The first choice a company faces when looking for a new leader is whether to hire from within or to execute a national search. That decision is often determined by the health of the brand, says David Kincheloe, president of National Restaurant Consultants.
“I think when you’re in a poor financial situation or you have a public image problem or something along those lines, that’s when you start looking externally,” he says. “If things are going well, you should have that candidate in place to just kind of move into the next position.”
Kincheloe says grooming future leaders is a basic executive responsibility. Most companies will perform better by promoting in-house candidates. He’s worked with some firms that employed search firms and hired an outsider only to see that person falter at the helm.
“And we promote somebody from within, and they do amazing,” he says. “I’m always a firm believer that the miracle is usually in the house. I think if you look internally first, it’s the easiest candidate to bring on board. It’s a smoother transition, not quite as shaky, and a lot more comfort to everybody else in the system.”
For some brands, the CEO becomes the very embodiment of the company. That can be good or bad, depending on the brand, Kincheloe says. He points to Papa John’s founder John Schnatter, who announced plans in December 2017 to step down from CEO to become executive chairman of the board. Schnatter starred in television commercials, and his face was printed on cardboard pizza boxes. It all followed the playbook written by KFC founder Colonel Harland Sanders and Wendy’s founder Dave Thomas, who each served as the public face of their respective brands.
But tying a brand image up in one personality can prove risky. Schnatter came under fire for comments about NFL player protests hurting his business. And Chipotle’s Ells has been the most vocal spokesman for the company’s “Food with Integrity” focus. In Chipotle’s case, Kincheloe says, an external leader is needed to set a new direction for the struggling chain.
“There’s a classic example of needing a radical change,” he says. “I think there has to be something unique that comes out of it. You kind of saw that at McDonald’s, where they’ve gone to all-day breakfast, jumping in to try to improve their image with new recipes and so forth. And it’s paying off for them. I think you’ll probably see the same kind of thing happen at Chipotle.”
Bob Gershberg, CEO and managing partner of Wray Executive Search, says the market for executives is not keeping up with demand. Many baby boomer leaders are retiring or moving into consulting work, and the following generations are inherently smaller or less experienced.
“In the executive search business, the demand for our service now is as great as ever,” he says. “That’s the good news. The bad news is that recruiting is tougher than ever.”
Gershberg says outside firms can dive deeper within the talent pool than a company’s board of directors.
“In order to find the best, we leave no stone unturned, go to every one of your competitors. Everyone who’s doing a great job becomes a good candidate. And that’s something companies can’t facilitate themselves,” he says. “It may be somebody that we know; it may be somebody that we don’t know. But it’s typically someone who’s doing a great job for someone else.”
Aside from identifying successful candidates, Gershberg’s firm explores whether the candidate and the company would make a good cultural fit. Recruiters spend time at headquarters with other employees and interview board members.
“We often say in our world there’s an art and a science to what we do,” he says. “The science side is the side that is matching skill sets and competencies. The art side is cultural fit, the success factors within that culture, within that group. Those are the pieces we spend a lot more time trying to get our arms around.”
Fundamentally, Gershberg says, chains are looking for more than just subject-matter expertise. They need emotional intelligence as much as they need a high IQ. They also need to excel at leadership, not just management, he says.
While many firms will conduct national searches for their next CEO, some search processes are less eventful.
In 2011, founder Phil Romano tapped Adam Romo to oversee his Dallas-based Eatzi’s Market & Bakery. Romo was previously CFO of Eatzi’s before leaving to work on a pre-IPO tech startup. And Romano trusted both his startup experience and previous work at Eatzi’s. The decision was made without a search or an executive-recruitment firm—just with a conversation.
“There are a lot of organizations that do the same thing,” Romo says. “If you look around, even large companies, they’ll already have a CEO in mind because of their background, experience, and relationship.”
Romo has no plans to leave the six-unit chain anytime soon. He hopes to help build it out into a national brand. He believes he possesses the correct experience to grow the brand. But he expects the next CEO search will likely look much more formal than the one that recruited him to Eatzi’s.
“It has to be that way,” he says. “As the company gets larger and larger, it will need a leader where having the startup experience really won’t be as critical. It will be somebody that has experience running a larger organization.”
Earlier in his career, Romo worked at fast-growing Brinker International Restaurants. Every few years, he witnessed waves of turnover among executives.
“They were growing so fast, they didn’t possess the skill sets. They had to go outside and hire people in larger organizations with that experience to help take the company to the next level,” Romo says. “The faster the company’s growing, the faster you’re going to see turnover at the executive level. A lot of time, you’re hiring people with a really short ceiling.”
Romo plans to grow the European-style eatery by first filling out the Dallas-Fort Worth metro area, then moving on to other major Texas markets like Houston, San Antonio, and Austin before expanding nationally.
As CEO, he views his job as keeping his entire team—whether they’re from the finance department or the marketing department—focused on the company’s broader objectives: to execute on food quality and customer service. C-suite executives often specialize in one function, touting years of work experience in finance, operations, or marketing. But Romo says a CEO must be more of a jack-of-all-trades.
To help bridge that gap and to train for the future, he’s worked to push his team members outside their comfort zones. Everyone attends the company’s hours-long weekly leadership meetings, even if the day’s topic doesn’t relate to their role or department. And he pairs up varying department heads to work on projects together.
“I try to get them as much exposure to these other areas so that if we do have turnover, we don’t lose all that institutional knowledge from that functional area,” he says. “It’s not perfect, but it really has helped, and it’s really made the whole organization more cohesive.”
In his role as CEO, Romo puts out fires constantly. In a single day, he could tackle a legal issue, address a human resource need, and then dive into a marketing need. It’s a constant challenge, but one he relishes.
“I don’t think I could do anything else after this,” he says. “It’s stressful and it’s challenging, but it’s exciting and gratifying all at once. Once you do this, you can’t imagine anything else.”