ideal that has never existed. Picking any manager, such as a head of IT, raises the same example of cliquish, suboptimal groupthink. The same could be said for how collectives choose politicians, pundits or professors. In the words of Flaubert, "our ignorance of history makes us libel our own times. People have always been like this." Lastly, he relies a lot on outdated sociological treatises (C Wright Mills, Weber, Whyte), and the idea of a WASP closed society. For example, at one point he mentions that in 1950 most CEOs where white, male, and Protestant, and the same is true today. But as pointed out it in Brook's Bobos in Paradise, you would be remiss not to mention the dramatic change over the past 50 years. For example, back then the Kennedy family were considered outside the establishment. Jews are now around 20% of Harvard's undergrad, and 13% of the Fortune 500 CEOs, even though 3% of the US population. The WASP elite have given way to a much more meritocratic elite, and the fact that it extends to the boardroom is partially a result of the new process for choosing CEOs. In predictable sociological fashion his straw man argument is the dopey institution-free economist, that conventional wisdom that Keynes and Galbraith effectively invoked, but which is now a tired parody of current economic thinking. In the end, there is nothing really deep here, just a fun book highlighting the current foibles of specific group of people trying to deal with incomplete information and coalition building.
Rating:
Summary: Important piece of work
Review: 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 intractable trends Khurana has described. The book's strengths lie in its portrayal of the way the CEO labor market is operating, the insights into why it is working that way and its portrayal of implications for the future of large American corporations if the trends continue. Moreover his findings raise two fundamental issues which, though clearly beyond the scope of this book, must be dealt with in any quest for amelioration.
First issue: When things are going well, boards of directors play very stereotypical and structured roles that rarely include in-depth managerial initiatives. The chances that a board of directors, could, once it becomes evident that a company needs new leadership, mobilize itself into an effective working group and then put in the time and energy to (1) decide why the company is in trouble (2) sketch some of the remedial actions that are needed to cure it (3) set out a rational professional search and bring in new CEO in circumstances in which he or she might succeed and (4) have the patience to permit a new CEO to effect a transformation, is virtually zero. Thus a realistic conclusion from the book's findings is that the chances of success in such a venture are so slight as to be not worthy of the attempt. And if that is the inescapable conclusion, then some solutions more drastic than Khurana's may be called for. One example might be consultants who are dedicated to filling in some sort of CEO role during a transitional year or two in such situations, working with the board to evolve a strategy. I am not recommending such a step - merely suggesting that some new thinking is required. The second issue -- again assuming that the risks in CEO recruiting will continue to be unacceptably high -- concerns a board's responsibility for making certain that they are never forced to undertake the impossible search. Instead of focusing on what boards have to do to improve their techniques for replacing the CEO, it might be more useful to ask whether it shouldn't be a responsibility of boards to ensure this doesn't happen. What mechanisms need to be built in for boards to assess managerial performance on an ongoing basis and to take prompt action when performance is not satisfactory.
While these are important issues that need to be dealt with, I do not criticize Khurana for not dealing with them in his very fine book. He has done yeoman service in identifying the issues and, in that respect, has hit a bull's eye.
Rating:
Summary: Study this book if you are looking for a CEO
Review: 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's performance, while the constraint school believes that internal and external constraints limit the CEO's ability to affect performance. A third school suggests that the pertinent question to answer is 'When does leadership matter?' rather than 'Does leadership matter?' as the leader's impact is highly case-sensitive. "As the Bank One story illustrates, however, it is not only the criteria directors use in choosing a new CEO that calls into question the efficiency and overall rationality of the external CEO market. So do many other features of the search itself." Not only was the initial boost to the stock price short lived, but the board was questioned on its control over the CEO after five directors, including the internal candidate for CEO, "volunteered" to retire from the board after five months. Whether the benefits would be worth the price agreed by the board would remain an open question for an unforeseeable length of time. "How are we to account for these remarkable, ultimately disquieting features of the external CEO search: the overestimation of the CEO's role and the fixation on charisma; the somewhat Byzantine nature of the search process itself, simultaneously closed to many presumably qualified candidates and open to the influence of many external actors; and the questionable outcomes that this process often produces? This book is an attempt to answer this very question." Boards seriously underestimate the damage that outside succession entails and if the firm is already in trouble, hiring an outside CEO might threaten the survival of the organization itself. A remarkable feature of the Bank One search was that the board passed up an experienced, highly qualified executive who knew the company and its business well. The airplane interview technique in which the incumbent CEO conducts a surprise interview with successor candidates individually and asks who should lead the company assuming both are killed provides very interesting information about the chemistry of the group. Repeating the process three months later when candidates are better prepared but only the incumbent CEO is killed, provides further valuable information. All information is shared with those involved in the final decision. If the process is initiated early enough, the shortlisted candidates can be moved into testing situations that may help the final decision. Kurana, Assistant Professor of Organizational Behavior at the Harvard Business School wrote this book based on a study of hiring and firing of CEOs at over 850 of America's largest companies. Anyone who is involved in the selection process of a CEO would be wise to study his findings.
Rating:
Summary: Brilliant, Timely, Entertaining
Review: This book is well written, based on sound research, and could not be more timely. I wish I could say that about more business books.
Rating:
Summary: Well written, insightful, timely topic
Review: 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.
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