The most important decision that Boards of Directors make is who to hire as CEO.
Unfortunately, the success rate of these selection decisions is poor. Consider the following statistics:
- 50-70% of CEOs fail in the first 18 months
- 11% of CEOs don’t even last their first year
- 34% of CEOs don’t last beyond three years
Why is it that Boards of Directors commonly get their CEO selection decision wrong?
In order to answer this question, it is important to understand leadership through the lens of adult development theory.
Leadership Through the Lens of Adult Development Theory
Adult development psychologists have found that:
- Adults can develop in adulthood
- There are three primary stages or levels of adult development
- Most adults never develop in adulthood
- The higher the stage or level an adult operates from, the more cognitively and emotionally sophisticated they are
- The more cognitively and emotionally sophisticated they are, the more effectively they can effectively navigate the demands of leadership
Three Stages or Levels of Adult Development Theory
I label and describe the three stages or levels of Adult Development Theory as follows:
- Base level: Mind 1.0 – Good Soldier Mode. At this level, an individual is a dependent thinker who is wired to fulfill their self-protective needs of safety, comfort, and belonging.
- Moderate level: Mind 2.0 – Progress Maker Mode. At this level, an individual is an independent thinker who is wired to fulfill their self-advancement needs of standing out, advancing, and getting ahead.
- Highest level: Mind 3.0 – Value Creator Mode. At this level, an individual is an interdependent thinker who is wired to fulfill altruistic needs of contributing, adding value, and lifting others.
Where Leaders Break Down Across this Framework
What we know is that the most effective leaders are Mind 3.0 leaders. Think of leaders like Satya Nadella, Alan Mulally, Ginni Rometty, Ed Catmull, Reed Hastings, Mary Barra, and Indra Nooyi.
While these leaders are out there, they are rare. In fact, research done by PWC has effectively found that only 8% of leaders operate at this level.
This research has also found that most leaders operate at Mind 2.0. In fact, it is 85% of leaders.
From my study, well-known Mind 2.0 leaders include Jack Welch, Steve Ballmer, Lee Iococca, Elon Musk, Donald Trump, and Elizabeth Holmes.
What Does This Have to Do with CEO Selection?
Who do you think makes up a typical Board of Directors? Mind 1.0 leaders, Mind 2.0 leaders, or Mind 3.0 leaders?
Naturally, it is Mind 2.0 leaders, because they make up the vast majority of leaders.
So, when a Board of Directors made up of Mind 2.0 leaders needs to select a leader, who do you think they are going to select:
- A Mind 1.0 leader who is a self-protective dependent thinker? (someone who does not speak the same “drive” language as the Mind 2.0 Board of Directors members)
- A Mind 2.0 leader who is an independent thinker that is focused on standing out, advancing, and getting ahead (someone who speaks the same “drive” language as the Mind 2.0 Board of Directors members)
- A Mind 3.0 leader who is a value-creating interdependent thinker (someone who does not speak the same “drive” language as the Mind 2.0 Board of Directors members)
So, most often, Boards of Directors select a Mind 2.0 leader, who does not have the cognitive and emotional sophistication to effectively lead a company through complexity and effectively into the future.
But, when organizations, for whatever reason, hire a Mind 3.0 leader, magic happens. Think Microsoft with Satya Nadella, Ford with Alan Mulally, and Disney with Bob Iger.
If you want to inform your Board of Directors or your Executive Team about these principles, let’s connect. I have worked with dozens of Executive Teams and Boards of Directors to help them elevate their organization.
