Early last October, the CEO of DuPont stepped down after struggling for months against a strong U.S. dollar and weak Brazilian agricultural markets. A board member and veteran U.S. executive took over as interim chief as the company looked for a replacement.
Weeks later, United Airlines announced that their new CEO had suffered a heart attack and would be on medical leave indefinitely. Another interim appointment: the firm’s general counsel took over as acting CEO and announced he would remain in that position until the former CEO’s return.
These are just two of many scenarios in which an interim CEO appointment may be necessary. A range of events—death, firings, scandals or acts of God—can lead to the appointment of an interim chief. And there is no standard for who will take the reins between permanent CEOs. At DuPont, it was a board member; at United, the general counsel; and in other instances, it will be someone from elsewhere in the company—or even outside it.
Some interim chiefs are lame ducks—for example, a board member who steps in for a while to show the world that someone has a hand on the company’s rudder. Other interim chiefs will be charged with executing a turnaround, and still others will come from executive management and may want to stir the pot, create change or even contend to be a permanent replacement.
What do all of these scenarios—indeed, any interim CEO appointment—share in common? The devil is in the dynamics: Each one carries distinct organizational and psychological implications for the company at which it takes place, as well as the people involved, which will largely define the job at hand for the interim chief. What kind of platform does the acting chief have to create change? Is he or she a contender to take over in full? What are the limitations, personally and professionally, for the person who is trying to get things done in this interim position? These are some of the questions that will help a board and an interim chief define the role of a particular interim appointment.
It falls on the appointee and the company’s board to be clear about their intentions for the interim chief’s role, to understand what the resulting mandate will be and to develop a plan to manage the transition from start to finish.
“When I was appointed Target’s interim CEO, I had the benefit of strong support and clear guidance, which helped me succeed in moving the organization forward. The clarity and my collaborative working relationship with the chairman of the board, Target’s leadership team and the full board of directors ensured our collective success in driving the business and preparing the enterprise for new leadership,” says John Mulligan, COO of the retailer Target.
Mulligan provides an excellent example of an effective interim chief. He took the job in May 2014, moving up from his CFO post upon the previous CEO’s resignation. He and the board were abundantly clear about his role as acting CEO—he was there to lead the company until they found a new chief. Thanks to this clarity during the leadership transition, Mulligan performed very well and returned to the CFO spot after four months at the helm—before being promoted to COO.
The need to name an interim CEO arises for a slew of reasons, and each appointment is different. That said, circumstances are almost always sudden and unexpected, investors and other stakeholders are often spooked and it is a challenge for any acting chief to excel.
The performance of an acting chief is as dependent on governance as it is on the effectiveness of the individual interim CEO. Accordingly, boards and their appointees should take immediate steps to understand the unique dynamics of an appointment—and the resulting roles and expectations of the interim CEO—and remember that the ingredients for a successful acting chief don’t stop at finding the right appointee.