Times are uncertain for CEOs, judging from the recent record turnover in the position. Experts chalk up the turbulence and turnover to fears of an oncoming recession, boards’ lack of patience, pressure from activist investors and more. There has also been an inordinate amount of scandal and even bad CEO behavior—the #metoo movement and today’s “cancel culture” have spilled over into the C-suite, meaning boards are less forgiving of CEOs who deliver bottom-line results but make front-page headlines for the wrong reasons.
I think it is a positive trend that CEOs are being held to higher standards. Although I also agree with Yale Professor Jeffrey Sonnenfeld that sometimes it takes courage for boards to stick by controversial chief executives.
The point is, even for boards who are blessed with great CEOs who seem set for the long haul, now is a good time to ask: What would we do? In the event of a CEO scandal, or illness, or sudden departure, are we equipped to deal with the ensuing uncertainty?
After witnessing many great leaders and transitions over 25 years in the executive search industry, and having made the transition into the CEO position myself, the following is advice that I can offer to boards:
1. Be cohesive and clear in messaging about the outgoing CEO. Whether the exiting chief executive is leaving on good terms or not, the board and leadership must have a clear, consensus-driven message that it will share with the rest of the organization and the public. Craft an official message and determine exactly who will deliver it. Be explicit that other key stakeholders (i.e., the board, leadership) should refrain at all costs from making public or private statements about the transition. Any leak or chatter surrounding a CEO’s exit muddies the message and complicates matters.
In addition, make the official statement about the transition as positive as it can be without sounding disingenuous. Employees and the media may focus on the negative and may speculate as to the circumstances around the CEO’s departure, but this, too, shall pass.
2. Stick to your succession plan. It goes without saying that an organization should have a CEO succession plan in place. Ideally, the plan stipulates who will take over as interim within 48 hours of the announced departure. If someone internally (e.g., the board chair or a senior leadership team member) will fill the role, terrific. If external, be sure to have one or more outside placement firms vetted and on speed dial so that an experienced, reputable interim CEO can be brought in to steady the ship.
3. Be specific about the outgoing CEO’s role. It can be a godsend for a new CEO to have clarity about the outgoing CEO’s exact role and timeline for eventual departure. If the situation calls for a clean break with the prior chief executive, then problem solved. If, however, a period of overlap is required and the predecessor will stay on in an advisory capacity, be sure to detail the scope and duration of that role.
4. Let the interim be just an interim. In other words, the interim CEO should not be a candidate for the permanent role. It is too hard for an executive to try to get the CEO job while doing the CEO job. Their loyalties and attention will be divided between current, pressing issues and wanting to display a vision for the future. There is definitely a case to be made for bringing in an objective outsider who can provide a nonpartisan viewpoint on the state of the organization and its needs going forward.
5. Take a deep breath—and pause. As difficult as a CEO transition can be, it does present a watershed opportunity. The whole organization can take a step back, survey the situation and formulate a new vision for the future: What do we want to be and who is going to get us there? A CEO’s departure is a chance for reflection, recalibration and reimagining the road ahead. A board should not let the “tyranny of the now,” as my colleague Paul Bohne has written, dictate rash and rushed decisions.
6. Let the next CEO drive the strategic vision. It is tempting for a board, in anticipation of a new CEO taking office, to rush to provide strategic clarity for the future—to make the next leader’s job easy, they reason. As an executive search professional, I know this to be exactly the wrong move. It will drive away the best candidates for the job. Candidates with ambition and vision will want to play a lead role in setting the course for the future, in collaboration with the board. I’ve witnessed situations in which the strategic plan was locked down before a new CEO was recruited—inevitably, it diminished the caliber of executives who aggressively pursued the position. Trust that the next CEO you hire will be savvy enough to take the company where it needs to go.