Chief executive officers (CEOs) are generally considered to have failed when they are unable to meet the expectations of their boards, shareholders and the market at large, or the company’s stakeholders.
This failure becomes official when a company initiates proceedings for the CEO’s exit. What are the primary factors leading to this dissatisfaction? What is the CEO’s ability to react? And can the top executive be considered a “failure” when receiving a severance package worth millions?
The actions new leaders take during their first 90 days can have a major impact on their success or failure. How does one best take charge in a new leadership role?
Transitions are pivotal times, in part, because everyone is expecting change to occur. But these are also periods of great vulnerability for new leaders, who lack established working relationships and detailed knowledge of their new role.
New CEOs, who fail to build momentum during their transition, face an uphill battle, which in the final analysis, may never be won. Once the battle is lost, a CEO’s reputation may be sufficiently tarnished where another leadership opportunity may be difficult to come by.
The Six Leadership Passages
The Leadership Pipeline Model (Ram Charan, Stephen Drotter and James Noel, 2001) explains the career stages and the critical transition points in the leadership process, where each passage represents a fundamental change in the skills and values that are important, and the activities that must be prioritised and allocated more time so as to avoid transition pitfalls. (see figure).
Leadership transition pitfalls for CEOs at Passage Six of the Leadership Pipeline occur for two common reasons: CEOs are often unaware that this is a significant passage that requires changes in values and it is difficult to develop a CEO for this particular leadership transition.
Preparation for the chief executive position is the result of a series of diverse experiences over a long time. The best developmental approach provides carefully selected job assignments that stretch people over time and allow them to learn and practice necessary skills. Though coaching might be helpful as an adjunct to this development process, people usually need time, experience and the right assignments to develop into effective CEOs.
Leaders who under-perform typically fall into common traps. First, they can become isolated as a consequence of over-reliance on financial and operating reports, and quantitative analyses to assess their new organisations. They spend too much time reading and not enough time meeting and talking.
The resulting isolation inhibits the development of important relationships and the cultivation of sources of information. Consequently, the new leader becomes remote and unapproachable. So it is important for new leaders to become acquainted with their organisations quickly.
Some CEOs rely too much on technical solutions, changes to organisational structure, or the manipulation of measurement and reward systems.
New CEOs fall into this trap through arrogance, insecurity or a belief that they must appear decisive and establish a directive tone. Unfortunately, employees become cynical about these superficial solutions and hence are reluctant to support change.
New CEOs, especially those with a collegial style, often believe that subordinates deserve a chance to prove themselves. However, retaining team members with a record of mediocre performance is seldom advisable.
While it is inappropriate to be unfair or to expect miracles, new CEOs should impose a time limit, for example six to 12 months (depending on the severity of the problem), for deciding who should remain on the senior management team. CEOs need honest feedback.
Good leaders make people around them successful. They are passionate and committed, authentic, courageous, honest and reliable. But in today’s high-pressure environment, leaders need a confidante, a mentor, or someone they can trust to tell the truth about their behaviour. They rarely get that from employees or board members.
Professional executive coaches can help leaders reduce or eliminate their blind spots and be open to constructive feedback. This not only reduces the likelihood of failure and premature burnout, but also provides an atmosphere in which the executive can express his fears, failures and dreams.
Tomorrow: Part 2 reviews what the success strategies are for leaders in transition.