Tag Archives: Prepare

How Do You Transition to New Leadership? Four Perspectives

Situation: The CEO of a professional service company is reaching retirement age. The plan for years has been for a key field manager to take on this role; however, neither the CEO, the founder nor most employees feel that this individual is up to the job. What can be done to either better prepare the key manager for the new role, or to demonstrate that this is unfeasible? How do you transition to new leadership?

Advice from the CEOs:

  • For the long-term benefit of the company, it is important to create a situation that will either prepare the field manager to succeed or provide the Company with a back-up plan for ongoing leadership.
  • If the CEO and founder are concerned about this individual’s ability to succeed, then coordinate a plan with the founder and then meet with the key manager.
    • Let the key manager know that the owners plan to sell the company in 3 years.
    • This can be an internal sale – the CEO and founder sell their shares to the key manager – or the owners will look for an outside buyer to buy out all current owners.
    • See how the key manager responds.
    • If the key manager expresses an interest in buying the CEO’s and founder’s shares, then require this individual to make the same level of financial commitment that the CEO and founder have made.
  • Another CEO experienced a comparable situation with an individual who was both underperforming and a significant shareholder.
    • This CEO created a very public vision of what he expected this individual to achieve – in positive terms. The CEO also put an outside hire in a similar role to create a performance comparison. The result was a significant increase in performance by the inside individual and a successful transition to additional responsibility.
  • If the key manager is to be put on a track that leads to the CEO role there will be two challenges: assuring that this individual can acquire the skills to succeed and assuring that the individual can demonstrate successful leadership within the Company. To meet these challenges, take the following steps:
    • Make a public announcement of the plan to transfer the mantle of leadership to the key manager;
    • Raise the bar of expectations for the key manager to demonstrate his or her leadership capacity;
    • Define a full program of training to provide the key manager with the skills to lead the Company;
    • Ideally, allow the key manager to prove his or her mettle through a highly visible responsibility – like growing a key market segment – so that he or she gains the respect of the others.
    • Require the same level of financial commitment that the CEO and founder currently bear, so that everyone knows that the key manager has “skin in the game.”
    • Put the key manager on the same compensation program as the CEO and founder, as this will become his or her compensation program on becoming CEO.

How Do You Facilitate a CEO Transition? Five Factors

Situation: An early stage company is preparing for an IPO. The founder and Board have selected a new CEO with experience taking companies public. How do you facilitate a CEO transition, and how can the founder best position himself to support the new CEO?

Advice from the CEOs:

  • Get clear on your own strengths and desired primary responsibilities, but prepare to be flexible in negotiating responsibilities with the new CEO. For example, if the founder’s strengths are marketing, IP and early stage fund raising, see how these compliment the strengths of the new CEO. Then select a title which will allow you to leverage your strengths without impinging on the focus of the new individual. Don’t pigeon-hole yourself with your new title; keep it as broad as possible, for example Executive Vice President.
  • If you, as the founder, have a good long-term relationship with your VCs and the Board this will be one of your strengths. Be prepared to counsel the new CEO on individual personalities and objectives of this group. The CEO will form him own relationship with the VCs and Board over time.
  • Chemistry between the founder and new CEO will be very important. The job of the new CEO is to captain the ship. Your new job is to be a superior first mate.
  • It appears that you have an excellent learning opportunity. Learn as much as possible from the new CEO as well as the experience of the IPO process.
    • To smooth the transition personally between the two of you, take the opportunity to tell the CEO that you believe that the Board made the best choice and that you look forward to the opportunity to learn from him. This might be best done outside of the office, for example taking the new CEO to dinner.
  • Maintain your relationship with the key VCs on the Board. Let them know about your future ambitions and that if the right opportunity opens up in one of their portfolio companies, you could be interested.