Steering the Ship: Navigating the Impact of a New CEO

The transition of a CEO is a critical moment for an organization, impacting strategic direction, culture, and executive dynamics. This impact is felt most acutely by the Executive Committee who have to react to a new leadership style, a new perspective and different priorities from the established norms.

Let us look at an example of one company and see how the transition between the incoming CEO and the Executive Committee occurred and what could have been done to mitigate any significant challenges.

Mr. Martin started as ABC Financials’ CEO on October 1, 2023, to replace Ms. Wagner who stayed until December 31, 2023, before retiring to support Mr. Martin in the transition period. It is now February 2024 and the Executive Committee (ExCo) members have shared amongst themselves that they do not understand Mr. Martin’s vision and strategy.

Mr. Martin was well respected in the market and had been CEO of a competitor for the past 8 years. He brought commercial experience, networks, and an execution-oriented management style to ABC Financial. Mr. Martin was hired to help expand key client business, to innovate commercial channels, and to digitalize the company. Profitability per client and efficiency was a sales issue.

Mr. Martin’s meetings with Ms. Wagner in the first three months were about results, clients, strategy, but not about the ExCo team members’ management styles. During the first ExCo meeting of 2024 Mr. Martin presented his strategy and vision and asked everyone to react. The ExCo expressed their disagreement with Mr. Martin. One would think that this was normal. The ExCo and the new CEO were getting to know each other while execution of current projects and priorities remained critical.

After 6 months of Mr. Martin having joined, ExCo team members started accepting Mr. Martin’s strategy with little chance to challenge. The Board fully backed Mr. Martin’s plans. Mr. Martin had an ambitious transformation plan and required full support to achieve targets. The approval of the strategy and transformation led to some ExCo members feeling they were unable to speak up. Other ExCo members favored the plan as they also saw the reward of achieving transformation targets. Division amongst the ExCo settled in with some members not wanting to speak up. Mr. Martin exercised position power to get his strategy approved.

A year into Mr. Martin’s new role, the transformation efforts to enhance profitability, expand key client business, innovate commercial channels, and to digitalize the company were being derailed due to slower execution resulting from ample debate on budgets, cost cuts, and the bottom line.

As a result, Mr. Martin’s first year was not straightforward and led to internal dissent and lack of trust. As a new CEO, what could have Mr. Martin done differently?

1.        Inject Trust (Lencioni, Jones)

In order to have a high functioning executive team, Mr. Martin should have put efforts into defining and building trust. This action should have been taken in the presence of Ms. Wagner. Ms. Wagner was the perfect ambassador, having herself been in the role for 8 years as well. If anyone, it is Ms. Wagner the ExCo team trusted most. For the ExCo, losing Ms. Wagner after 8 years is a loss hence it is important that the new CEO learns how to build trust with each member of the ExCo. This involves alignment, co-created, and facilitated sessions to include:

a)        Self-disclosure on inclusion, control, openness, and stress

b)       Rules of engagement for communication, decision making, conflict management, and a fear vs speak-up culture (team charter)

c)        The CEO adapting to the team vs the other way around.

d)       “Why Should Anyone Be Led by Me” mentality.

2.        Adapt and Earn Your Power (French & Raven)

You have preferred power styles. You may have to completely start, suspend, and borrow power styles for success. You need to be able to develop situational and contextual power and pause your default power style whatever that is.

a)        Start with Charismatic Power. This is your unique opportunity to inspire, unite, and mobilize. Tell your story and then seek the story of the company you are joining.

b)       Stop any Legitimate or Coercive Power even if you have the backing of the board and former CEO. Get your hands dirty and take off the name tag of CEO. The new kid on the block you are. Do not forget this. Substitute coercion by ethics and integrity codes.

c)        Continue any Referent or role model power used by the former CEO by disseminating it amongst the team. Request ExCo members to nominate themselves as Referent powers for certain strategic/operational topics. By doing so you are keeping leadership traits within the company despite the former CEO leaving.

d)       Suspend your Expert Power. It takes experience, resolve, and patience to not immediately disclose your Expert Power. Ask who is the expert for what. Once each ExCo member trusts you use your Expert Power to challenge and improve.

3.        Use a data-oriented approach to agree with Strategy and Plans

a)        Ask each ExCo member to present a SWOT for their department. Ask peers to provide feedback on each ExCo member’s SWOT and key data/KPIs

b)       By collectively discussing the strategy and plan and by drilling down to each department and asking for feedback, the final product is the ExCo’s not the new CEOs.

c)        Take each ExCo member into a 1 to 1 to agree precise targets based on collective feedback and then share this with the entire ExCo and relevant stakeholders

d)       This is the moment to provide integrated direction and to exercise Expert, Informational, and Reward Power

Mr. Martin has a long way to go to get back on track with the ExCo. Reacting after a year and implementing some of the steps above can still work for a high performing executive team and with CEO onboarding. The ExCo is the eco-system, and the new CEO is an invader. The ecosystem has the power to either accept or discard a new CEO. Entering a new ecosystem is a delicate and deliberate act of CEO self-reflection, participative management, and organizational mission and vision fine-tuning.