Where has all the fun gone in being the boss?

Hiring a chief executive is about the most dangerous thing a company ever does. Make a mistake and it is not just a financial and public relations disaster: if things go really badly the company may lose its independence. And it's a move that has become more dangerous.

Hiring a chief executive is about the most dangerous thing a company ever does. Make a mistake and it is not just a financial and public relations disaster: if things go really badly the company may lose its independence. And it's a move that has become more dangerous.

Anyone reading newspapers sees strings of top executives getting their golden handshakes and will have the feeling the churn rate has risen. Think of BA, Barclays and BMW - and that's only the "Bs". Such anecdotal evidence in this instance seems to be supported by the factual sort. In the US, chief executive officers appointed after 1985 have been three times more likely to be sacked than those appointed before, andone-third of the top 100 US companies have changed the chief executive since 1995.

It is not really clear why "CEO churn" should have risen so much but I suspect it has a lot to do with the growing complexity of the business world. In a climate where business practice changes incrementally it is reasonably easy to identify the good people for any particular CEO post.

But where the whole competitive framework of a business can change in a few months (for example, the transformation of financial service caused by the internet) the set of skills that seemed right may turn out to be quite wrong.

Now there is a new pressure. There is not just the danger that a CEO might fail in the job; even successful ones may feel they don't want to serve out their full contracts because of the lure of entrepreneurship. There has been a string of high-profile departures in the US, top executives leaving Fortune 500 companies to join start-ups.

Despite the latest bout ofe-scepticism, the lure of entrepreneurship seems likely to wax further. If the problem up to now has been to pick the right chief executives, it may increasingly become one of how to persuade them to stay.

First things first: how do you get the right one? An article* in the latest Harvard Business Review tackles this one head-on by arguing that the rise in the churn rate has less to do with the usual explanations - greater competition, globalisation, billion-dollar mergers, even the impact of the internet. Instead, say the authors, boards pick the wrong COEs because they don't look for the human quality of leadership.

Instead, they tend to set out a narrow, technical set of criteria, give that to a firm of headhunters and see what comes up. The trouble with headhunters is that they do what they are told: ask them to find competent managers and they do. The board will then hire what seems to be the low-risk candidate. But a competent manager is not necessarily a good chief executive, just as great Number Twos sometimes make terrible Number Ones.

So what should the board do? The authors have a seven-point plan. One, the board should be clear about what sort of leadership it wants. Next, it should make sure divisions within the board are resolved, for a split board makes the job of any CEO very difficult. Three, it should measure the "soft" qualities in a potential CEO, technical skills and human ones. It should also, four, beware of candidates who are long on charisma but short on followers.

Next, it should recognise real leaders are threatening. That is why boards often choose "safe" candidates: they can identify technical competence but not real leadership. Six, it should know that chief execs are often very bad at choosing their own successors. And finally, they should not rush things - the adage, act in haste and repent at leisure, applies here as in so many other walks of life.

It is hard to quarrel with this line of argument, though in practice the strategy is not easy to implement.

I would add two further points. The first is that being a successful chief executive has become very specific. To take those three examples of sacked chief executives noted at the beginning, in each case the success had to bring a mix of unusual qualities. There were perhaps only half-a-dozen people in the world who could run BA successfully - it looks as though they may have got one of them. The succession at BMW failed - or it looks as though it has failed. And Barclays, while a less particular business, may or may not have made the right choice.

The second point is that companies have to find ways of making the chief executive post more fulfilling. US corporations load on the options; European companies have tended to offer status. Neither really offer fun.

If a job is precarious, as being a chief executive has become, the buyers of the talent have to offer danger money: hence the enormous pay-offs if the candidate fails. But no one likes being rewarded for failure, not even those who pick up the cheques. The smear of failure also makes it harder to find something else to do.

The risk/reward ratio is further skewed by the rising opportunity cost - the opportunities a potential CEO misses by taking on the job. The more attractive it is to be an entrepreneur the less attractive it becomes to be a senior executive in a large company. Besides, building up even a moderately successful business will make the owner far richer than having the top job in a Footsie company.

But we still need people to run the corporate giants. The challenge is to make those jobs more enjoyable so real leaders are attracted to them, rather than have companies scrambling desperately for a very limited supply of talent.