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Published: May 24, 2012
 / Summer 2012 / Issue 67

 
 

CEO Succession 2011: The New CEO’s First Year

This is perhaps an even more important step for new CEOs from inside the business, who risk the perception that they will limit their role to being the “superboss” of their previous territory. “I think it’s important, especially in the initial phase, that you don’t hang on to your old job,” says Severin Schwan, CEO of pharmaceutical giant Roche. “You need to move on, and to make sure that the organization immediately recognizes that you are now in a new role. Because people always think, ‘This is the guy from that unit, so he looks at things from a particular angle.’ You have to get rid of this perception.”

4. Build trust through transparency. Gaining the support of all the stakeholders is critical to success in the new CEO’s first year. Different constituencies will be watching closely, monitoring performance carefully; in the worst-case scenario, some will resent the new CEO’s rise to power. In this atmosphere, building trust is critical, and the best way to do that is to be as open as possible about plans and motives with all the critical players, and to move decisively in making the most pressing changes.

“Absolutely key is transparency with all your stakeholders,” says Roche’s Schwan. “The moment you put issues or risks on the table and speak about them openly — with the board, with your colleagues on the executive committee, with external stakeholders, media, and investors — that in itself creates trust. And that in turn triggers support: The moment you frame the topic, people become very interested in making it better and working at a solution.” And support is surely one of the most pressing needs of the new CEO.

Once gained, that trust will make the new chief executive’s job considerably easier, Schwan notes. “If you feel that you have the trust from key stakeholders, from your own team, from the board, from external stakeholders,” he says, “then the pressure is reduced. If you feel that the trust is being lost, then the pressure gets much higher.”

5. Be selective in listening to advice. As soon as his or her appointment is announced, the new CEO will inevitably be surrounded by people offering advice — board members, business unit leaders, customers, investors, even the press. Everyone has an agenda, but not all of the advice is in the best interests of the CEO or the company he or she has been hired to run. Few people will be able to see the whole picture of where the company stands and what it needs. And it can be difficult, if not impossible, to sort out the valuable advice from the worthless.

“Don’t listen too much to external advice,” says Ian Livingston, CEO of BT Group. “The truth be told, you’ve got to make your own call. It’s your decision, and most everyone actually knows that.”

Advice from key internal leaders, on the other hand, can be very useful, Livingston points out. “The best advice, actually, isn’t from shareholders, isn’t from brokers. The best advice I get is from CFOs and HR directors, because they’re people who have a view across the entire business.”

6. Yes, it is lonely, so find a sparring partner. A common theme among the CEOs we spoke with concerned the importance of finding someone, whether internal or external, from whom you can learn what you need to learn, or with whom you can discuss plans and people honestly and openly, knowing that the other person has no agenda other than your success. Increasingly, that role has been played by the current chairman, as we’ve noted. But no matter who that person is, or why the new CEO feels the need to turn to that person, every new CEO should look for a well-informed, objective sounding board.

 
 
 
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Resources

  1. Ken Favaro, Per-Ola Karlsson, and Gary L. Neilson, “The Four Types of CEOs,” s+b, Summer 2011: Last year’s study suggested that the nature of the CEO’s job varies with the role of the corporate core — and that the more involved headquarters is in operational decision making in any given company, the more fragile the CEO’s tenure is likely to be.
  2. Ken Favaro, Per-Ola Karlsson, Jon Katzenbach, and Gary L. Neilson, “Lessons from the Trenches for New CEOs: Separating Myths from Game Changers,” Booz & Company white paper, January 2010: The practices that will substantially contribute to success for new CEOs.
  3. Ken Favaro, Per-Ola Karlsson, and Gary L. Neilson, “CEO Succession 2000–2009: A Decade of Convergence and Compression,” s+b, Summer 2010: This study documented a decade’s worth of CEO succession trends and noted how governance norms are converging and the job of the CEO is compressing, in terms of both tenure and capacity.
  4. Gary L. Neilson and Julie Wulf, “How Many Direct Reports?Harvard Business Review, April 2012: An author of this article and a Harvard Business School professor discuss why the CEO’s average span of control, measured by the number of direct reports, has doubled, rising from about five in the mid-1980s to almost 10 in the mid-2000s.
  5. For more thought leadership on this topic, see the s+b website at: strategy-business.com/strategy_and_leadership and the Booz & Company website at: strategyand.pwc.com/global/home/what_we_think/featured_content/ceo_succession.
 
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