As I wrote in past articles “3 Steps To Internally Recruiting Your Next CEO“ and “NBC follows 3-Step Succession Plan In Replacing Jay Leno“ replacing a Chief Executive Officer (CEO) or other high level performer can be a very daunting task. There are many causes for this. One major reason is first time CEOs face “a quantum leap into new reality” according to a recent cooperative study by both Boston Consulting Group and the executive recruiting firm Spencer Stuart. The study of 389 recently minted CEOs found the perception of results has a greater influence on newcomer’s job security than actual results.
Another study of 50 first time CEOs by executive recruiter Heidrick & Struggles found that improving results requires a rapid management shake-up. This is often a major challenge for a first time CEO. Their most common complaint is that they had not acted quickly enough to replace key, high-level managers who needed to be replaced. Many executives I placed as a technical recruiter in turnaround situations share this objection.
At least 20 U.S. public companies chose a first-time CEO in the last 2 years. This includes General Motors, RadioShack Corp. and Duke Energy Corp. All faced a steep learning curve and impatient boards of directors eager to quickly replace them. For example, Cosi, Inc. quickly pushed out Carin Stutz after only 17 months on the job. She later commented, “I certainly tried to move swiftly to bring high-quality talent, but it never seems fast enough.” She shared power with investment manager Stephen F. Edwards who wanted her to more quickly shake up her management team. Instead, she preferred to give executives time to prove themselves. Unfortunately, as Cosi’s fortunes worsened, she got pushed out last June.
Another related issue with new CEOs is they must rally the troops with a clear vision. Unfortunately, that is easier said than done. The new CEO may have the greatest plan in the world, but if current employees are not listening, this will be a recipe for failure.
One textbook case seems to be Microsoft. As I shared at “Microsoft’s New CEO Bearing Fruit“ Satya Nadella is already steering their fortunes to a more mobile path. This seems to be working and will provide new life into the tech giant.
There is no one right way to choose a first time CEO. With any selection there will be a steep learning curve. All executive recruiters and executive recruitment teams will caution to be diligent in your vetting of any potential candidates. After that when the CEO is selected they will need to hit the ground running quickly!
What are your thoughts?