Interim CEOs Make Sense For Unexpected CEO Departures & Succession

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In response to Equilar Article “CEO Succession in Bunches – An In-Depth Look at S&P 1500 Companies with Multiple CEO Turnovers between 2007 and 2010

On the topic of using Interim CEOs for unexpected CEO succession: For a company to have an immediate and well-thought-out leadership answer in the case of sudden CEO departure, I believe it’s a strong sign of responsible thinking and preparation rather than an indictment of a firm’s succession planning, particularly when the current (departed) CEO had plenty of runway expected. Like other significant organizational risks, you want to be prepared for unexpected, even tragic scenarios. Not having an immediate solution to those circumstances is irresponsible. The succession solution doesn’t necessarily have to be a permanent CEO (which ties into my next comments), but there must be a solid solution.

Indeed, an existing Board member is a typical source for interim CEOs, but it can also make good sense to go with another person from the Executive Team. Sudden CEO departure can shock an organizational culture, which in turn has negative ripple effects. What the organization needs is an instant stabilizing influence, including and interim CEO that the troops know, trust, and want to follow. Often times, there is a such a highly credible person who has been there a long time, has many deep relationships, clearly cares about the company and its people, and has a proven track record of success. Bingo. That person can be the parental influence that helps the family know that everything is going to be all right.

Why, you ask, isn’t the previously-described person just anointed permanent CEO. Couple of reasons. First, this person is typically on the tail-end of their own career, very likely planning to retire in a couple of years. They’re honored to take the reins on an interim basis, but have no desire (or ability) to significantly alter their retirement projection. Second, the CEO of the future might require skills and experience the interim CEO doesn’t have. This interim CEO can adequately manage the current business challenges for a relatively short period of time, and as importantly will serve a crucial emotional role for the organization. But they don’t have the right stuff to take the company to the next level and/or to handle what’s coming down the pike.

In short, interim CEO succession planning makes sense. It’s like a life insurance policy—you’d rather not have to use it, but are glad you have it if you do.

As for the piece of the article that covers the unexpected short tenure of new CEOs, these finding are consistent with previous research we’ve cited that shows that senior-level transitions fail more often than they succeed. The primary reasons for this trend include (a) a solid blueprint for success wasn’t really nailed down before the search, so the search was misguided, (b) assessment of the degree of fit between candidates and the role requirements was less-than-rigorous, essentially allowing a mis-hire, and/or (c) inadequate onboarding or assimilation was provided, which otherwise could have accelerated traction and value addition. These mistakes can be minimized, but that’s probably another blog discussion.

Kevin Hummel, Ph.D. is a Managing Director of Board Advisory, LLC

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