CEO Transitions in 2023: Challenges and Opportunities
CEO transitions have always presented challenges for companies, but post-pandemic, we’re seeing more turnover than we have in at least five years. Endemic burnout combined with challenging global and macroeconomic circumstances are causing CEO turnover in companies and organizations at every level.
At Audacia Strategies, we help our clients build companies, infrastructure, and culture that can weather even the harshest of circumstances. With this in mind, we’re going to get into the why of this current tide of CEO turnover and share the smartest moves companies can make during an executive transition, particularly at this moment.
We’ve all seen the numbers about employee turnover, and CEO turnover is catching up too, with Fortune reporting that it has reached its highest rate in five years. According to Challenger, Gray, & Christmas, Inc., CEO turnover is up 18% from a year ago (the numbers are from March 2023). But why are we seeing this uptick in CEO turnover happening right now?
First, leaders are dealing with burned-out employees. Mental Health America reports that in a study of 1,500 individuals, three-quarters of workers say they have experienced burnout. We’re all dealing with the same global and economic challenges. We watched the Great Resignation happen over the last few years. Between managing employee experience, customer experience, and their own burnout levels—CEOs have been at the forefront of change.
Second, We’re in a volatile time between market movement, elections, and global conflict. When a stock crashes, a bank closes, or a product fails, leaders have to take responsibility. This might—either by their own choice or not—lead to an executive transition.
Finally, the IPO market is also to blame. We’ve seen fewer IPOs which means that there are private, venture, and equity-backed companies who were planning on an exit in 2022 or 2023 that just won’t happen. The question to the CEO becomes, do we stay the course or bring in a specialist leader to pivot the firm to be more competitive in the 2024 or 2025 IPO market?
The answer to this question has serious implications for the fate of the CEO and might amount to deciding between keeping a current CEO with public company experience or refocusing investments in their business and hiring a new “specialist CEO” with a depth of expertise in software or distribution, for instance.
So what are the challenges for leaders and board members dealing with CEO transitions in this particular macroeconomic environment?
CEO and executive transitions are always fraught. Even if it isn’t explicit, a new CEO comes with the potential for significant change. Corporate leaders often feel the desire to say, “Nothing is going to change. Everything is going to be the same. Everyone stay calm.” Why? They understandably want to reassure their employees that things will be okay. But there are truer and better ways to reassure your employees—everything changes, even if you don’t intend it to, and when it does you risk getting blamed for lying to people.
Dealing with Multiple Constituencies
There are always multiple constituencies too. In our work, we focus a lot on employee-executive relationships and helping employees understand how and why change is happening. But beyond employees, companies also need to address business partners, customers, and financial stakeholders.
Each of these groups has ideas about your company’s executive transition, and it’s essential that they understand the perspective, goals, and background of the incoming executive. Why is she the right person? Why did she take the job? What is the opportunity she sees in the market?
While executive transitions present ample challenges, they also present excellent opportunities for building trust, strengthening culture, and driving future success.
The First 100 Days
As much as possible, let the first 100 days be a time for listening. Listen to (and visit, if possible) your constituencies and ask questions to get a sense of the goals, pain points, and existing strategies for the company. Incoming executives should ask questions like: Where is the friction for this organization? Where are we amazing? What can we do better?
After the first 100 days, come back to your team and reflect on what you heard. Let your employees know where you can be reached and where your priorities will be. While this contradicts the traditional advice to “hit the ground running,” most pain points are multivariate problems.
Without understanding all of the variables, the CEO risks creating problems rather than solving them. At worst, executives can get dragged into the nitty-gritty early on. Avoiding this requires focusing on the big picture, and especially on the “why” of the organization. What is the purpose, and why do we exist? Spending the first 100 days listening and establishing relationships and expectations is essential for a successful tenure.
Create opportunities to listen to your employees through the channels they’re already using. If you’re coming into a remote organization, host listening sessions on Zoom or Slack. If you’re in person, consider hosting a coffee hour or an “Ask Me Anything” session. It can also be helpful to allow anonymous questions to be sensitive to employees’ concerns.
Particularly during times of transition, employees need to hear your answers to the hard questions: What will this mean for me? How will my manager be affected? Does this CEO really invite questions or not? When conducted with curiosity, empathy, and a bias for transparency, listening sessions can catalyze important discussions.
Draw the Story Arc
Why are you here? This is the first and most fundamental question of employees, customers, and business partners. An incoming executive should be crisp about why she chose this company and what working at this company means to her. If there can be a formal handoff between the exiting and incoming CEO, even better. Particularly for employees, knowing that the former (hopefully beloved) CEO hand-picked the incoming CEO can make for an especially smooth and amicable transition.
But of course, this is not always available. When it isn’t, having a trusted third party such as a board chair endorse the background, values, and vision of the incoming CEO can make a world of difference.
Managers are the first place most employees will turn for information and to “check the temperature” of a change. Keeping the pulse of your people leaders and employee influencers is a huge opportunity. Engage and listen to their challenges and frustrations and equip them with the tools and information to support their team. There is nothing worse as a manager than to feel helpless when your team is asking for help.
Don’t hesitate to give them a channel to funnel questions. Be honest about the fact that we are all learning and moving through this transition together. We may not have all the answers but we’re working on it and we’re working together.
Just as your employees will wonder what the transition will bring, so will your customers. Am I still going to be a priority? Will you keep investing in what I buy from you? As with your employees and managers, be clear in your communication about what the new CEO will bring to the company or organization from the customer point of view.
Keeping Everyone Invested
One of our clients had five CEOs in four years. At a certain point, employees and customers reach a level of change fatigue. Customers don’t care and just want to make sure they have the same account representative. Employees go into survival mode, annoyed at what they see as change for the sake of change.
Particularly with this one client, by the end there was almost no faith that someone would stick around: “I’ll believe it when I see it.” The upshot of this attitude is that employees might be unwilling to invest in new initiatives. An incoming CEO can show they are aware of these dynamics by being patient—it will take longer to establish trust and credibility.
In a case like this, it will be especially important to listen and let people vent. Let them air their true pain points and try to do small things in the early days to make their lives better. One of our clients, facing employee burnout, was able to offer every third Friday of the month off. It wasn’t every other Friday off like employees wanted, but it showed employees that the new CEO was listening.
It’s not easy to be the new CEO, especially if it’s due to less-than-ideal circumstances. Being a CEO puts you in an interesting position—people often tell you what you want to hear, and never tell you that you have a bad idea. But when you start somewhere new, you often have two reactions:
- People who aren’t afraid to speak their minds.
- People who are terrified that by speaking up they’ll be fired.
Being ready for the tough questions—and asking them yourself when no one else will—can help you succeed. As will a healthy dose of curiosity and empathy. Feedback is a gift. By taking time to listen, communicate carefully, and respond, you can ensure that both you and your company are headed in the right direction.
If you want to talk more about an upcoming or ongoing executive transition, don’t hesitate to contact us. Our team of professionals is ready to give you a strategic edge.
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