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When a CEO steps down, it will probably set off a domino impact of chaos. Boards—usually caught off guard—should jumpstart the seek for a successor. And within the course of, they generally exclude the departing CEO from the search or transition—resulting in a lack of institutional data and damaged belief. Nevertheless it doesn’t should be this manner.
Management advisors Rebecca Slan Jerusalim and Navio Kwok say the connection between a board and CEO could make or break the altering of the guard. They spoke to Curt Nickisch on HBR IdeaCast in 2024 about greatest practices for CEO transitions.
CURT NICKISCH: Rebecca and Navio, welcome.
REBECCA SLAN JERUSALIM: Thanks. We’re thrilled to be right here.
NAVIO KWOK: Thanks. Thanks for having us.
CURT NICKISCH: Clearly, the CEO transition is tremendous vital to an organization. Is that significance one thing that signifies that individuals actually give it a whole lot of consideration and do it proper, or that there’s a lot stress to do it proper that individuals sort of fumble it as they attempt to handle it nicely?
REBECCA SLAN JERUSALIM: Nicely, I might say there’s tons of labor on the market wanting on the succession course of, what components of the succession course of are actually crucial, and notably even round CEO succession. What’s the proper step and cadence to this? What’s the board’s involvement? What position does the incoming CEO play?
And what hasn’t been studied or checked out or actually understood is the expertise of that one who’s so pivotal to the group; the one who has been on the helm of the group, setting the technique, managing the technique, creating the organizational tradition. How does that individual’s expertise in transitioning out of the position actually impression the group, the succession expertise, as we’re actually very a lot targeted on the incoming CEO?
NAVIO KWOK: I believe we frequently additionally see that there’s a little bit of this stress between how pressing one thing is and the way vital it must be. And so CEO succession for a board and probably the highest crew as nicely is one thing that’s extraordinarily vital, however not very pressing, as a result of these selections are inclined to occur nicely upfront until there was an emergency state of affairs. And so what a board will do is that they’re going to concentrate on the day-to-day, and naturally, non-urgent vital issues are at all times going to get pushed off, and I might bucket succession in that class, and because of this, it’s not at all times prime of thoughts.
CURT NICKISCH: After which it turns into prime of thoughts in a short time usually. In your analysis, you discovered that 83% of CEO successions had been initiated by the CEO themselves, which sort of stunned me a bit bit. You sort of really feel like these persons are presupposed to be within the sizzling seat and in the event that they’re not performing, they’re out and we have to get anyone else in. And actually, it’s sort of largely largely on their timelines.
NAVIO KWOK: Yeah. I had seen some analysis. I believe they plotted the efficiency trajectories of CEOs, those who had been performing nicely and those who weren’t, after which they sort of checked out whether or not or not they initiated succession or in the event that they had been compelled out, and truly, that isn’t a robust predictor. So in recent times, the efficiency of the CEO doesn’t at all times have that direct contribution to once they step down. And so I believe that performs into why largely, we present in our pattern, it’s CEO initiated and it aligns to what you may collect from public CEO information on no less than why CEOs or why boards reference CEOs stepping down is it’s a retirement resolution.
REBECCA SLAN JERUSALIM: I might say we had been additionally fairly stunned on the variety of CEOs who self-initiated the succession. I imply, when you undergo any sort of board governance coaching, you actually know that succession is meant to be actually prime of thoughts and never a final minute resolution in and round who would be the subsequent successor, however this must be an actual course of round figuring out early, build up the capabilities of inside successors and operating via totally different situations to have the ability to put the best individual within the position. And really a lot an excellent portion of our pattern, and also you referenced 83%, lots of them self-initiated, and what we discovered was additionally fascinating was that they actually stunned the board.
CURT NICKISCH: Yeah. You had a narrative within the article of a board that met eight occasions to attempt to persuade the CEO to remain once they wanted to be spending that point on not making an attempt to arm twist an unwilling government to be sad longer, however exit and discover the alternative.
REBECCA SLAN JERUSALIM: And a number of the causes that CEOs had been initiating the succession had been causes that the board might have and will have had higher perception into lengthy earlier than the CEO made that declaration, so issues like we speak about temporal causes, age and tenure in position. These are straightforward issues {that a} board can have common ongoing conversations with the CEO about.
A few the opposite causes CEOs introduced their readiness for succession had been actually round, they noticed that there have been future wants of the group that they couldn’t essentially or shouldn’t essentially be those delivering on. They usually additionally acknowledged that they may probably be a blocker to succession and that there have been individuals prepared or actually must be within the strategy of being prepared for that CEO position, they usually didn’t wish to block their alternative.
And so these are two issues that basically stood out to us as a result of a whole lot of what has been written about CEO succession speaks to the ego that’s concerned in being on the prime of the home and never eager to relinquish that seat for others. And in precise reality, there have been some actually vital and totally different concepts that got here via these conversations that boards ought to actually be speaking to the CEOs about and never frightened to the identical extent that it’s purely ego-driven or a maintain on energy that’s protecting these CEOs in place.
CURT NICKISCH: Yeah, no, I suppose tales of individuals being CEOs, being compelled out, burning all of it as they go, proper, these are huge issues that scare boards and scare lots of people, however it’s in all probability few and much between when it’s actually anyone who simply says, “It’s time. I’m getting drained,” proper?
REBECCA SLAN JERUSALIM: They in all probability make the information extra.
CURT NICKISCH: You’ve outlined the ways in which they need to be extra proactive earlier than this information comes. As soon as the information comes, what errors do you see boards make at that time?
NAVIO KWOK: One which comes out via that analysis is the extent of CEOs’ involvement in their very own succession course of. So in our analysis, we recognized 5 issues that they did all the best way from simply canvassing for candidates all the best way to onboarding. And so if we go away apart onboarding, which most CEOs did have some extent of involvement there, we discovered almost one in 4 CEOs had been excluded from that course of totally. You already know, go away it to us.
We didn’t use this language in our paper, however it jogs my memory of the RACI framework in relation to venture administration. You’ve acquired accountable, accountable, consulted and knowledgeable, and the board is accountable for succession as a result of the board shall be there when the outdated CEO steps down and new one is available in, however who’s accountable? I believe we’d say that it must be the outgoing CEO to some extent – multiple in 4 being excluded totally. And there’s all these causes we discovered why it’s essential really for the group.
CURT NICKISCH: Nicely, it simply stands to cause for any job, proper? We’ve all left jobs and recognized that ideally once you go away a job, it’s a spot that’s higher than it was earlier than you arrived. And it’s not simply the hours of your time doing one thing that may be changed, that it’s really a stronger group after you allow, however I don’t know, when you overlap with the one who’s changing you to assist practice them, that that’s a really constructive factor for a corporation and it’s virtually the identical thought for CEOs, it’s simply that it’s quite a bit trickier when you may solely have one individual in cost, however you go from one individual to the following, so how do you deal with that transition? So what do you inform CEOs which might be on this place? What’s your recommendation for them?
REBECCA SLAN JERUSALIM: Pay attention, finally, when executed proper, there’s a position for them to play within the succession course of, however that they do even have to acknowledge that they aren’t going to have full management. The management right here will ebb and circulation all through the method. And for them, what the connection is that the management piece, we likened it to or we related it to mattering, that they’re so used to having such an amazing impression on each resolution that the group makes, that not being able to have some management or impression right here really connects to their capability to really feel like they matter, like they’ve worth, like they’ve enter. And once they’re not on condition that sort of alternative to weigh in, there’s a deeper sort of psychological want in and round wanting to point out that they nonetheless have some worth right here so as to add.
CURT NICKISCH: It’s sort of an attention-grabbing dance, proper? Ought to they provide info? Ought to they wait till they’re requested? What’s the protocol there?
REBECCA SLAN JERUSALIM: A lot of that has to do with how they function with the board in another matter. One of many strongest findings that we discovered is the connection and the power of relationships between the CEOs and boards had been predictive, and I say predictive, predictive, air quotes, this was a qualitative examine, not a causative exploration, however the power of the connection between the boards and the CEOs actually impacted how the general expertise of the CEOs within the succession course of.
NAVIO KWOK: It’s like once you wish to ask for a favor from somebody in your community, it’s far more useful and productive when you’ve had an current relationship with them after which the request comes. However typically we’ve got associates in our community the place they solely come to us once they want one thing. And that to me, what may be akin to a CEO board relationship, which is there’s fairly a little bit of a chasm between it, and they also’re solely speaking when there are issues that must be mentioned, and now you’ve acquired this huge factor that we’ve got to work with in concept collectively. It’s not the primary time they’re assembly, however the relationship is so new and also you’re making an attempt to construct this relationship at that very tough cut-off date the place there may be a lot danger even on an excellent day and a well-thought-out succession course of.
CURT NICKISCH: Nicely, it makes it sound like then it’s additionally incumbent on the outgoing CEO to be speaking with the board earlier in order that it isn’t a shock and that feelings don’t flare up once they do give that announcement.
REBECCA SLAN JERUSALIM: That’s proper. It must be an extended ongoing dialog. And CEO succession shouldn’t be thought-about sort of a momentary or second in time. It must be a years within the making, ongoing dialog between the CEO and the board and actual identification and preparation of key successors alongside the best way; ought to make the board really feel assured that they’ve acquired optionality, that the CEO is on prime of this and serving to and growing these people; that the board has visibility to them.
And so when the CEO then broadcasts their willingness and readiness for succession, the board ought to actually really feel like they’ve acquired a line of sight to who these excessive potentials and people potential candidates are, that they’ve been constructed up through the years, that they’ve readability round what that profile appears like. And sure, there may be tweaks alongside the best way, however it shouldn’t come as such a shock and shock that that is occurring.
NAVIO KWOK: I believe the implication too for any supervisor of a crew or a frontrunner in a corporation is to at all times have a robust bench. We’re not anticipating boards to be not stunned when a CEO says they wish to step down. We’re not asking boards to not try to persuade and shift the timeline a bit bit, however they need to be ready for that very inevitable end result. And so for any chief or supervisor, you need to have a deep bench. An instance is the Vancouver Canucks had been simply in a playoff run.
CURT NICKISCH: That is an NHL hockey crew…
NAVIO KWOK: Sure, NHL hockey crew and the goalie was the back-up to the back-up. That was the one who ended up taking part in as a result of the primary goalie was injured after which one thing occurred with the second goalie. So we’re considering that every one sports activities groups, sports activities crew managers, they’ve an consciousness of the place they’re going to drag expertise. Now, whether or not or not it involves fruition like this case, it’s not at all times going to be successful story, however no less than having an consciousness of the important thing gamers which you can pull on when wanted is essential and in relation to CEOs, particularly so as a result of there may be a lot that’s on their shoulders once they step into that position.
CURT NICKISCH: What did your analysis discover for the most effective practices for outgoing CEOs?
NAVIO KWOK: I’ll share a narrative. One CEO stated to extra clearly demarcate their roles and tasks and the time at which one individual was formally going to be enrolled. So this specific CEO had stated they felt they had been fairly clear that, “I’m nonetheless CEO till a sure date, then you definitely’re going to step in,” however it appeared to blur, and actually, he might see the board members and sure prime crew members shift their allegiance to the brand new particular person, and so there’s a bit of virtually encroaching of tasks. So being extra clearly demarcating, whose duty goes to cease and begin when that was pretty notable, and I might say, Rebecca, it’s in all probability a part of the transition section of succession.
REBECCA SLAN JERUSALIM: Yeah, I might say two associated issues. One is lots of them talked about taking their successor with them to any conferences, exterior conferences, distributors, suppliers, board conferences, et cetera, in order that they may actually get the advantage of the outgoing CEOs’ relationships and the tie to no matter relationship they had been fostering.
This readability and demarcating roles and tasks is true for the board with the CEO and actually laying out what that transition plan must be and appear like, what the timeline is, what the tasks are. And a few of them even talked about, and few, however a few of them did discuss in regards to the board having a job in that being their finish of the day efficiency evaluation of how a lot have you ever helped help your successor in transitioning.
CURT NICKISCH: Now, irrespective of how clear the position is, it’s nonetheless exhausting, proper? You might have a really clearly demarcated when the opposite individual takes over, however then they take over and their priorities are totally different. The issues that you simply’ve actually thought are vital as CEO abruptly are perhaps decrease down on the precedence record. Regardless that you wish to go away the position, to see anyone else do issues otherwise, there’s acquired to be powerful feelings there.
REBECCA SLAN JERUSALIM: There’s a great quantity of emotion all through the whole lot of this course of. An actual curler coaster, once more, buffered by the sturdy trusting relationship with the board. However I’ll provide you with a way of what that curler coaster appeared like. The feelings, the outgoing CEOs had been very a lot managing their very own feelings in addition to the board’s feelings, the senior crew’s feelings as nicely.
Previous to saying that the succession course of, it may be fairly lonely for CEOs, for outgoing CEOs, realizing that they’ll in some unspecified time in the future exiting that position. Lonely, I say, as a result of they’re not essentially in a position to share the information that they are going to be discovering a successor initially, and there’s not that many individuals or locations that they will flip to share a few of that emotion. It may well really feel dishonest ultimately.
However post-announcement, there might be pleasure about handing over to the following successor. We heard tales of grief and misery in giving up the job. There is usually a frustration with lack of involvement. And Navio shared some tales in regards to the senior crew sort of turning away from the outgoing CEO, even when they had been nonetheless within the seat.
CURT NICKISCH: Kind of a lame duck sort of response?
REBECCA SLAN JERUSALIM: That’s proper. They will really feel responsible in the event that they’re blamed for this course of going poorly. One of many CEOs who we spoke to even talked in regards to the phases of grief having to surrender that seat, and this CEO really didn’t absolutely exit from the group, stayed on in an government chair position, and so was nonetheless tied to the group ultimately, and but nonetheless likened the expertise of shifting out of that position – it was his resolution – however shifting out of that position and nonetheless feeling like this was an amazing emotional impression.
And so when requested about, “How do you take care of that? How do you acknowledge that?”, he stated even simply naming the expertise and being conscious or cognizant that this might and really probably that this curler coaster of feelings is current and might impression you – leaning into that a bit bit extra. We’re sort of taught there’s no feelings within the boardroom, however in precise reality, it is a very actual human expertise.
CURT NICKISCH: Private, yeah.
REBECCA SLAN JERUSALIM: It’s very private. And so it’s actually crucial to have good trusted advisors to speak via that have, to acknowledge that it might very simply occur and have some plan round the way you’re going to handle that sort of feeling and emotion.
NAVIO KWOK: Yeah. I wish to give my spouse Alana credit score for this. She’s a medical psychologist in coaching. She says, “title it to tame it,” as regards to feelings, so simply merely with the ability to have a label for it’s really fairly impactful in understanding what it’s. And feelings on the whole I believe particularly in enterprise, we speak about how vital emotional intelligence is, however we don’t really create or facilitate an atmosphere the place persons are comfy to speak about their feelings, and so it’s a bit paradoxical to count on somebody to have that ability, however there’s no alternative to essentially sort of observe it.
After which when there’s one thing as main as a succession once you in all probability must be absolutely able to make the most of these expertise, nicely, you by no means had any alternative to observe up till that time, and we’re asking the CEO that they really can’t speak about in any respect. So it’s this bizarre dynamic they should take care of.
With that CEO that Rebecca had simply talked about too, he raised an excellent level that you may want to concentrate on simply what your triggers are, and also you may not know what they’re till you see them. So for that particular person, what actually struck them initially was when their workplace was now not within the heart of their constructing. So it was once they had been extra on the periphery bodily, that’s when he felt, “Okay, that is actual. That is vital and I’m the outdated guard leaving.”
So I believe that speaks to an earlier query you had about simply what a CEO can do, the outgoing CEO and the incoming CEO, is being conscious of the symbolic nature of government management on the prime. And so this CEO really made a concerted effort to maneuver his workplace away from the middle, and nonetheless he was harm. That symbolic nature is essential, and it will probably each assist individuals help the incoming CEO and typically unexpectedly could make it very actual for the outgoing CEO that it’s very actual and it’s time so that you can step down.
CURT NICKISCH: Yeah. You’ve gone from being a really, essential individual; it’s part of your identification, it’s a giant identification change.
REBECCA SLAN JERUSALIM: It’s attention-grabbing you name that out. One of many key questions that we requested our contributors is, is CEO one thing you do or did or one thing you might be? And it’s very exhausting on the prime of the home to essentially be capable of separate an identification. These CEO jobs are 24 hours, seven days per week. You’re all in. And after we requested that query, there was sort of a tough break up. 47% stated that it’s one thing that they did, and 43% stated it was one thing that they had been. The remaining had been sort of a little bit of each.
And that’s telling. I imply, even for the parents who had what we’d say very low ego, sort of salt of the earth, very humble people who would describe their position as CEO on the backside of the group, it was nonetheless a really personally difficult curler coaster expertise to navigate. And plenty of of them felt it was actually useful to have the reflection, the time to replicate on that have, as a result of only a few individuals really, as you’re going via it, you’re not taking the time to replicate on it.
And then you definitely’ve left the position and there’s little or no that individuals wish to know and perceive of your expertise via that, however but it was useful to each perceive after which for them of their subsequent position, iteration, whether or not it’s as one other CEO or on a board, to truly have actually sturdy sentiment and feeling about how this could go and what feels proper past the particular governance of it was useful and impactful for them.
CURT NICKISCH: What are a number of the greatest classes right here for different executives or actually anyone leaving a job and handing it over to anyone else that you simply assume all of us can study from?
NAVIO KWOK: I’d say related even nicely earlier than you’re leaving a job is to not absolutely tie your identification to both your job or a job. I believe that has specific implications with AI and its potential danger of displacing sure staff and at a minimal, altering the job that they’re doing in ways in which we are able to’t essentially forecast.
So Microsoft and LinkedIn got here out with a piece tendencies report simply very lately, they usually discovered that on LinkedIn’s quickest rising jobs within the U.S., lots of them, I believe perhaps the quantity was two-thirds, weren’t in existence 20 years in the past, so that you don’t even really know what job you may do sooner or later. And so when you tie your identification and sense of self to what you’re doing proper now within the group you’re in, it’s going to make that strategy of letting go, stepping down or altering jobs far more troublesome.
So I’m not saying don’t tie it to it, however I’m saying take into account it a bit bit otherwise. So what do you tie it to?
And so I learn a narrative in a guide by Dan and Chip Heath, they’re brothers, one among them no less than is with Stanford, they usually shared a narrative of Floyd Lee, who was a retired Marine Corps and Military chef. He was 25 years in service, had retired, then the Iraq warfare occurred, so he really re-enlisted as a chef to assist out. And usually, military meals could be very bland, and the mess corridor he was main was pristine meals. Issues had been stunning, meals tasted nice, and folks would come from outdoors of that mess corridor on weekends to eat his meals. And he stated for him, it’s not that he’s in control of meals, he’s in control of morale.
And so when you align your identification to that sort of message for you and your position, I’m in control of morale, then if for no matter cause you may’t be a chef anymore, there are nonetheless different methods in which you’ll fulfill that non-public worth and want of being in control of morale. However when you’re tied completely to being a chef, a military chef for that particular person specifically, then it makes stepping down very exhausting if that job now not exists sooner or later.
REBECCA SLAN JERUSALIM: I might simply add, and we requested this of a number of the CEOs, what sort of recommendation would you could have for people? A part of it’s like Navio talked about, discovering your intrinsic goal. What’s the worth that you simply wish to add? The place do you get essentially the most pleasure? Most of the CEOs in our pattern didn’t step down and retire. They went on to do different issues.
There was additionally this query of avoiding simply creating some busy work since you’re sort of frightened you’ve acquired such a full work life and plenty of can step on wanting to maintain that tempo up, not recognizing that with out true planning and recognizing what subsequent – they’re very strategic of their work life, however not very strategic in planning their private life outdoors of this key position. And so fascinated about that, having common conversations, planning for it earlier than the final day is actually vital.
We additionally heard about partner and household renegotiations. What? You’re round now extra? What does this appear like? Or we stated we’d journey and now you’ve sort of thrown your self into all this other-
CURT NICKISCH: I don’t know you! Yeah.
REBECCA SLAN JERUSALIM: Yeah. Board work, busy work. So there’s some renegotiation that should occur as nicely, however it does go hand in hand with actually purposely fascinated about and planning for that subsequent stage.
CURT NICKISCH: Rebecca and Navio, thanks a lot for approaching the present to share your analysis and to speak about this actually vital transition.
NAVIO KWOK: Thanks. It was a pleasure.
REBECCA SLAN JERUSALIM: Thanks for having us.
HANNAH BATES: That was Rebecca Slan-Jerusalim and Navio Kwok of the manager search and management advisory agency, Russell Reynolds Associates—in dialog with Curt Nickisch on HBR IdeaCast. Jerusalim and Kwok wrote the HBR article, “The Important position of the Outgoing CEO.”
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This episode was produced by Mary Dooe and Me, Hannah Bates. Curt Nickisch is our editor. Music by Coma Media. Particular because of Maureen Hoch, Rob Eckhardt, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and also you – our listener. See you subsequent week.
