When the time comes for a Chief Executive to step down, the energy spent on succession planning and the money and effort taken to find the right heir should hopefully result in an apt appointment.
Yet, according to plenty of research online, the statistics suggest there’s a 40 – 60% likelihood of an executive leaving an organisation within the first 18 months. Other researchers suggest it’s the first 100 days that are critical and will dictate whether a senior leader will commit to a role.
I know from experience working in the field of executive search, a succession of senior managers can have a profound impact on a business. Not only is it costly to re-advertise and take on interim support, the effect of this disruption can also be unsettling for staff and stakeholders. It can also impact on the bottom line as a result reduced productivity or share value.
When US bookstore Barnes & Noble sacked their CEO, Ronald Boire, after less than a year in post, the company’s stock price was said to have dropped by 13%.Similarly, a PwC study in 2015 of the world’s largest 2,500 public companies concluded that CEO turnover cost shareholders an average $1.8 billion. In 2018, this is likely to be significantly higher.
I recently read more details about such a high-profile case last year. Chris Lattner, an executive recruited from Apple Inc. to head up Tesla’s Autopilot software, was said to have clashed with CEO Elon Musk. Only six months into his appointment, Lattner left the electric car manufacturer.
In this case, the reason for departure seems to have been mutual and owing to the wrong fit. Often the most significant barrier to an executive staying put is the culture change. A move between sectors – say from Aerospace or Automotive to Sales and Marketing– can be a leap too far for some; a dramatic change in pace or process can be overwhelming.
For others, a meagre induction or on-boarding experience can lead to some CEOs questioning their own decision, or end with a clash with corporate governance. However, I’ve seen that fault can sometimes lie with a new CEO owing to some simple errors:
Stamping authority too quickly
There’s sometimes a temptation for a new CEO to make their mark quickly, but this can be rash and have long-lasting effects. Although it’s hard to come back from a show to weakness, it’s equally risky to make assumptions and judgements before spending time understanding an organisation and turning over a few stones.
A new CEO can have the distinct advantage of being an analytical outsider, however, launching a new vision, direction, or brand identity too quickly can come across as clumsy and dictatorial. There may well be valid reasons as to why things operate in a certain way currently, or similar initiatives that have been tried and failed before. Vitally, a CEO needs to take councel from others internally, as all big changes involve a lot of time and people to implement.
“In my last company…” syndrome
Another common error is for senior executives is to keep referring to how things operated more effectively at their former workplace. This can be very irritating for new staff and come across as being critical and superior. It’s important to remember businesses are different for a myriad of factors, and these can’t always be replicated elsewhere.
A change in management should be an opportunity to share opinion and use parallels to highlight how difference and change is sometimes a positive thing. It’s critical, however, to avoid remarks that could be construed as egotistical and show a lack of respect for a new company’s culture. Otherwise, there’s a risk staff will secretly be thinking “If your last place was so good, then why did you leave?!”
External before internal
Spend too much time concentrating on external-stakeholder relationships early on – before getting to know internal stakeholders – can be unwise. Staff may begin to think a new CEO has other priorities and only comes to them when they need something. A new appointment gets one chance to make an impression, and it’s hard to come back from a poor start.
It’s important to spend time working with cornerstone figures who are the hearts and minds of the organisation and ambassadors for the business. Success rests on people and not processes, so getting out and about and walking the floor with genuine purpose is essential.
Leading on from the last few points, implementation without consultation can be a disaster. Imposing change for the sake of change, and without seeking the expert input that’s available within the business, is guaranteed to cause anger, disillusionment, and potentially costly absence through stress.
There needs to be a relationship whereby staff can give honest feedback without fear of repercussions. All senior leaders need to show they are open to change and alternative thinking which includes the Board of Directors.
Building a weak team
In my colleague Matthew Lewis’s recent blog, he made the important point:
“[…] being an exceptional leader does not automatically make you a good character judge! Making a hasty or inappropriate appointment can have a significant long-term impact with real business implications; there can be years of fallout as a result.”
Making poor hiring choices, or allowing decisions for the wrong reasons, can be catastrophic. A new CEO needs to be focussed on forming a competent team (by collaborating or utilising expert leadership headhunters), sharing ideas and best practice, and empowering others.
Unrealistic target setting
Setting unrealistic or badly-informed targets is a simple way for a CEO to be held accountable in the short-term. Often these can be linked to issues that predate their arrival. There is a tremendous sense of expectation from staff and external stakeholders, but like the first point, being pressured into making decisions too quickly can be flawed also. On the flip side, being honest when challenges are coming – instead of acting like everything is fine – is an effective way to model accountability.
When employees see decisive leadership that they admire and trust, the benefits are immeasurable.