The Life Cycle of the CEO: Managing The Entry Phase Effectively

This is the third in a series addressing the imperatives and challenges CEOs face through the entire spectrum of the role—from preparation for the job to exit. Here’s part one and part two.

CEO succession gets the headlines. Identifying and placing the “right” executive in the role brings optimism, and is often reflected in the stock price of publicly traded companies.

But the real success of the CEO succession process is not just contingent on identifying the best candidate to shepherd the company going forward. Success depends on handling the transition and integration into the role effectively. There are a number of challenges that must be met to accelerate the integration of new CEOs and allow them to thrive early on. Here’s a look at the key issues, and some strategies for tackling them:

Board-CEO Partnership. Clarity on performance objectives helps to make an explicit connection between critical issues and the new CEO’s focus. Prior to Day 1, the board and CEO should agree on what good looks like in terms of performance and translate that agreement into specific performance objectives and agree on how they will monitor and track progress against objectives. Alignment and clarity on objectives help set up an effective board-CEO partnership and allow for more open and constructive strategic discussions in the boardroom.

Revising Strategy. Most CEOs want the autonomy to react and make decisions as needed, and don’t want unnecessary interference from the board. The board’s fiduciary duty is implicitly tied to strategy, and boards no longer want to be merely a rubber stamp to strategic decisions. Alleviate unwanted churn between board meetings by being explicit about strategic decision rights with the new CEO. Identifying the handful of topics that need proper board discussion before decisions are made helps a new CEO understand what issues to bring to board meetings—and what they can handle alone.

Senior Team Performance and Strategic Execution. Team members passed over for the CEO role or loyal to the outgoing CEO may not be on board with the new CEO’s leadership and direction. Senior team members energized by the new CEO and support the shift in direction may not have the skills or capabilities required for success. In both situations, the sooner the new CEO builds an aligned, high-performing team, the better off the organization will be.

A new CEO must also shape the operating culture appropriately to accelerate adoption, coordination, and performance. Defining new ways of thinking, behaving and working together by examining the strengths and gaps of how work gets done (the operating culture) can facilitate strategic execution.

Early Wins. A new CEO has the added pressure of meeting expectations of investors and analysts. Although a shift in strategy may be the appropriate move long term, any dips in short-term performance are likely to be magnified. It is important for a new CEO to achieve some quick wins that signal the revised strategy is working or that progress is being made on the most critical issues identified by the board. The board can help in this regard by understanding what drives investor confidence.

Specifically, the “early wins” that investors look for are subtle in nature: Does the new CEO have a grasp of the company’s challenges and opportunities? Is there a clear vision and strategic plan? Coaching the CEO to find different ways to communicate this information to the street can ease the external pressure and strengthen the partnership that forms between board and CEO during the transition.

CEO transitions can be fraught with unexpected challenges and pitfalls. Setting the new CEO up for success can be the difference in the first year’s performance. Positive momentum in the first year in terms of company performance is likely to reinforce support for bigger or broader changes that may be needed in the future. The message is clear: CEO succession is much more than finding the “right” leader—supporting an effective integration of the new CEO is equally important.