How to hire a CEO

Many founders of small businesses decide, at some point in their career, that they’d like to concentrate on another area of their business – or maybe on another business entirely.

If this is you, it might be time to hire a CEO for your company, and delegate some of your critical responsibilities. 

But there are many questions that might feel overwhelming to you at the moment: What skills should I look for? How do I reliably evaluate them? What are the must-have qualities of a CEO? How can I pull this off successfully?

One of the best ways to assess your candidates’ preparedness to take a leadership position in your company is to use pre-employment skills testing to assess specific skills, such as negotiation, communication, or people management.

In this article, we’ll look into a few key points to consider when hiring a CEO, discuss the top qualities and skills you should be looking for, and explain how to evaluate your candidates.

What is a CEO – and when should you hire one?

A CEO, short for chief executive officer, is the person who's responsible for making key business decisions, setting the company's direction, and making sure everyone on the team is working together to get there. 

They also assess the business' financial performance by evaluating its profitability, the sustainability of its growth, and the way its resources and assets are managed.

Typically, CEOs work with a team of other executives and managers who help them out and ensure the overall business goals translate well into specific tasks and objectives. 

Smaller companies might only have a few other managers working together with the CEO, while big companies might have a large leadership team and a board of directors. 

Qualities to look for in a CEO

There are a number of key qualities you need to look for when hiring a CEO or planning your succession.

For example, the successful candidate needs to:

• Be aligned with your business in terms of values and culture

• Have a deep understanding of your industry

• Be an excellent communicator and team player

• Be goal-oriented and driven

• Have a proven track record

• Have strong decision-making skills

Those are fundamental qualities of a CEO, but before you start the hiring process, you should be certain that you actually need to hire a CEO at this stage. 

When should you hire a CEO for your small business?

A CEO (chief executive officer) is the highest-ranked manager in your company and they will lead it, define goals and objectives, and work towards achieving them by managing your team and assets. 

For many small businesses, the founder also takes on the role of a CEO, but, as the business grows, it might make sense to hire a CEO and focus on other key business functions and areas.

Hiring a CEO means finding the right person who’ll be able to lead your company and help it grow. It includes delegating some of your key business responsibilities to them and making sure they’re fit for the role, but before that, you need to know whether it’s the right time to hire a CEO. 

If you find yourself in one of the following three situations, it might be the right time to hire a CEO for your small business.

1. If you don’t have the right business experience

When you, as the founder of the company, don’t have enough experience, it might make sense to hire someone who has the critical business experience that would enable them to lead your company efficiently.

Founding a company doesn’t mean that you have all the connections, networks, and operational knowledge to manage it in the best possible way. So, hiring a person who can scale and grow your company might be the right decision if you don’t have the right experience and skills to lead it. 

2. If you’d like to not do everything by yourself

Focus on the things you’re good at: you, as the founder, shouldn’t have to do everything by yourself. Find a CEO who can complement your skill set and who can help you grow the company. 

Usually, founders have co-founders that help them with this, but you can also hire a CEO to help‌. According to Simon Sinek, author of Start with Why, founders often tend to fall into one of two categories: the ‘Why’ and the ‘How’ founders.  

The Why founders ‌focus on the vision for the company and the big picture, providing direction, motivation, and a clear goal.

The How founders focus on the operational parts of achieving that mission, vision, and goal. 

For example: 

• Steve Jobs (The Why) had Steve Wozniak (The How)

• Bill Gates (The Why) had Paul Allen (The How)

• Martin Luther King (The Why) had Ralph Abernathy (The How) 

• Walt Disney (The Why) had his brother Roy Disney (The How)

• Herb Kelleher (The Why) had Rollin King (The How).

It doesn’t matter if you’re the Why or the How type — what matters is finding the right person who’ll complement your skill set, so your company grows. And this is where you should hire a CEO.  

3. If you want someone to work on the business while you work in the business (or vice-versa)

Sometimes, you have expertise that’s required to work in your industry, but you lack the overarching business experience to work “on” your business and its growth, and managing sales, marketing, negotiations with stakeholders, and so on.

Let’s assume you have a writing business. You are an expert writer, knowing the ins and outs of composing content in your niche. But what you’re not accustomed to is all the marketing that’s required to put enough eyeballs on it, all the negotiations required with the publishers, and all the legal/operations needed for everything to run smoothly. 

In that instance, you might want to hire a CEO and outsource all the tasks related to building and growing your business, and actually concentrate on the work itself. 

Top skills to look for when hiring a CEO

Once you’ve decided to hire a CEO, look into each of your candidates’ skill set and see if they’re a match for your small business. 

A CEO needs to be versatile and have a number of critical skills to manage a business successfully.

Let’s look into each one. 

1. Excellent communication skills

A CEO needs to be able to clearly communicate his thoughts, vision, and company’s mission to all employees, stakeholders, and partners. Clarity of communication needs to be top-notch for a CEO so they can successfully lead the company on all fronts.

2. Adaptability and open-mindedness

A CEO needs to be open to new ideas, approaches, and systems to enable the growth and adaptability of the business. 

If a company doesn’t grow (through improvement), it’s likely that it will fall back and do worse on the market. So the CEO needs to be open-minded to new ideas that come along and decide how to implement the ones that make the most sense for the business.

3. Teamwork and collaboration skills

The CEO you’ll hire will need to work with other C-level executives, employees, and external partners. That’s why they need to have excellent collaboration skills that allow them to work well with others to create better solutions. 

4. Approachability

Long have passed the times where the CEO would sit in the ivory tower, completely isolated from everything happening on the company floor. 

As a CEO of a small business, they need to be approachable by employees and other managers to improve operations and know what’s going on in the business on a daily basis. 

Toyota’s employees gave around 250,000 suggestions on how to improve processes in their factories and around 70% of them got adopted. It pays to listen to your employees. 

5. Transparency

A CEO needs to lead the company transparently. This is not just oriented toward shareholders, but also towards the employees of the company: They need to know where the company is headed and what the current situation is like. 

6. Growth mindset

Growth mindset is a term coined by Carol Dweck stating that the potential a person has is almost unlimited, factoring in their determination, will, and hard work. 

A growth mindset is all about knowing you’ll be able to figure things out and that you can improve even in areas where people think it’s impossible. 

7. Strong business ethics

A business leader needs to be ethical in their conduct and lead the business the same way. Too many times have we seen the downfall of CEOs who didn’t operate on the highest ethical standards and principles. 

8. Strong decision-making skills

A CEO’s job is about making decisions that impact many people, and that can make or break the business. That’s why a CEO needs to be decisive in his actions and lead his employees toward the company’s vision with confidence and clarity. 

9. Creativity and innovation

Companies need to innovate and disrupt their industries to grow and outperform their competitors. 

So, a CEO of a small business needs to be creative in their approach and innovate processes and operations to grow the business and push it forward.

How to evaluate your future CEO’s skills

Having a list of skills that a CEO of a small business needs to have is one thing, but objectively evaluating those exact skills to see if an applicant really has them is a completely different task.

That’s why we have developed a comprehensive test library featuring hundreds of tests that companies can use to test and grade their candidates objectively. 

You can combine up to five skills tests into an assessment, based on the specific requirements for the role, and use the assessment as the first step of the selection process to shortlist the best candidates. 

When it comes to CEOs, you should use a combination of a few tests to find out if candidates have the above-mentioned skills. For example, you could use TestGorilla’s tests to evaluate the following: 

• Leadership and people management: Your next CEO should be above all else an excellent leader who knows how to inspire and motivate teams and guide them to success. 

• Culture Add: A person’s alignment with your organization’s culture is essential for any role, but especially executive ones. 

• Negotiation: CEOs need to negotiate with stakeholders, partners, employees, and clients on a daily basis. Evaluate your applicants’ skills with this test.

• Business judgment: Find out whether candidates can evaluate opportunities and risks and make the right business decisions consistently. 

• Critical thinking: Assess candidates’ analytical thinking skills with this test and see whether they’re able to evaluate information and make sound judgments. 

• Business ethics and compliance: Everyone in the company, including your CEO, should adhere to your organization’s policies and have a strong ethical compass.

• Problem solving: Find a CEO who isn’t intimidated by problems but sees them as puzzles to be solved, isn’t afraid to get their hands dirty, and, most importantly, who has the right problem-solving skills. 

These tests are a good way to test a candidate for the skills needed to be a CEO of a small business. Also, you can add more tests to your hiring process. You can find all TestGorilla’s tests in our test library. 

Once you perform an initial assessment with the help of skills tests and shortlist your best applicants, you can use a combination of a few different hiring tools to further narrow down your selection. For example, you can: 

• Use structured in-depth interviews

• Do job simulations

• Assess applicants’ track record

• Perform detailed reference checks

CEO interview questions

Skills tests will enable you to evaluate your applicants’ overall suitability for the role and identify the most promising talent. 

Interviews, however, are still an essential part of the hiring process, because they enable you to gain in-depth insight into each person’s qualities, previous experience, and their alignment with your own vision. 

Here are some strategic interview questions you can ask candidates for the CEO role: 

1. What's your vision for our business for the next three to five years?

2. What qualities make you a better fit for this role than other candidates?

3. Describe your experience with financial management and creating budgets. How do you ensure budget compliance in the long run?

4. How do you prioritize tasks when everything seems urgent?

5. How do you implement unpopular but necessary changes?

6. What company culture do you thrive in? 

7. What's your experience in scaling a small business?

8. How do you mitigate risk when taking a new direction?

9. How do you evaluate the success of a business? What metrics do you use and how do you track them?

10. What's your approach to criticism, both giving and receiving?

11. Can you provide an example of a partnership or collaboration you negotiated that was beneficial for the business?

12. How do you ensure that employees are happy and motivated? What strategies do you use to improve the employee experience? 

13. What's your leadership style? Has it changed over the years?

14. How do you ensure that a business's short-term objectives align with its global values and mission?

15. What's your take on AI? Do you think it will impact our industry, and if yes, in what ways?

If you need more ideas, check out our selection of 60 interview questions for executive directors, the best 20 management interview questions, or also our 30 leadership behavioral interview questions.

Where to find a CEO

Finding the right CEO is a challenging task – you cannot simply post a job ad on a traditional job board and wait for the applications to roll in. 

Instead, you need to use a more strategic approach; you can still use job boards, but you need to use other methods, too. Here are some of the ways to source applicants:

Internal hiring

The best person for the CEO role might very well be already working with you. You can use talent mapping to see who has the skills and the potential to take on the leadership of your business and then use targeted training programs to help them transition into the new role. 

Internal mobility is an excellent way to reward top performing employees and make sure your next CEO has the in-depth industry knowledge and experience they need to drive your company forward. 

Networking

If you don’t see a good fit among your current employees, it might be time to consider external applicants and leverage your professional network. 

Connect with peers and mentors to see if they know anyone who might be a good fit. Ask your contacts targeted questions to evaluate a person’s suitability for the role before you move on to the next step of the CEO recruitment process, such as: 

• Why do you think this person would make a strong CEO? 

• Have you worked with them directly before? What’s their management experience in our industry? 

• How do they manage conflict with coworkers or stakeholders? 

This will help you get an idea of a person’s experience and also see how others perceive them – which is critical for the role of a CEO. 

Passive recruitment

Passive candidates are those candidates who aren’t looking for a job and are mostly happy in their current roles, but might still be interested in transitioning to another company, if you offer them a challenge that’s sufficiently interesting for them (and the benefits that go along with it). 

You can source passive candidates at industry events and even on LinkedIn. Due to the sensitivity of passive recruitment for executive roles, you might consider hiring a recruiter to get in touch with potential candidates without exposing too much information about your business. 

Job boards

Job boards can help you get in touch with a wider (and potentially more diverse) talent pool, so they do have their role in executive recruitment.

You can use LinkedIn or specialized platforms like WellFound (formerly AngelList Talent) to post a job ad and source candidates. 

How much does a CEO cost?

According to Glassdoor, the average CEO salary in the US is about $197,000/year of base pay and $219,000/year additional pay, which includes bonuses, stock options, and profit sharing. Therefore, the total average pay of a CEO in the US is about $416,000 per year.

A CEO’s salary varies widely depending on factors such as: 

• The company’s size, industry, and performance

• The company’s ownership structure

• The person’s experience, qualifications, and track record

• The location (high-cost-of-living (HCOL) areas might demand much higher salaries)

Use skills tests to assess your potential CEO and hire the perfect match

Hiring a CEO is always a stressful process because you need to find a person who’ll continue leading your company and you want to find the best possible candidate. 

That’s why using tests that assess the skills of your candidates objectively and bias-free is crucial. Eliminating “gut feelings” and instead making data-driven decisions will help out when hiring a CEO for your small business. 

Hire the best CEO — your company deserves it. 

With TestGorilla, you’ll find the CEO hiring process to be simpler, faster, and much more effective. Get started for free today and start making better hiring decisions, faster and bias-free.