A few years back the HR@Moore CHRO Survey Advisory Board suggested we ask some questions about onboarding a new CEO. The results of that study were interesting, but all from the perspective of the CHRO. This past year we have been conducting a study of how board members define success in CEO succession, and I must say that the results surprised me.
The study primarily focuses on having board members tell us the events, developments, and/or metrics they use to determine whether or not they made the right choice for a CEO succession after that CEO has been in place for a while. We ask them to tell about the most successful CEO succession they have been part of, and the least successful, and then ask a series of questions around each example. One question focuses on how they knew that the CEO was successful or not successful.
We fully expected to hear some combination of financial metrics such as ROA, TSR, etc. However, the board members we interviewed almost discounted those. What they did point to has tremendous implications for how CHROs can help a CEO to succeed.
First, they almost universally mention that successful CEOs articulate a clear and compelling strategy for the organization. The strategy addresses the key issues and obstacles of concern to the board. It also provides clarity and direction for the executive team. Finally, the strategy engages the executive team and the rest of the organization in a way that is exciting and energizing. Note that this does not mean the organization views the CEO as charismatic, but that the strategy itself excites them.
Second, they point to the CEO taking the appropriate initial steps toward executing the strategy. This entails putting together the right team, developing new structures, and making all the relevant decisions necessary to operationalize the strategy they have articulated. They expect to see some metrics indicating progress (e.g., reduction in headcount, investments in certain areas, etc.), but they really do not expect to see quick turnarounds in operational or financial measures.
Finally, they look to developments within the executive team as a signal of the CEO's success. They recognize the need to manage some members out, but get concerned when certain people begin to depart voluntarily. They note that executive team members' nonverbal behaviors and hesitations around answering questions about the new CEO raise concerns.
Our interviews suggest that if new CEOs get the three items above right over their first year, the board likely will judge the CEO as a success. Thus, CHROs can help by (a) helping them and pushing them to develop, articulate, and communicate the clear and compelling strategy, (b) providing guidance in the initial steps toward implementing the strategy, and (c) engaging the high priority executive team members critical to the success of the firm. If a CHRO can do these, then maybe there is less likelihood that the new CEO will feel the need to find a new CHRO.