Does Your Company Use a Horse Race to Select a New CEO?
Behind the romanticized facade of Thoroughbred horse racing is a world of drugs, gruesome breakdowns, and slaughter. While spectators show off their fancy outfits and sip mint juleps, horses sprint-often under the threat of whips and illegal electric shock devices-at speeds so fast that they are prone to injuries and even hemorrhage from the lungs. In their frantic attempts to outrun their opponents, they often sustain injuries, strain ligaments and tendons, and even break bones. A broken leg, for example, can be fatal to a racehorse.
In addition, a racehorse is subjected to the constant stress of being watched by thousands of fans. The crowd’s taunts and jeers, and the clapping of winners, can aggravate an already stressed animal, which may be depressed by a loss or simply tired of the rigors of racing. The racehorse’s rider must use all of his or her skills and experience to coax the horse to its peak performance in order to win.
The sport’s popularity declined after the Civil War, and by the mid-1830s only a few percent of Americans listed it among their favorite spectator sports (McDaniel and Vander Velden). After World War II, interest in horse racing continued to decline; today it struggles to compete with major professional and collegiate team sports for viewership. Despite its long history, the sport remains popular in many parts of the country, where it is a regional and local sport with a strong following among older blue-collar workers.
A number of companies use a “horse race” approach to choose their next CEO. Proponents of the strategy say that overt competition between several recognized candidates within a defined time frame can motivate the entire company to work hard, and help ensure that the new executive is highly skilled and aligned with the vision for the organization.
Regardless of whether an organization uses a horse race, successful succession processes usually start with an emphasis on developing high performers through a series of functional assignments and stretch opportunities and then testing them in more demanding roles. This, they argue, enables the company to select top executives who are ready to take on the challenge of leading a large, complex organization.
Nevertheless, some boards and current executives find horse races unsettling because they can create an uncomfortable climate of competition and insecurity among the executive ranks. And although the outcome of a horse race is likely to produce an excellent leader, it is important for the board and current CEO to decide whether the company’s culture and organizational structure are compatible with an overt leadership contest. In such cases, the company may be better off identifying a few senior leaders who will work well together to build a robust and effective executive team. Then the board can rest easy knowing it has a proven process for selecting its next CEO. In the meantime, the board and current CEO should keep a close eye on the horizon to be sure that it is on track to achieve its vision for the future.