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I’ve written recently about when it’s time to look for a new CEO and also why so many successions fail. Often, though, the problem of where to find a replacement comes up, especially with The Great Resignation firmly underway and a well-documented shortage of staff and skills at all levels.

Rather than suffer a leadership vacuum for a period, consider hiring an interim CEO. There are many good reasons to do so, and why this practice is becoming more common in the US and Europe, especially.

Remember, there can be many reasons for a CEO to leave – voluntary resignation (leaving for another opportunity or, and this is becoming more common in South Africa, moving abroad), ill health and no longer able to perform his/her duties, or the board has had to remove the CEO for some reason.

If your board drives an ongoing and active succession planning process for all key roles then securing a replacement CEO might be fairly quick, but there is still likely to be a period of 3-6 months before the new person can join. Without this level of planning, it’s likely that it could take at least twice this length of time.

The costs are massive, as this study, published last year in Harvard Business Review shows. It estimates a massive $1 trillion cost in lost market value alone (20-25% of total market cap), due to badly managed C-Suite successions in the S&P1500. And the longer-term implications are likely much larger as companies struggle to regain lost market positions, etc.

Of course, this is just the measurable effect on large, listed companies. In the US, there are over 6 million firms that employ staff, with businesses employing 500 or fewer accounting for about half of company payrolls, so the impact of poor CEO succession on the total business population is likely many times larger.

Think about the effect on your business of having no CEO for 6-12 months – would it lose market share, key staff, strategic relationships? Would it survive?

You need access to a highly skilled executive with a great track record – fast!

An interim CEO is typically available at short notice – in my last interim role, for example, I was at the business just two weeks after my meeting with the group executives, despite the business being in a city some 1600 km (1000 miles) away from my home. The incumbent CEO had suffered a major health problem and it became clear that he would not be resuming his duties any time soon, if at all. The company was undergoing significant change on multiple fronts, too, following acquisition a year or so earlier, so things needed stabilising and the change projects needed completing.

This is a common situation for an Interim CEO. They must hit the ground running, expecting to put in long hours, often needing to make significant changes to the business, too (especially if the previous CEO has been removed by the board for performance-related reasons), while stabilising the team as a whole as there is frequently a good deal of instability and concern following the sudden departure of the incumbent.

A typical Interim CEO has decades of experience, is frequently retired (or, at least, semi-retired) and so has been through a wide range of tough situations in her/his career. They’re able to bring fresh perspective to the business and, where needed, make the tough calls because the role is a transitional one (in the US interim CEOs are frequently appointed to handle tough business restructurings, for example, clearing the decks, in effect, ahead of a new permanent CEO).

Because of this experience they can also be a significant help with finding and mentoring the full-time replacement, so making the new CEO more productive even more swiftly. And, of course, putting an interim CEO in place reduces the risk to the business of a leadership vacuum.

For smaller companies especially, the interim CEO might well be a good deal more experienced than a CEO they might ordinarily be able to attract, or afford, but the benefits this experience and skill set can bring to the business will be felt long after the interim CEO has gone through the knowledge they will pass on, so the interim executive can also be looked on as a great hands-on trainer for the team, too. They might even be asked to stay on afterwards as a non-executive director / board member for this reason.

A typical interim CEO Is hired on a flat all-in monthly retainer, rather than the typical salary plus bonus and equity of a full-time CEO – it makes sense to keep it simple. So, although at first sight this might look costly, you don’t have the longer-term issues of equity vesting, pension funding, and so on.

So, if your business is facing a crunch, consider getting an interim executive in to fill any gaps (not just a CEO one) – even in these tough times. You’ll be pleased you did.

 

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You might also find this article of interest: An Interim CEO Could be a Boards Blessing