Shame, bitterness and loss: WHY CEO EXITS ARE HARD
I am pleased to share this week's Financial Times' Working It newsletter.
In this edition, I had the opportunity to discuss with Isabel Berwick and James Fulton, the significance of the behind-the-scenes preparation for a CEO during a transition, emphasising that the individual work is as important as the broader succession planning.
We also explored the necessity of having the right people in the mix. The design and ownership of winning CEO-transitions requires clear sightedness and explicit intent around creating value and reducing risk. If you have skin in the game, you really cant be impartial!
We need honest talk about CEO endings
We hear a lot about “the first 100 days” when a new CEO or leader takes over. Everything is shiny and filled with possibility. What happens at the other end of tenure, in the 100 days before a CEO’s exit? “That’s under written-about,” says James Fulton, formerly global head of talent at Goldman Sachs and now an adviser on leadership and succession.
James’s longtime collaborator, Kate Lye, founder of The Savoir Group, is also intrigued by the very human reasons why there’s often an unspoken code of silence around leaving and succession planning, often from everyone involved. It’s not surprising, she says, “if you think about the emotions tied up in it: shame, embarrassment, bitterness and worry that the next person is going to be better.” Recruiters will expertly manage the succession selection process, Kate points out, “but not the choreography of the emotion”
And these powerful emotions can be destructive if they aren’t acknowledged and processed, Kate says: “You should not rely on rational, professional, incredibly talented people to behave in an adult way, when they are under that sort of pressure. Even though they’ve agreed to an [exit] plan.”
Focusing on the “last 100 days” as a core part of the succession process, from a CEO’s personal perspective as well as institutionally, allows transition to be explicit — and also gives the opportunity to voice hard truths. The board, especially, has to be allowed to speak up. James says: “The board may think this, and the CFO thinks that, and the chair thinks the other. And how are those dynamics and tensions worked through and resolved? I think it’s done rarely, if ever. It ends up being the most powerful person who wins out.”
One of the techniques that Kate finds works best for CEOs and boards in transition is to persuade the outgoing boss to stay more silent and reflective during this period: “Really helping pave the way for the successor, [means] you have to put your ego in a basket.” In practice, she suggests, that means a CEO telling senior staff that “you’re going to hear less and less from me, and that’s deliberate”. Taking less of an active role also allows the outgoing CEO to speak freely — when asked, or in private . “That’s where I’ve seen businesses do really smart things, where they say ‘we are going to use you to help us reconfigure this, or help us think afresh. You know how we’ve always done it. You’re not going to be here for the next bit. If you are being truly honest, how should we do it?’”
A good outcome is to frame any exit (even a forced one) in a positive way, James says: “One CEO said, ‘I’m going to be the best predecessor that my successor has ever had.’ It’s a lovely framing. So, for example, he said, ‘I know that six months down the line, we’re going to have to take a really tough decision. I’ll take it, to clear it off his plate.’”
And the next level for “last 100 days” planning? Tying the departing leader’s ongoing remuneration to their successor’s success.
In a nutshell: Leaving a job is hard. That’s amplified for outgoing CEOs, especially for performance-related ousting (even if it’s not made public). An explicit ambition to behave differently during the last 100 days of tenure can help.
Want more? James Fulton and Kate Lye wrote an HBR piece on The Art of the Executive Exit, which might be good to share with the board.