The private equity firm Blackrock has almost 250 companies in its portfolio. That means they need to select 250 CEOs to run these businesses. That portfolio is worth billions. They turned CEO hiring from an art to a science.
Blackstone’s approach to hiring CEOs is a comprehensive and rigorous process that emphasizes not just past successes but also future potential and alignment with the company’s strategic goals. This focus on the “who” as well as the “what” sets it apart from many traditional executive search processes.
Step 1: Define the “investment thesis”
The board and the partners define the investment thesis. What do they expect the business to deliver. That outcome is then distilled into creating the leadership profile of the CEO. An investment thesis is a concise and well-structured document that outlines the strategic rationale for an investment. It identifies the key factors that are expected to drive value creation for the company, such as mergers and acquisitions, digital investments, or expansion into new markets. The investment thesis also sets a time horizon for achieving these objectives and outlines a potential exit strategy.
Prioritize the “who” as well as the “what.” Finding the right leader who aligns with the company’s strategic goals and possesses the necessary traits for success is paramount.
Blackstone uses investment theses to guide its investments and ensure that its portfolio companies have strong leadership teams in place to execute their strategic goals. The firm’s CEO selection process is closely aligned with the investment thesis to ensure that the chosen leader has the necessary skills and experience to deliver on the company’s strategic objectives.
Step 2: Interviews, presentations, assessments, reference checks, 5-hour psychometric assessment will take 3-4 months
A multi-faceted selection process that includes in-depth interviews, rigorous assessments, and thorough reference checks is essential. Every component matters because the CEO’s role is demanding and gruelling. Psychometric evaluations can provide valuable insights into a candidate’s cognitive abilities, personality traits, and leadership style. For each role 10-15 candidates are screened to distil it to only 2 candidates who finally make the cut.
A clinical psychologist evaluates the mental make up of the candidate. The CEO has to handle emotional pressures of being admired one day and vilified the next day. The success modes are resilience, confidence in leadership, emotional intelligence and self awareness. Low cognitive ability; insecurity and an insecure person rarely succeed as CEOs.
Every hiring mistake costs 15 times the base salary in hard costs and lost productivity. A wrong hire who is paid $100,000 costs the company $1.5 million, says consulting firm ghSMART
- Go beyond the references provided by the candidate. Blackstone uses their own backchannels and reach out to a broad network of individuals who have worked with the candidate. That includes customers, stakeholders, board members, team members etc.
- Provide ongoing support and onboarding. A structured onboarding plan and continuous support, including coaching and feedback, are critical for ensuring a successful CEO transition. The CEOs announcement is day one of the process.
Source: Fortune Magazine, Feb-March 2025
Can this person deliver what the business needs, in the way it needs it, at the time it needs it? That remains the acid test of every hiring decision. The stakes are higher for a CEOs search.
