kicked out of nursery school that day. If my mother hadn’t been the most patient person in the world, I might never have gone to school. When everybo… - Ben Horowitz

Jim Collins, in his bestselling book Good to Great, demonstrates through massive research and comprehensive analysis that when it comes to CEO succession, internal candidates dramatically outperform external candidates. The core reason is knowledge. Knowledge of technology, prior decisions, culture, personnel, and more tends to be far more difficult to acquire than the skills required to manage a larger organization. Collins does not, however, explain why internal candidates sometimes fail as well. I will attempt to do so here. I will focus the discussion on two core skills for running an organization: First, knowing what to do. Second, getting the company to do what you know. While being a great CEO requires both skills, most CEOs tend to be more comfortable with one or the other. I call managers who are happier setting the direction of the company Ones and those who more enjoy making the company perform at the highest level Twos.

Much has been written about process design, so I won’t repeat that here. I have found the “The Basics of Production,” the first chapter of Andy Grove’s High Output Management, to be particularly helpful. For new companies, here are a few things to keep in mind: Focus on the output first. What should the process produce? In the case of the interview process, an outstanding employee. If that’s the goal, what’s the process to get there? Figure out how you’ll know if you are getting what you want at each step. Are you getting enough candidates? Are you getting the right candidates? Will your interview process find the right person for the job? Once you select the person, will they accept the job? Once they accept the job, will they become productive? Once they become productive, will they stay with your company? How will you measure each step? Engineer accountability into the system. Which organization and which individual is responsible for each step? What can you do to increase the visibility of their performance?

In the later section “How to Evaluate CEOs”, I describe the CEO job as knowing what to do and getting the company to do what you want. Designing a proper company culture will help you get your company to do what you want in certain important areas for a very long time.