Tsun-Yan Hsieh and Stephen Bear on “Six Lessons for Managing CEO transitions”

imagesHere is a brief excerpt from an article co-authored by Tsun-Yan Hsieh and Stephen Bear for McKinsey & Company. In it, they explain why a leader’s best chance to lock in new organizational norms is usually during the first few months on the job. That would include but not be limited to a CEO or to any other occupant of the C-suite. Much of their advice is relevant to almost anyone whose supervisory responsibilities have been increased substantially.

From a series of discussions with CEOs who have undergone such periods of transition and from their and their McKinsey colleagues’ work with public- and private-sector leaders around the world, they have distilled six lessons about how to make the best use of these periods of fluidity. Here is the introduction. To read the complete article, check out other resources, learn more about the firm, and register to receive email updates and direct access to free resources, please click here.

To check out the McKinsey Quarterly, please click here.

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A new manager brought in from the outside. A key retirement. An executive waiting in the wings who finally gets his or her chance. The splitting of the Chairman/CEO role into two separate positions. The departure of unsuccessful contenders. Beyond their obvious effects on individual careers, such changes are also opportunities—often not fully exploited—to bring about significant organizational change. Never more so than when the change takes place at the very top with the appearance of a new CEO. These “appearances” are becoming increasingly common as more industries face discontinuities and more stakeholders assert their rights. Indeed, nearly a quarter of the CEOs of Business Week’s top 1,000 companies have turned over during the past two years. How can companies—and new incumbents—better leverage these stressful periods of transition to break out of the performance-limiting aspects of the established order?

Perhaps an oil company president put it best: “This place has had three presidents in five years. My predecessors all made the mistake of trying too hard to get things back to normal. The organization took it as an endorsement of business-as-usual when a lot had to be changed. When I came in, the place felt rudderless. They were watching me to see if I would break them out of this rut. I did.” Appropriately so. CEO transitions offer a natural, albeit brief, opportunity to shake up the status quo and change it fundamentally.

Make no mistake, even in the most flexible organizations, an entrenched status quo rapidly develops. Everyone knows what is important; who has influence; what success really means; which roles have prestige; which protocol must be followed to get things done; what constitutes a career-limiting move. On the positive side, this shared knowledge, when replicated all the way down the line, promotes a certain efficiency. It is clear whom to call; how reports should be done; which meetings to attend; what is kosher to ask; and where the land mines really are.

CEO transitions disrupt these efficiencies and sever the web of familiar practice. Connections are broken; intelligence flows stop; secure power bases are thrown up for grabs; uncertainty takes the place of continuity; and what was once an easy and standard route to follow becomes a voyage into uncharted waters. Within 100 days or so, however, a new order usually gets established and things settle down again. Or, in the absence of strong leadership, the old order reasserts itself. Either way, such periods of genuine transition—the time when all is in flux, nothing is fixed, the status quo is interrupted, and an organization buzzes with the expectation of change—are painfully short.

But they are also—if properly grasped and managed—a unique opportunity to reset a company’s rhythms to the requirements of the future. The general readiness to listen, learn, and act is at its height. So is the willingness, during this honeymoon phase, to defer judgment and give new incumbents the benefit of the doubt. These are, then, times of fluidity during which new performance expectations can be established more easily and new organizational norms are cast. They are also when the foundation stones get laid upon which a CEO’s legacy will be built.

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To read the complete article and the six lessons for managing executive transitions, please click here.

Tsun-yan Hsieh is a director and Steve Bear is a principal in McKinsey’s Toronto office.

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