Successful Chief Executive Transitions Part 2: The Role of the Predecessor

By: Paul C. Winum

Welcome to the second installment of our three-part series on successful chief executive transitions. In our introductory post, we talked about how to minimize risks and capture opportunities with three stakeholder groups during a CEO transition. This post will address the role of the predecessor, who has a significant part to play in the overall success of a new CEO’s transition.

 

The influence of the predecessor on the transition of an incoming CEO can be blatant or subtle, positive or negative, cooperative or confrontational. He/she can be an invaluable dispenser of wisdom or an obstinate builder of roadblocks. The circumstances will be as varied as the individuals involved. To be successful, the new chief executive must quickly learn to manage this powerful presence and make it crystal clear to all stakeholders as to whom is leading the organization.

Angel or devil, there is no denying that the lingering shadow of the predecessor affects every freshly appointed CEO. In some cases, this is a legacy left behind by a beloved founder. In others, it is the very real presence of a former chief executive who has left the office but not the building. Research by RHR International indicates that 50% of previous CEOs stay involved with the company as a member of the board. On average, those who stayed as a director did so for eight months—three quarters of the first critical year of the transition process.

Stay or Go? Will new leaders have an easier time transitioning without them, or is it healthier for former CEOs to stay on? According to the RHR International/Corporate Board study, sitting board members were evenly split on the issue.

Clear-cut answers to this conundrum are hard to find. There are times when a clean break is best, and others when an overlap is valuable. Often, contractual agreements spell out the terms of departure. The ideal scenario would be if the outgoing and incoming leaders could sit down with the board and make a determination of the exit strategy based on the leaders’ respective skillsets, the organization’s business needs, and the chemistry between the two executives.

Positive Behaviors: Even if he/she leaves immediately after the changeover, the exiting executive can provide valuable support prior to the exchange of power, especially to an internal successor. Our study cited examples such as (a) seeking opportunities to connect the CEO-select with board members on a deeper level, (b) introducing him/her to key external stakeholders, and (c) showing visible support for (and confidence in) the new leader by thoughtfully shifting key decisions and accountabilities prior to the role change. Making decisions on poor performers (but leaving the selection of replacements to the incoming CEO) was also deemed very helpful.

Based on years of experience dealing with the selection, integration, and transition of chief executives, RHR consultants have observed the following positive behaviors on the part of the outgoing leader who stays on the board (current research also reflects these conclusions):

  • Helping the CEO-select anticipate some of the major adjustments he/she will face during the transition
  • Providing insights on how the board operates and what kind of issues are on the agenda
  • Giving the incumbent “room to run” and lead the business
  • Offering support as a mentor or sounding board, but not overstepping their advisor status
  • Clarifying their post-leadership role in comprehensive communications to the board, shareholders, staff members, and employees

Whether the prior CEO leaves immediately or remains on the board, the best practice is to literally and symbolically “let go” at the changeover—providing the new chief executive with the freedom and autonomy to lead as the singular source of authority.

Danger Signs: Warning indicators that the ex-CEO is not letting go include (a) being too involved in business and key decisions, (b) exerting undue influence on the board behind the scenes, and (c) their opinions to the board continue to outweigh those of the incumbent. These dangerous actions can impede the incoming CEO’s growth and development in the role and inhibit members of the board from building a trusting relationship with him/her.

Additional problems center on the new CEO inheriting a senior team that identifies too closely with its old boss and his/her leadership style. This can cause confusion and make it difficult for the team to shift alliance to the new leader and his/her agenda—especially if the predecessor is sitting right down the hall. An incumbent may even face resistance from the ex-CEO while attempting to reshape the team to match the company’s current business needs.

All board members should be aware of these negative situations and take immediate action to neutralize them. A worst-case scenario is if the directors are not even cognizant of being manipulated. If allowed to continue, this situation can cause contradictory communications, conflicting loyalties, and confusion as to who is in command. The final result is a new leader with limited effectiveness, severe damage to the organization, and a revolving door of successive CEOs. It may take an external consultant to assess the dynamics among those involved, determine the root cause, and suggest interventions to put the organization back on track.

 

Part two of a three-part series: The third installment will offer suggestions on what incoming CEOs can do to help themselves through the transition period.

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