Two out of every five new CEOs fail in the first 18 months (HBR, January 2005).
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 confirms its decision to initiate proceedings for the CEO’s departure. 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 the 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 discrete career stages and the critical transitions points in the leadership pipeline, 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 1).
Source: The Leadership Pipeline, (2001), by Ram Charan, Stephen Drotter, and James Noel
Common Leadership Transition Pitfalls
Leadership transition pitfalls for CEOs at Passage Six of the Leadership Pipeline occur for two common reasons:
1. CEOs are often unaware that this is a significant passage that requires changes in values.
2. It's difficult to develop a CEO for this particular leadership transition. In terms of the latter, 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.
According to Dr Michael Watkins, the author of the best seller, “The First 90 Days” (HBS Press, 2003), the biggest trap new leaders fall into is to believe that they will continue be successful by doing what has made them successful in the past. There is an old saying, “To a person who has a hammer, everything looks like a nail.” So too it is for leaders who have become successful by relying on certain skills and abilities. Too often they fail to see that their new leadership role demands different skills and abilities. And so they fail to meet the adaptive challenge. This does not, of course, mean that new leaders should ignore their strengths. It means that they should focus first on what it will really take to be successful in the new role, then discipline themselves to do things that don’t come naturally if the situation demands it.
Dr Watkins further adds that another common trap is falling prey to the understandable anxiety the transition process evokes. Some new leaders try to take on too much, hoping that if they do enough things, something will work. Others feel they have to be seen “taking charge,” and so make changes in order to put their own stamp on things. Still others experience the “action imperative” – they feel they need to be in motion, and so don’t spend enough time upfront engaged in diagnosis. The result is that new leaders end up enmeshed in vicious cycles in which they make bad judgments that undermine their credibility.
From my executive coaching engagements involving CEOs over the past 10 years, my observations are that leaders who under-perform typically fall into common traps. First of all, they can become isolated as a consequence of over-reliance on financial and operating reports, and quantitative analyses to assess their new organizations. They spend too much time reading and not enough time meeting and talking. They want to know the organization before venturing out into it. The resulting isolation inhibits the development of important relationships and the cultivation of sources of information. Consequently, the new leader becomes remote and unapproachable. In short, it is important for new leaders to get out and become acquainted with their organizations quickly.
Secondly, new CEOs have to be careful not to enter the firm with a well-defined fix for the organizational problems. Some CEOs rely too much on technical solutions, changes to organizational 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 their record of mediocre performance is seldom advisable. Retaining direct reports, who are not up to the task, squanders precious time and energy, which leaders might be directing elsewhere. While it is inappropriate to be unfair or expect miracles, new CEOs should impose a time limit, for example six to twelve months (depending on the severity of the problem), for deciding who should remain on the senior management team.
Unfortunately, some new CEOs try to do too many things, hoping that something is bound to work. Unfortunately, this approach renders an organization confused and overwhelmed, rather than spurring it into action. Priorities become unclear. While experimentation is good, too much of it deprives initiatives of sufficient resources and attention. It is important for new CEOs to prioritize the important issues, and not be diverted by the less important ones.
Upon the arrival of a new CEO, there inevitably is jockeying by those who have exerted influence in the old organization and hope to have influence in the new regime. Vying for the new CEO's attention will be those, who cannot help simply because they are not capable, those who are well-meaning but out of touch, those who actually wish to mislead, or those who are simply seeking power for its own sake. New CEOs must exercise care in deciding to whom to listen, and to what degree. In order to avoid this trap, new leaders must keep lines of communication open to ensure that internal influences are balanced.
For a variety of valid reasons, unrealistic expectations can be set at the time a new CEO joins the organization. The recruitment process is seductive, and there is much that both parties don’t know. Consequently, new leaders should never presume that an initial mandate will, or should remain, unchanged. Rather, they should negotiate through the transition with their superiors to clarify their mandate and set expectations. Unrealistic expectations, on the part of a CEO or the owner/board, are an inappropriate way to initiate a relationship.
Ensuring a Successful Transition
The most challenging time for leaders is often in the early days of leading and managing others. Ram Charan, Stephen Drotter and James Noel noted in their book “The Leadership Pipeline’’ (John Wiley, 2001) that the biggest shift was from being a manager of self to a manager of others. The shift from only having to manage yourself to having to manage other people around you can be challenging, especially for young, inexperienced leaders. Once the initial leadership skills have been learnt, the progression to manager of managers and leader of leaders becomes much easier.
In the extensive research by the author published in the book Coaching in Asia – The First Decade (Bawany, 2010), indicates three success strategies where leaders in transition could adopt (Refer to Figure 2):
Alignment with Strategic Direction: Individual expectations of the leader as well as the functions must be aligned with organization goals and strategic direction; more importantly, there must be dialogue to create alignment.
Expanding Leadership Competence: The organization must have absolute clarity on requirements and expectations of the various stakeholders on the leaders, including the articulating the crucial emotional intelligence competencies and leadership capabilities best suited for the role. The Leaders need to develop their own leadership expertise including learning to build an effective leadership team, to manage the performance of others and to effectively delegate and develop others (hence they need to possess managerial coaching skills)
Expanding Organization Competence: Leaders have to understand the business processes that create economic value for the organization. Higher levels of leadership have to understand when and how to redesign these processes to accomplish the strategy as well as understand the capabilities needed to operate these processes.
Figure 2: Success Strategies for Leaders in Transition
Expanding Leadership Competence Expanding Organization Competence
• Shift of Mindset (Mental Models) • Business Processes
• Business and Financial Acumen • Structure & Accountabilities
• Emotional Intelligence – Core Transitional Skills • Relationships, Power & Politics
• Development of Others (Corporate Coaching Skills) • Staffing & Capabilities (Knowledge Mgt)
Source: Sattar Bawany, ‘Maximising the Potential of Future Leader’ in ‘Coaching in Asia – The First Decade’ August 2010 (ISBN: 978-981-08-6569-6)
New CEOs must manage themselves if they are to be successful. The physical demands of a transition are high, as are the emotional demands, not only at work but also at home. An inability to manage stress can impede a new CEO's efforts. A clear head can provide a substantial edge, as can emotional balance. Exercising clear-headed judgment, staying focused, and maintaining emotional evenness are all critical factors. It is important to maintain perspective and avoid isolation. The most common cause of failure is not technical (corporate strategy, technologies, or functional aspects of the business), but rather a failure to read and react to political currents or a failure to manage the internal challenges of the transition. New leaders are more likely to succeed if they build and utilize a balanced network of technical, political, and personal advisors.
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 behavior. 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, not only reducing the likelihood of failure, and premature burnout, but also provide an atmosphere in which the executive can express fears, failures and dreams.
For a new CEO, the most important goal is to build momentum towards achieving priorities, the objectives the new leader wants to achieve within the near term. Success relies on securing early wins and laying a foundation for deeper change. The transition process requires a deeper assessment of organizational capabilities, and change that supports a more focused set of priorities. Following this learning period during transition, vision and coalition building are critical to success.
Prof Sattar Bawany, Honorary Academic Advisor of IPMA and Adjunct Professor of Strategy of PGSM. He is also the Co-Chair of Human Capital Committee of American Chamber of Commerce (AmCham Singapore). He can be contacted at email@example.com and Website: www.ipma.com.sg
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
Do you know more about this story? Contact us anonymously through this link.
Prof Sattar Bawany is the CEO & Master Executive Coach of Centre for Executive Education (CEE Global).