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Managing the Risk of CEO Transition

January 29, 2016

Posted in: WATSON Views

An intentional and proactive approach to onboarding sets your CEO up for long term success, CEO transitioning

CEO transition is a high-risk game. Business journals are full of statistics of new CEOs who are hired with enthusiasm and fired within the first 18 months of their tenure. The recent public airing of the events leading up to Arvind Gupta’s resignation as President of UBC brings to life such a statistic and provides insight into the kinds of challenges that can arise.

Bringing on a new CEO is an exciting and important time for any organization. It is often a pivot point to help the organization re-energize or move to the next level. However, CEO transition can also be a time of high risk. Key challenges for a new CEO often include:

  • Lack of alignment between the board and new CEO on the role and expectations
  • Failure to build key relationships
  • Failure to understand the culture and
  • Failure to demonstrate results.

In our experience, boards typically invest significant time and effort in the recruitment process to find the next CEO. However, where many boards fail is that they take their hands off the wheel once the contract is signed and assume that the new CEO will address the organizational challenges as they expect.

In order to increase the chances of CEO transition success, boards must direct considerably more effort to the onboarding and feedback process. They must be intentional and proactive in their approach to help the new CEO integrate into the organization, culture, team, function and role.

We have recently worked with a number of boards to help them develop onboarding processes for new CEOs.

Key Factors to A Successful CEO Transition

Based on our work, we believe there are a number of key factors that can increase the chances of a successful transition.

  • Broaden the scope. The idea of onboarding opens up when you see it as more than just the first week of meetings and the binder containing every organizational policy ever created. For us, onboarding is a process that is intentionally designed by the Board to set up the CEO for success.
  • Clarify expectations. Create the space for the board to meet with the CEO to talk about roles, expectations and priorities. These can be incredibly powerful conversations that foster clarity, alignment and trust.
  • Help with the relationship transfer. Great relationships don’t just happen. Boards need to think through the critical relationships, plan for meaningful introductions and have a way to monitor these relationships.
  • Don’t underestimate the importance of the cultural fit. CEOs are often hired for skill and fired for fit. Don’t underestimate the importance of cultural fit in the hiring process and the onboarding process. Use the onboarding process to create the space for the CEO to learn about the organization’s culture and become part of it.
  • Design effective feedback processes. High quality, objective feedback is critical, especially when you are new to a role. A new CEO will likely ruffle some feathers in the beginning – that might even be the plan. Having a set of touch points scheduled where the Board and the CEO can offer feedback is incredibly valuable – perhaps at the 3-month, 6-month and 12-month points. We also strongly encourage a 360-degree feedback process within the first year that can offer a clear picture into the CEO’s strengths and areas for improvement and progress towards agreed upon results.
  • Open and Accessible: Ensure the CEO has easy access to seek counsel from directors and meet with the board as required to test and confirm strategic priorities, share challenges, confirm ongoing roles and build relationships.

Ensuring your organization has the leadership it needs is one of your most critical responsibilities as a director. Leaving it all to the search process is a high risk strategy. In order to help a new CEO be successful, boards must be intentional about setting the stage for success. A well thought out on-boarding program facilitates alignment between the CEO and board on strategic priorities, articulates well-defined performance expectations for the CEO, provides mentorship and support for the CEO, and includes informal and formal feedback mechanisms to build a culture of dialogue and ensure issues of concern are addressed early.