Beyond Selection. New CEO Succession

24 Jan 2019
By Laura Grierson
executive search CEO succesion

One-third to one-half of new chief executives fail within their first 18 months. [1]

Why? Often people believe this is due to poor strategic choices by the new leader and sometimes because the board makes an imperfect choice – overestimating a candidate’s capability or hiring a leader that lacks the skill set required to fit the Pivot [2]. But in reality, finding the right CEO for your business is only half of the puzzle. When a succession fails, the responsibility is often shared.

Many CEOs state that their on-boarding experience was just not helpful on the things they most needed and that figuring things out could have been a lot easier and happened a lot of faster.[3]

Often boards, outgoing CEOs and chief human resource people don’t lay the groundwork for new CEOs to succeed. They often miss the more subtle intricacies that help set a CEO up for success, for example:

  • How decisions are made (who has the authority);
  • How change and innovation take place;
  • Who has the most influence in the company;
  • The ‘political’ dynamics of the senior leadership group (underlying egos, beliefs, coalitions); and
  • The culture and how people work and think.

Not covering these subtle yet vital areas of how a business operates, can lead to a new CEO not being prepared, then wasting precious time trying to understand these dynamics. It can also lead to:

  • Not making ground on the cultural changes needed to achieve their strategic agenda.
  • Overestimating the willingness of people to change and abandon old, comfortable habits.
  • Being unprepared to manage the organisation’s culture.

In RHR International's 2012 study of 23 major CEO transitions, 57% of CEOs promoted from inside and 83% hired from outside said their boards were "less" involved than they should have been [4]. 

Common mistakes by Boards:

  • Underestimating the complex nature of succession, assuming it’s like similar lower level transition.
  • Failing to really consider & communicate the intangibles, like culture and political aspects of the company, that may cause issues.
  • Setting simple one-dimensional expectations of the new leader focused only on financial and operational goals (with no focus on cultural, political and people ones).

50% of companies reported providing no formal transition plan for new leaders [5].

To lay the right groundwork for new CEOs to succeed, HBR’s Ciampa (2016) recommends:

  • Ensuring each person (i.e. Chair, Directors, CHRO, and outgoing CEO) knows their distinct role in the new CEO transition plan.
  • Taking the time to understand & communicate the cultural, political and people elements of the business – especially those which may hinder a change agenda.
  • Ensure the Board gets clarity from the incoming CEO on the best way to work together going forward (e.g. information needed, communication & meeting structures, & behaviours).

 

[1] Ciampa, Dan. (2016) After the Handshake. Harvard Business Review. December 2016.

[2] Charan, R. (2016) The Secrets of Great CEO Selection: An insider’s guide. Harvard Business Review. December 2016.

[3] Ciampa, Dan. (2016).

[4] RHR International. (2012).

[5] Ciampa, Dan. (2016).

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