Cloudera Hires Smart and Brings on Industry Veteran Tom Reilly

Sometimes a company makes a move you simply have to applaud. It was just announced that Tom Reilly has been selected as CEO for Cloudera. Reilly is a well-seasoned executive who has successfully built and sold technology companies several times in his career. But it isn’t just the selection of Reilly that is important; with Reilly, the firm gains access to Ombud, one of the most fascinating of the next-generation Gartner challengers, one focused on measuring customer loyalty using analytics and social networking. Reilly is chairman and founder of Ombud. Let’s talk about selecting a CEO and what Cloudera did right.

Picking a CEO

One of the mistakes I see a lot of companies make is that they pick a CEO who hasn’t actually been a top executive yet, making this their first top job, someone who comes from a different industry, or someone who comes from a different company phase.

The problem with picking someone who hasn’t been a CEO yet (Carly Fiorina, one of HP’s failed CEOs, is an example) is that the job of CEO is vastly different from any other executive job. In most any other job, you specialize: in finance, operations, manufacturing or sales. In addition, as an executive, your job is defined by the person to whom you report. As a CEO, you have to be somewhat expert in all of the areas that report to you or you won’t be aware of problems that another executive either doesn’t see or is covering up. In addition, you have to flip from primarily being focused on promoting yourself so you can win the next promotion, to promoting the company and your people. That can be a painful learning experience (Carly didn’t survive it).

If you come from a different industry, you enter with a series of assumptions based on your last job. Those assumptions simply aren’t true, but you are forced to hit the ground running even when you don’t have a clue as to the direction or gear you’ll need. Carol Bartz, who failed at Yahoo, is an example. Bartz ran like a fiend, but it was clear she had no real idea what Yahoo did. Even though she had been incredibly successful at her last posting, she flopped at Yahoo. 

Companies go through phases. There is the start-up phase, when the company is being built, everyone is very close, and folks are expected to work pretty much every hour they are awake. There is the transition phase, when the firm gets too large for a simple structure and gains a complex multi-tiered management structure. There is the sustaining phase, when the company has shifted from rapid growth to focus on not screwing up the gains it has made. There may be a turnaround phase if the company stumbles badly. Each requires a very specific skill set. While a CEO can have the breadth for two of the three, the CEO who can do all three is very rare.

Reilly: Unusual Breadth

Reilly starts off with experience as CEO from several companies and he was successful in each. Not only has he run small companies like ArcSight and Trigo, he has held executive positions in large companies like HP and IBM. This should allow him to step into the role of a CEO relatively easily because he won’t be learning this unique job on the job and comes in with substantial experience.

Reilly has significant enterprise software company knowledge, from both the small and large companies he has worked in. Cloudera is in this same segment, albeit a different but fast-growing sub-segment. ArcSight was in a similar fast-growing segment and most of the skills Reilly acquired at ArcSight should fit well into Cloudera.

Cloudera is in the transition phase of its development, more mature than a startup but still well short of the large sustaining company it will become. This is very similar to where both ArcSight and Trigo were, suggesting that Reilly is well trained for Cloudera’s current phase.

The result: Reilly’s selection should work exceedingly well for both companies.

Wrapping Up: CEO/COB Separation

It is always nice to see a company do an excellent job of picking the right skills for the top job because so many boards get this so very wrong. However, one decision that I haven’t yet mentioned is a best practice for those of us who cover governance, and that is separating the CEO and Chairman of the Board positions. Look at HP: Every time it has allowed a CEO to be the chairman, it has ended very badly. This lack of separation generally leads to bad behavior by the CEO or a growing rift between the board and the top executive. Cloudera’s placement of Mike Olson as chairman creates this needed separation and should further ensure the success of this effort.

Congratulations to Tom Reilly and Cloudera. You did this one so very right. I’d say this even if Tom Reilly wasn’t a friend of mine. The fact that he is makes this all so much sweeter.