About 40 percent of executives—whether promoted from within or hired externally—fail within the first 18 months. If those executives are CEOs, the cost can add up to tens of millions of dollars. A failed transition also can take a toll on a company’s reputation.
The fault often lies with the incoming CEO, who may not have adequately prepared for the top role or who may have misread the new organization’s internal politics or culture when he or she first arrived on the job.
But some don’t work out even when they’ve done all that is humanly possible to prepare, says Dan Ciampa, who advises CEOs during their transitions. In those cases, the company hasn’t done its part, says Ciampa, co-author of Transitions at the Top: What Organizations Must Do to Make Sure New Leaders Succeed (John Wiley & Sons, 2015). “Most companies don’t know what they should be doing to increase the chances of success,” he says.
Sometimes, a company’s board of directors can be more hindrance than help for the incoming CEO.
“Most boards in my experience don’t have … the capability or the insight or the experience to oversee a succession process and, in general, don’t spend enough time thinking through what their role should be,” he says.
Chief human resource officers (CHROs) can and should play a much more significant role than they typically do in ensuring the new CEO’s success, according to Ciampa.
“In particular, when it comes to a succession [from within], the HR person should be central to making sure the transition is a successful one.”
Because there are so many variables in CEO transitions, Ciampa focuses on the scenario in which the current CEO and the board are preparing for the CEO to retire at some specific point in the future.
In such a top-level transition, the CHRO can help in a number of ways, including the following.
Handling the administrative aspects of the change. Like a good chief of staff in the military, the CHRO should coordinate the search process, plan the new leader’s assimilation into the organization and keep the rest of the organization informed.
Serving as an internal advisor to the outgoing CEO. Be the CEO’s sounding board on key issues and an advisor on company politics, alliances and relationships that will affect the transition.
Facilitating communication between the board and senior managers. For example, the CHRO may describe the mood of the senior managers to the board or answer their questions about the succession process.
Helping the new CEO strengthen senior managers’ teamwork. HR leaders should have the political and people skills to identify the relationships that are most important, as well as the barriers to a successful transition. If a senior manager is compromising the new leader’s ability for success, then the HR leader must step in and address the problem directly with that person.
“If I could wave a wand, the person in HR could know more about transitions and what causes them to fail than anyone in the company,” Ciampa says. “The head of HR should be a student of succession. He or she should be comfortable with people who have power, not intimidated by it, and certainly not afraid to direct it and face up to it.”
One mistake that boards and HR leaders commonly make is to assume their work is done once a new CEO accepts the position. “The transition process doesn’t end on day one of the person’s tenure,” he says. “It only ends when influential managers of the company have assigned their loyalty to the new leader.”
Dori Meinert is senior writer/editor for HR Magazine.