CEO Transitions: Here’s How to Handle them

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The time has come—for one reason or another, it’s time to step down as CEO of your company. How do you handle such a situation? What are the key things that the company needs to consider to ensure that the process runs smoothly? Chris Moses, Senior Operations Manager from Blackstone Consultancy and Matthew Blagg, CEO of Criticaleye impart their wisdom on handling a transition, with Simon Bittlestone, CEO of Metapraxis giving insight from a financial analytics standpoint.

Chris Moses discusses:

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“Changeover of a CEO can be a tricky business. Naturally, you would wish to find the opportune moment to carry out the transition where it would have as little impact as possible on the business, but sometimes situations outside the organisation’s control can dictate that the changeover must happen straight away.

The world of high powered CEOs in any field or industry is relatively small. Most recruitment would happen internally first, so as to minimise the time needed, not only in the recruitment process, but in the individual adjusting to the organisation’s culture. If no suitable internal candidate is identified, the organisation will then look externally. Only if the board believe a complete overhaul of the organisation or the culture is required would the preference be to carry out external recruitment straightaway. Succession planning should be a part of any organisation’s business strategy, so there should always be an internal candidate already identified to step in if required. Irrespective of the recruitment process, the CEO is such a pivotal position that if you get it wrong, it could affect the share value of a listed company. For example, The Financial Times reported on 22nd May 2017 that shares in LafargeHolcim initially jumped more than 4% as investors welcomed the Swiss-French cement group’s appointment of a new Chief Executive, Jan Jenisch, as the group attempted to move on from recent controversy over its activities in Syria.

Share prices can also go the other way. In December 2017 Bloomberg reported that shares in Steinhoff International Holdings plunged after its Chief Executive Officer resigned amid accounting irregularities, rocking a company that’s rapidly expanded from its roots in South Africa into a retail empire spanning Australia, Europe and the US. When CEO Markus Jooste quit the stock slumped as much as 72% in Frankfurt, wiping out more than 7 billion € ($8.3 billion) in value.

So, how do we prevent mistakes being made in appointing the next CEO?  At Blackstone Consultancy, we routinely help companies carry out due diligence on individuals, i.e. if their corporate and financial history needs to be examined. There are routine desktop research databases to ensure initially that the person under consideration is who they say they are, that they have the correct qualifications and industry experience to allow them to competently carry out their duties.

As the due diligence will be consented, that will allow you to approach educational and professional membership bodies to check CV statements of professional competencies. It would also be recommended that HR departments of any organisation you have contracted to carry out the due diligence process contact their counterparts in previous employers to ensure that they actually employed the individual. In large organisations or listed entities during the process of appointing a new CEO reputational issues are as relevant than professional competencies. Imagine a situation where a newly appointed CEO is discovered to have contributed to an article several years before criticising his new employers or supporting a political or social viewpoint that is considered controversial i.e. Brexit. These instances always affect share price and the organisation’s reputation and could have been prevented with a more proactive due diligence strategy.

In summary, to protect the organisation both financially and reputationally, effective due diligence on candidates prior to appointment in any strategic or high-profile position is a must. At Blackstone Consultancy, we employ an industry leading subscription database and analysis tools that allow us to identify any risks associated with candidates. This enables organisations to make a decision based on all the information available to them and appoint the correct individual to the post, therefore minimising any transition or appointment issues further down the line.”

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Additionally, giving his unique insight and advice on the topic, Matthew Blagg says:

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“Organisations should have a clear succession strategy in place well before the current CEO passes on the baton. This should identify potential candidates early in the process and give them access to leadership development opportunities, mentoring and exposure to other leaders and experts outside their organisation, so they have the right skills, capabilities and aptitude to take on a demanding CEO role.

In our own research with CEOs, Chairs, Non-executive Directors and senior executives across the C-suite, we are consistently told that mentoring and learning from peers who can share experiences and similar challenges, provides much more effective and beneficial leadership development than formal courses or the input of the Chair and Board directors. Similarly, it is helpful, especially for individuals in leadership roles, if they have access to advice and learning opportunities away from their organisations, shareholders, stakeholders or Boards, where they are going to be effectively and genuinely challenged; and where there are no hidden agendas, prejudices or boardroom politics to get in the way of either addressing a problem which needs to overcome or putting a strategy in place that will drive the business forward.

In our experience from leaders across our own community, nothing fully prepares you for the role of CEO, it is a lonely place at the top – you are under tremendous pressure to make the right changes and put the right strategy in place to take the organisation forward.

If it is an internal candidate, previous relationships with colleagues will inevitably change and so having the right support network in place, whether this is an external and impartial mentor or a safe space outside the organisation where that individual can share and discuss concerns and ideas is hugely valuable. Add to this that a new CEO suddenly has ultimate accountability for the success of the business and responsibility for its people, and it’s also important to give consideration to the personal pressure a new CEO may feel under in the early days, regardless of the fact that they will undoubtedly have been fulfilling a senior role with a high level of responsibility when appointed.

When it comes to choosing the right replacement, this will depend on what the business needs at that particular time. Too often, boards and HRDs look outside the business for their next CEO – we know from our research that most senior executives think more budget should be spent on developing leadership talent internally rather than paying head hunters to find someone new, although the latter invariably gets the lion’s share of the budget. There is a lot to be said for bringing on someone from within the business who will understand the culture and the legacy – this is not to say they won’t make changes, but their changes will be made in a way that is mindful and respectful of what the business has achieved to date.”

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And last but not least, Simon Bittlestone adds:

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“In any onboarding process, providing easy access to relevant financial and business data is crucial. Understanding the trends in historical data will help a new CEO get up to speed far quicker in terms of the performance of the business. By looking at this data and working with the CFO and finance function to understand the market context and likely future performance, the new CEO will be able to base initial strategic decisions on facts and create a realistic business plan, which will undoubtedly provide some reassurance to the wider team.

From my own experience of taking over a business, personal interaction alone isn’t enough to really understand the organisation. It carries with it the perceptions of the individual – which is useful but can also potentially be misleading. Understanding the realities of what is working and what isn’t and how that is likely to change ahead, gives you the best chance of making the biggest and quickest impact, which is vital for a new CEO in establishing trust and support.”

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