One of the essential tasks of an incoming chief executive is to get out from the shadow of the person who was at the helm before, and to be seen as clearly in charge.
But that is made more difficult for half of incoming CEOs because their predecessor hasn’t left the building, and in many cases the board of directors stays too aloof, a new study has found.
In 50 per cent of transitions, the outgoing CEO stays on as a member of the board of directors for at least eight months and many remain involved in daily operations in an attempt to “help’ the new CEO to adjust to the job.
For more than a third of those new chief execs, the hovering by the predecessor turns into bothersome meddling, according to the international survey of 36 chief executives and 210 board members by RHR International LLP and The Corporate Board magazine.
Half of the CEOs interviewed said they found their transition into the role “challenging and chaotic.” Only 57 per cent said their companies provided any support for them in their integration into the organization.
“The unexpected part of this is the extent to which the predecessor is still around long term either as part of the transition team or on the board,” said Guy Beaudin, Toronto-based managing director of the Canadian operations of RHR International.
“This says that boards must be more clear than they have been in the past about how long the predecessor should stay and in what capacity.”
The results show a predecessor can help the new leader into the organization, but it is better for the old CEO to keep hands off if there needs to be any quick changes in strategy or the senior management team. The directors surveyed said that, otherwise, it is difficult for the new CEO to dismiss people who were hired by the predecessor – and it’s rare that an outgoing CEO will acknowledge that the strategy needs to change.
Forty-nine per cent of the directors said the best role for the outgoing CEO is to exit quickly and play no role on the board. Forty-four per cent favour a short overlap period of no more than six months to assist transition. Only 7 per cent said they favoured a continuing presence of the predecessor on the board.
Significantly, every director in the study has been through a transition at least twice and as often as four times, either as a director or CEO. And 36 per cent said they had seen an incoming CEO fail.
“You don’t want an entire board constantly looking over your shoulder, but the executives indicated they appreciate one or two directors taking the lead to help introduce them and act as a sounding board for their strategies,” Mr. Beaudin said.
The outgoing CEO should introduce key external stakeholders and help facilitate discussions of major issues with board members and make decisions on poor performers, but the selection of replacements should be left to the new chief, the study recommends.
According to the survey respondents, behaviour by former chief executives that should raise concerns includes:
Being too involved in business and expecting to have input on key decisions.
Exerting undue influence on the board behind the scenes
Continuing to expect their opinions to board member to outweigh those of the new CEO.
Having a senior team that still identifies closely with the old boss and his or her leadership style.
“Boards should become more active in working with the new CEO to provide as much context as possible and take immediate action on any signs that the outgoing executive is being manipulative or otherwise hindering the transition,” Mr. Beaudin said.