The Life Cycle Of The CEO: At The Exit

This is the last in a series focusing on the different stages of the CEO lifecycle—the CEO’s exit. This phase is the simplest conceptually, yet can be surprisingly challenging. Handled well, a CEO can create an enduring legacy through enabling the effective transition of his/her successor. Handled poorly, the contributions of an otherwise successful CEO can be overshadowed by missteps at the end, hampering the next leader and causing the organization to lose focus and momentum (Inside CEO Succession: The Essential Guide to Leadership Transition by RHR on the topic covers this in much more detail).

There are three key elements in this phase:

Assist the board in the selection of the successor. 

The board is ultimately responsible for selecting the next CEO, and it is one of their most important responsibilities. However, for planned successions, the incumbent CEO can help frame the process, partnering with the board, serving as a catalyst for action when needed and providing input. The CEO typically has considerable influence when the focus is on internal candidates, but less of a voice when the likely source is external, although there are exceptions. Supporting the selection process without attempting to dictate the results is the CEO’s role at this point. The CEO also generally has the greatest insight into the individual sensitivities of the internal candidates and how best to communicate with them in order to maximize retention.

Supporting the succession with a full orientation to the organization, board and all stakeholders. 

Once the selection has been made, there are important aspects to consider. First is the timing regarding the hand-off of responsibilities. Staged transitions, such as creating a time-limited COO role, can signal an upcoming transition and allow the organization and the external world time to adjust, as well as allow the successor to learn parts of the organization that may be less familiar to him or her. However, business requirements, personal situations and the dynamics between the incumbent and the successor should also factor into the decision. At least three months of overlap between the two executives allows some time for the incumbent to provide insights into the senior team, the organization, competitors and the industry. Second, it is important to generate a robust and compelling communication plan that encompasses internal stakeholders as well as a proactive outreach to key external constituents such as customers, suppliers, investors, analysts and the media.

Working with the board on whether and how the departing CEO will be involved with the organization in the future. 

The views are mixed regarding whether or not the incumbent CEO should remain involved with the organization in a time-limited role as board chair or another role, or to make a clean break. This decision should be based on what the organization and the new CEO need to be successful, and what the outgoing CEO is willing or able to do. When the organization must make a radical shift in strategy, the presence of the prior CEO can impede the new leader’s ability to dismantle what was previously built. The dynamics between the two individuals will also impact the decision, as well as how well-defined the proposed roles and responsibilities are.

This time is fraught with emotions and a sense of loss for the departing CEO, requiring considerable balance, grace and maturity to navigate well. As demanding as the role of CEO is, it also comes with a sense of purpose, power, status, compensation and perks that begin to diminish virtually as soon as a successor is identified. Even those who believe they are prepared can be surprised by the mixed feelings this phase inevitably evokes. Ensuring the outgoing CEO has trusted sources to help him or her navigate each of the steps in this stage can help provide support and maintain a sense of perspective, focusing on building his or her legacy through leaving behind a sustainable, successful organization. A summary of RHR’s research on CEO transition is available at www.rhrinternational.com.

The Life Cycle of the CEO:

Overview | Preparation | Entry | Middle Phase | Closing | Exit

Deborah Rubin, RHR International: Dr. Deborah Rubin is a senior partner, Practice Leader Co-Head—Board & CEO Services at RHR International.