When It’s Time to Replace a CEO
During a moment in recruiting history when most executive search professionals are suffering, our practice in for-profit education has been thriving. Part of the reason is what I call ” board fatigue”–PE or VC partners and other board members who’ve grown impatient with the CEO of a portfolio company. In some cases their dissatisfaction is known to the CEO; in others, for various reasons (such as accreditation issues in the postsecondary education market), the board has chosen to conceal its desire for change, even from the sitting CEO.
The call to me typically begins, “We’re thinking of replacing a CEO. But we need this to be done in confidence. Can you do it and still be effective?” The answer, of course, is, “Yes, but first give me one good reason why you don’t sit down with your CEO and discuss why the change is needed.”
Answers vary, but the most common is, “We don’t want to lose momentum or cause uncertainly within the company,” i.e., “We’re afraid that news the CEO is being replaced might affect morale and revenues.”
This may be true, of course, but before embarking on a sub rosa search for a replacement, consider these issues–
• Are you sure the situation cannot be resolved without the CEO being deposed? Have you tried everything to turn him/her around? Is the problem focused on a few concerns–work ethic, slow decision making, failure to address a single overriding market challenge, etc.–or is it overall leadership?
• Are there intermediate steps you might take to at least put the CEO on notice? “Probation”? Come to Jesus? Sabbatical? Revisiting compensation?
• Could the problem be resolved by bringing in the right support, e.g., a COO or new CFO?
• Could the CEO be moved into a different to position, allowing you to bring someone in above him/her? Would your CEO accept demotion to President and COO, for example? Could the CEO be moved into a Chairman role?
• How can you present the decision to replace in such a way that the CEO sees the wisdom in your decision? Obviously the CEO has a financial stake in the company’s success. Might it be that he or she will be relieved? See this as a win-win?
• How valuable could the CEO be in the process to find the replacement? Do you want him/her to play an active role, and would s/he be effective in this role, if properly motivated?
• What are the risks if word gets back that a search is being conducted for a new CEO?
• What are the risks that a disgruntled CEO could sabotage the search process? Agree to participate in interviewing, then blow candidates out of the water?
• What effect will conducting the search in confidence have on the overall quantity and quality of candidates? On your ability to secure the best among these?
• How and when do you expect to inform the CEO what’s going on?
• What role will the departed CEO have in the transition process once the new CEO is named?
click here for more More