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CEO Hiring Fails—Don’t Let It Happen To You

People are often led to believe that CEOs get fired or resign because of financial pressure, but in many cases, the root of the problem is professional performance, according to a survey by Leadership IQ.

Mark Murphy, Leadership IQ’s founder and best-selling author, led a study of more than 1,000 board members from 286 companies that had fired their CEOs. Answers revealed that most CEOs get fired for “soft issues,” as opposed to financial performance.

Here’s a breakdown of the results:

  • 31% of CEOs get fired for poor change management
  • 28% for ignoring customers
  • 27% for tolerating low performers
  • 23% for denying reality
  • 22% for too much talk and not enough action

Now let’s take a look at a few recent CEOs who didn’t work out:

  • Ehab Al Shihabi. He was replaced as CEO of Al Jazeera America after the company was sued for $15 million over alleged sexism and anti-Semitism at the company. Al Shihabi was reportedly blamed by one departing executive for presiding over a culture of fear.
  • Peter Chou. Chou was CEO of HTC, a Taiwanese smartphone maker. The company replaced Chou because he was said to have reputation as an abrasive manager. He would later stay on to lead product development as head of the HTC Future Development Lab.
  • Dov Charney. After a six-month suspension from popular clothing company American Apparel, this CEO was officially fired after allegations that he had misused corporate funds. In general, Charney’s time as CEO was plagued by controversy. In 2009, the company came under fire for hiring illegal immigrants to work in its Los Angeles factory. Charney himself had been accused of sexually harassing female employees and using violent behavior in dealing with a male employee.
  • Yishan Wong. When Yishan Wong accepted this job, it may have been more than he bargained for. He resigned from the company, explaining in a note that the job was “incredibly stressful and draining.” There also was a disagreement between Wong and the company’s board over the location and price of a new office.

So, what can you do to make sure you don’t hire the wrong leader? Really, your strategy should be the same whether you’re hiring hourly employees or executives: focus on job fit.

Small companies are especially keen the impact that each employee has on the business, that’s why they carefully consider every hiring decision. In fact, Entrepreneur Magazine compiled a guidebook of hiring tips from National Small Business Week, and almost every respondent emphasized the importance of hiring employees who organically fit into the corporate culture and who are passionate about the brand. Overall, personality trumps credentials when entrepreneurs are deciding who they want to bring onto their team.

Money matters, but these CEOs may have stuck around if they had been better vetted for soft skills and leadership competencies, not just financial or business savvy.

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