How to Hire a CEO: A Board's Guide to the Search

Few decisions a board or an owner makes matter more than hiring a CEO. The person you choose sets the company's direction, picks the leadership team and decides what good work looks like for everyone below them. A good appointment can carry a company for a decade. A poor one costs years, and often the people who leave along the way.

This guide walks through a CEO appointment in the order a board usually runs it: deciding what the company needs, choosing between internal and external candidates, assessing finalists, making the offer and supporting the new CEO through the first year. It includes a one-page mandate to fill in before the search and questions to settle before approving a finalist.

DisclosureJake Jorgovan co-founded Alpha Apex Group, which is mentioned in this article.

Why the CEO appointment deserves the time

I learned a simple line from my adviser, Alex McClafferty, and wrote about it in 2019: "Your business is a reflection of you." Whatever a leader brings, the team mirrors back. How the team works shapes what customers experience, and what customers experience drives the numbers. A CEO sits at the top of that chain. Their standards become the company's standards, which is why the appointment deserves the board's full attention.

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Jake’s historical account, summarized from this article. These results describe his experience and are not a performance forecast.

The cost of getting it wrong is measurable. In a proprietary analysis, Spencer Stuart found (opens in a new tab) that companies whose CEOs resign under pressure or leave within two years see a 20% negative impact on total shareholder return, measured 24 months after the transition. Tenures are also getting shorter: in Spencer Stuart's review of 2025, 37% of the S&P 1500 CEOs who left that year had done so within their first five years in the role.

Decide what the company needs from its next CEO

Start with the company, not the candidates. Before the committee discusses names, agree in writing on three things: where the business is going over the next three to five years, what is standing in the way, and what the next CEO must own to get it there.

The situation shapes the profile. Spencer Stuart's 2025 S&P 1500 CEO Transitions report says the best candidate depends on it. A CEO with prior experience may be the best option for turning around a poorly performing company or one hit by scandal. A talented first-time CEO is more likely to deliver higher performance over time. Its 2021 study of 855 S&P 500 CEOs (opens in a new tab) appointed over 20 years found that CEOs with prior experience in the role delivered lower market-adjusted total shareholder returns than first-timers over the medium to long term.

Russell Reynolds Associates makes a related point in its CEO Turnover Index (opens in a new tab). Its advice is to assess candidates against the leadership challenges the business is likely to face, "not only the demands of the role today."

Every CEO covers the same broad ground: strategy, the big decisions, the leadership team and the company's finances. The useful question is which of these needs the most attention in the next few years.

Write the mandate before the search

Once the board agrees on the situation, turn it into a mandate. In a 2020 episode of my podcast about hiring team members, I described two habits. Write the role down before looking at anyone for it, and define what the person should have achieved 90 days in, so they know how to succeed. Hiring a great person who doesn't fit within the organization was a mistake I had made myself. For a CEO, the timescale is longer and the questions are bigger, but the discipline is the same.

Insider or outsider?

Most new CEOs at large US public companies are promoted from within, but outside hires are common, especially at smaller companies. Spencer Stuart counts "insider-outsiders" recruited from outside and promoted to CEO within 18 months as internal, and directors appointed from the board as external.

Industry matters too: 70% of new healthcare CEOs in the report were hired from outside, against 23% in financial services. Spencer Stuart classified 84% of the S&P 1500 class of 2025 as first-time CEOs, a group that included some who had already led private-equity portfolio companies. The most common route was the COO or president role (48% of appointments), followed by divisional CEOs (30%) and CFOs (9%).

The practical point for a board is to have both options ready. Spencer Stuart's advice is that boards should have "both viable internal candidate options and an understanding of the external talent market" when a transition comes. Nineteen of the 2025 appointments went to directors from the company's own board, which the report reads as a sign that some companies were not ready for succession.

If there is a credible internal candidate, assess them against the same mandate and the same evidence as outside candidates. An insider who is compared only with the outgoing CEO, or an outsider compared only with an idealized profile, makes the decision harder to defend.

Run the search and assess the finalists

1. 1

   Form a small search committee and agree its process

   Keep the committee small enough to meet quickly and senior enough to speak for the board, for example the chair or lead director and two or three other directors, with any investor or owner whose approval is needed. Agree the timetable, who interviews each finalist and what each interviewer covers. Carol Quinn of Hire Authority, quoted in a 2011 article on hiring a CEO (opens in a new tab), would not let anyone interview who had not been trained, and set each interviewer's role and questions in advance.

2. 2

   Decide whether to retain a search firm

   For an external or mixed search, a retained executive search firm can approach candidates who are not looking for a move and keep the approach confidential. Korn Ferry's annual report (opens in a new tab) for the fiscal year ended April 30, 2026, checked in October 2026, says its search fees are generally one-third of the placed candidate's estimated first-year cash compensation. It adds a percentage of the fee for indirect expenses, and an extra fee if the final compensation is higher than estimated. That is one firm's practice, so ask any firm for its fee base, payment schedule and what happens if the appointment fails. The guides to executive search firms for CEO hires and what search firms charge cover the choice in more detail.

3. 3

   Assess past decisions, not presentation

   Ask each finalist to walk the committee through two or three decisions they made as a leader: the situation, what they chose, what happened and what they would change. Use the discussion to assess how the candidate leads people as well as what they achieved. Probe the numbers behind each result, their personal contribution, and how they handled disagreement among employees, directors, investors or customers. Ask for a decision where protecting the company's values carried a financial cost, then test the account with references. Patricia Thompson, a corporate psychologist quoted in the same 2011 article, noted that CEO candidates have probably become skilled at "presenting a positive image." In her view, a psychologist's assessment gives the company a more objective perspective, as one data point and never the only one.

4. 4

   Test the mandate with a real problem

   Give finalists the same brief on one live issue in the business and ask how they would approach their first 90 days. Their answer shows how they think, and it shows whether they have understood the mandate the board wrote. Then give each finalist the same hypothetical disruption relevant to the business, and ask what they would protect, what they would change and how they would communicate under pressure.

5. 5

   Check references and background thoroughly

   Speak to people who worked for, alongside and above each finalist, including people the candidate did not suggest. Thompson also suggested asking administrative staff how the candidate treated them. Verify qualifications and employment history, and complete the background checks your company requires for its most senior role.

Let the candidate see the real company

The best candidates have choices, and they should test you as hard as you test them. Spencer Stuart describes an experienced growth CEO who accepted a role that turned out to need a turnaround, with board dynamics he had not anticipated. Within 18 months, the job had become the hardest challenge of his career. Its advice is that the board and the candidate must both understand the conditions for success before the candidate accepts.

Give finalists the same information the board sees: the latest financials, the strategy, known risks, and an honest view of the leadership team. Let them meet every director. A candidate who joins without that picture can spend their first year discovering it.

Make the offer

Agree the compensation range before candidates are approached, so the search is aimed at people the company can afford. Robert Holdsworth, an energy-company president quoted in the 2011 article, started with a figure combining salary, stock, bonuses and benefits, and made the package known early so there were "fewer surprises" on both sides.

Benchmark the package against companies of similar size, sector and ownership, and balance short-term pay with long-term incentives tied to the outcomes in the mandate. Settle the structure around the role at the same time. Spencer Stuart reports that one-quarter of S&P 1500 boards appointed an executive chair alongside a new CEO in 2025, most often the outgoing CEO, and its research suggests the executive chair role should be used carefully. If the outgoing CEO or a founder stays, as executive chair or on the board, write down what they will and will not do. Ask the finalist what authority, support and practical arrangements they need to accept and succeed, and settle those alongside compensation.

Support the first year

The board's job changes once the offer is signed: from finding the CEO to making that CEO effective. Spencer Stuart, writing from its work with boards, says nearly 40% of CEOs lose the board's confidence (opens in a new tab) midway through year two. Its guidance for boards (opens in a new tab) sets out a practical rhythm:

• The first 30 days: a one-on-one between the new CEO and each director, and an agreement with the independent chair or lead director on what the first board meeting should cover.
• The first months: the CEO's own assessment of the state of the business, shared with the board early.
• Six to nine months: a strategy offsite where the board and CEO agree the detailed strategy and the measures behind it.
• Board composition: a first-time CEO may benefit from at least one director with recent CEO experience.

Spencer Stuart also warns that new CEOs often wait too long to change their top team. Discuss early what the CEO expects to change in the leadership team, so a needed change is not delayed for fear of how the board will read it.

Plan early meetings with the leadership team, employees beyond the C-suite, and key customers or partners, so the new CEO can test their assumptions about how the business works, and agree how those findings will reach the board. Use the 90-day and first-year measures in the mandate to review progress together, early and openly, so neither side is surprised at the end of the year.

If your board had to write the CEO mandate today, could it agree on what the next CEO must own?