From Fortune 500 companies to private equity–sponsored startups, CEO turnover is on the rise. According to global outplacement firm Challenger, Gray, & Christmas, CEO turnover reached an all-time high in the fourth quarter of 2018, with 129 CEOs leaving their posts in the final month of the year. A number of factors are driving the exodus of venerable and successful CEOs. Baby boomers, the largest demographic of workers in American history, are reaching retirement age, and the current health of the stock market makes cashing out quite an appealing proposition.
With so many experienced CEOs churning into retirement, replacements are being promoted from within, and empty CEO chairs are being filled with first timers routinely. According to consulting firm Spencer Stuart, of the 11 new CEOs of S&P 500 companies who were appointed in the third quarter of 2018, 10 were promoted from within. These CEOs are younger, less experienced and, in many cases, untrained as they make the transition from their operational roles to ones requiring a higher level of enterprise leadership and strategic direction.
First-time CEOs can improve their chances of success by adopting some of the following strategies right at the outset that will help to cement their leadership and set the company on the right course.
Win the Board
Aligning with the board is priority number one for any new CEO. After all, the board holds the keys to the new CEO’s future employment. It’s essential for the CEO to have a clear understanding of the board’s expectations for the business and how the CEO’s performance will be measured. In addition to putting on a good PowerPoint show during board meetings, it is vital for new CEOs to build relationships with each individual board member, be it through formal one-on-one meetings or informal lunches or dinners. During these more intimate engagements and interactions, board members can have their advice heard, and the CEO can gain the trust and support required for success. It is critical to establish transparency and trust from the beginning.
Assess the Team
The tenure of first-time CEOs will be made or severely undermined by their surrounding senior team. Without a team in place that supports the CEO’s vision, understands the strategy, and has the ability and willingness to implement it, prospects for success are greatly dimmed. During their first six months, new CEOs must use a combination of objective assessment and instincts to make any changes deemed necessary to the composition of the senior team – even if those changes are sweeping and dramatic. One CEO of a software enterprise lamented not having moved forward with needed changes sooner: “Being too slow to decide is sometimes worse than making a bad decision, and I waited too long to make moves both positive and negative.” Whether drawing people from within or outside the organization, the CEO must find people with the necessary capabilities, requisite commitment and complementary skills – and do so quickly.
Establish a Leadership Rhythm and Cadence
Long before the new CEO ascended to the office, the organization had an existing cadence in regard to meetings, roles, priorities, metrics – heck, even holiday parties. Whoever was previously in charge ran the company a certain way and with a certain routine. A CEO at a building products company learned just how ingrained a company’s cadence can be: “It can be very difficult for a company to change how the business is run, even if that company wants change and recognizes that change is needed.” The new CEO must create new habits, maintain predictable and consistent operating leadership, and work to overcome the inevitable inertia to establish a new cadence and quickly shape how the business is going to be run under the new regime. The CEO must be a role model for consistency in purpose and predictability in how the company is run.
Strategically Prioritize Your Time
New CEOs are often shocked at how little control they have over their time. They quickly recognize that it is not feasible, realistic or productive to be involved in every detail. Upon taking the helm, a CEO of an engineering technology company found that “more than 50 percent of my time is beyond my control and dedicated to board, investors, community involvement or preplanned and required meetings.” First-time CEOs need to prioritize how they spend their time in the interest of creating value for the firm and driving the agenda for growth. CEO’s must take an increasing role (therefore dedicate time) on talent and developing leaders. Stepping back and letting go can be difficult. The new CEO must use the first several months to learn everything there is to know about the entirety of the business, but then take a step back and allow trusted senior leaders to do their job.
Evaluate and Pivot
Finally, great leaders are not just smart, strategic and assertive; they are humble and introspective and welcome feedback from all corners. Only by having humility and objectivity can a new leader properly assess progress against the strategic agenda, business priorities, effectiveness of the senior leadership team and alignmechnt of the organization. CEOs should solicit feedback from all sources, including the rank-and-file, who should be able to comfortably express concerns and suggestions. Specifically, CEO’s should participate in an objective 360 degree stakeholder feedback assessment after 12 months in the role. The most successful CEO’s have the humility and agility to adjust were necessary and continue to drive their agenda forward.