When a CEO is abruptly dismissed—whether because of misconduct, ineptitude or differences with a board of directors—how does the departure affect the employees who remain, and how can HR help them cope?
A recent Wall Street Journal article explored the alarming rate at which CEOs are being fired. In June alone, General Electric, Uber, Whirlpool, Buffalo Wild Wings, Perrigo and Pandora all announced CEO departures. In the first five months of 2017, the article states, 13 companies with market values of more than $40 billion installed new CEOs.
Whether a CEO is fired, forced out or leaves voluntarily, the result can be employees who feel rudderless and demoralized—worried about the future of the company, their own careers and the policies of new leaders, said Kim Littlefield, senior vice president of Keystone Partners, a Boston-based talent management and career transition services consulting firm specializing in supporting C-suite executives who have been fired.
"Whenever there is a termination at the CEO or senior leadership level, there is a big impact on the organization," Littlefield said. "Employees begin to question the future of the organization, which naturally leads to wondering whether their job is safe, causing employees to either disengage or look for a new job. This reaction is valid because usually when there is a change in senior leadership, executives bring in their own team members and there is turnover and restructuring."
During this time, Littlefield said, HR and other senior leaders need to be visible, available and vocal. They should encourage managers to conduct team meetings as soon as possible after the announcement to find out how people are doing, offer words of appreciation and encouragement, and redirect workflow as needed.
"So many leaders want to hide behind closed doors during times of turmoil," Littlefield said. "Instead they should take this time to 're-recruit' their remaining employees by showing an interest in them, being available to answer their questions and address their concerns, and being vocal about how valued they are."
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Communicating What Happened
Senior leaders should tell employees that the CEO is leaving as quickly as possible, said Alexandra R. Lajoux, chief knowledge officer emeritus at the National Association of Corporate Directors, a nonprofit training organization for corporate board members, and author of The Art of M&A Integration (McGraw-Hill, 2006).
That, however, doesn't mean it's wise to spill all the details about the departure.
"Remaining leaders should absolutely not let employees know the full reason for the termination, unless the CEO and the board have jointly crafted the statement, preferably with the advice of counsel," she said. "Communications about the departure should be approved by legal counsel and should be written with privacy and liability in mind. The departing CEO may be suing the company for a number of reasons, including breach of contract, discrimination [or] defamation. By divulging reasons beyond boilerplate [statements], the company is treading dangerous waters."
Moreover, she said, it could be legally risky for a company to announce that it has fired a CEO.
"When there's an announcement of a sudden CEO departure, it is typically couched as a 'resignation,' which is an appropriate statement," she said. "Most employees will not be surprised and will have fairly accurate theories as to why this event occurred. In a healthy company, employees already know a great deal about the company's leadership and culture. The main obligation the company has is to be humane and respectful about the [departure], while acknowledging within reason any objective, factually correct, positive accomplishments of the CEO. For example, it could be acknowledged that under the CEO's tenure, sales increased by 40 percent in three years. But it would not be appropriate to add lavish praise at odds with the decision, which may have been prompted by other factors that are negative."
Do Some Soul Searching
If a CEO has been fired, it's likely that something is amiss at the company, "and the company needs to do some soul searching about this," Lajoux said.
"This is a long-term problem that can't be solved by simple communications to employees or addressed merely by raises and promotions," she said. "If there is a problem with leadership that led to an abrupt termination, a company can't just throw money at the problem; it needs to address it. This is why the skills that [the Society for Human Resource Management] teaches are so important; every boardroom should … hear the voice of HR."
If leaders want to know how workers are feeling about a change in leadership, Littlefield said, the solution is simple: Ask them.
"Rather than wait until employees give their notice, begin conducting 'stay interviews.' This is a one-on-one interview between a manager and a valued employee. The purpose is to learn why employees work for the organization and find out what might make them want to leave. Ask employees questions like, 'What about your job makes you get out of bed in the morning?' 'What do you value about this organization?' 'Why are you proud to work here?' 'What concerns do you have about the organization?' 'What would you do differently?' 'What would cause you to leave?' Then use the key themes to re-recruit them and remind them of how valuable their contributions are and why the organization is great because of it."
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