Stakeholders can learn a lot from watching an organization go through executive transition. Handled well, c-suite transitions impart confidence in the organization and its future direction. Handled poorly, leadership changes can alert investors to bigger issues within the organization, whether material or merely perceived.
The c-suite (i.e., CEO/CFO, for our purposes today) is the public face of an organization. According to the 2015 Edelman Trust Barometer, an annual study on global trust and credibility, 43% of people say that they trust the CEO as the spokesperson of the company.
Executives embody the credibility of the company. There is a good reason transition of these key leadership roles is watched so closely: as the c-suite goes, so goes the health of a corporation.
In Part I of this two-part series, we’ll talk about the planning and announcement of an executive transition. Stay tuned for Part II when we’ll discuss how to prep your new executive for primetime.
Executive Transition = Financial Risk
We all know there could be any number of perfectly benign reasons for an executive to choose to leave a particular company, knowing this doesn’t make an executive transition any less of a risk in the eyes of stakeholders.
While you may feel energized by the winds of change blowing through your organization, from the perspective of an investor or a customer, a change in leadership introduces an unknown variable, which is just a different way of saying financial risk.
When the current CEO is performing well, there are questions about whether her successor will be able to maintain the momentum. When the current CEO Is performing poorly, there are questions about how quickly her successor might be able to turn things around.
A leadership change can also be unsettling to employees, since the CEO is the cultural leader of an organization. So transitions also raise questions about the cost to organizations in terms of human capital.
Since all eyes are on you, c-suite transitions are really make or break. It’s so important for these types of big changes to be planned and carefully orchestrated. Okay, let’s talk strategy!
2 Types of Transitions: Planned and Unplanned
There are really just two types of c-suite transitions: planned and unplanned. You should have a plan either way! (Now is probably a good time to review my recent post on Crisis Management.)
There are unique challenges associated with each type, but with the right transition strategy in place, you will be equipped to manage unfolding events as much as possible.
1. Planned Executive Transitions.
If you have the luxury of knowing that a c-suite transition will take place, make sure you have a plan to communicate and acclimate external stakeholders (e.g., shareholders, customers), as well as employees.
While executive transition is generally viewed as a risk, there are steps you can take to minimize the risk in the eyes of investors. A well-considered transition plan indicates a healthy corporate succession plan aligned to the company’s stated strategy.
Additionally, if you have the benefit of time and a transition period of anywhere from a few weeks to a few months, it’s an opportunity to engineer a smooth hand-off between executives.
Joint meetings with current and interim leadership, as well as investors, customers, and employees are a strong signal of organizational health during transition. Consider what will infuse your audience with the most confidence.
2. Unplanned Executive Transitions
If a CEO/CFO must step down unexpectedly, be prepared. This means being ready to communicate quickly, transparently, and as completely as possible. At the very least, I recommend having the interim leader identified along with his qualifications as soon as possible and preferably simultaneous with the transition announcement.
You should also discuss the Board’s search process for a permanent leader and criteria for the next leader. Also, discuss Board strategy—particularly, if the transition is a result of the Board wishing to move in a new direction. If possible, a broad timeline for a decision will also help calm stakeholders as there will be key milestones and communications to watch.
It’s always important to communicate as much as possible, as transparently as possible. But during times of executive transition, strong communication is absolutely essential. Communications that appear to be less than forthcoming and/or light on path forward will only breed rumors and ramp up perceived risk.
Keep this quote at the forefront of your communications strategy:
“If you don’t give people information, they will make up something to fill the void.” – Carla O’Dell, Ph.D., President, American Productivity & Quality Center
There will be questions, calls, emails sent to IR, CEO, CFO, CCO, and anyone who can be reached. Make sure that appropriate communications roles are established and shared. This responsibility will generally fall to media relations and investor relations.
Don’t forget about timing
Whether your executive transition has been a long time coming or out of the blue, your communications strategy for transitions should also include strategies around timing. In corporate communications, timing really is everything.
For instance, unexpected transitions raise questions about an organization’s financial health. One way to ease this concern is to consider timing the transition announcement to coincide with a quarterly release. If such timing is impossible, reaffirm or refer to previous transition strategies with which stakeholders are familiar.
It’s also important to announce the transition to employees, simultaneous with an external release. If you announce internally and externally at different times, rumors will fly compounding concerns about who is really steering the ship.
I recommend going so far as to have a specific employee communication plan to address key cultural characteristics and how the c-suite transition will affect the organization from a big picture perspective. When your executive is up to it, set up a town hall meeting where employees can be formally introduced to the new face of the company and have their questions answered.
Next week: we dig deeper into how to prep your executive (interim or permanent) for a successful transition.
In the meantime, if your organization is gearing up for an expected or unexpected transition, Audacia Strategies is here for you. Having the right strategy in place will convert your transition into a transformation. Contact us today to set up your consultation session.
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