Managing Leadership^®

Sometimes, when the CEO changes – particularly when the new one is an outside hire – key members of the top management staff can change as well. It is generally considered only reasonable that the new boss should be able to put her or his own team in place, managers who are known and trusted, and who are on board with the new agenda.

According to a recent WSJ item, turnover when there is no new CEO is 17% (pretty high, really – almost 1 in 6). When a CEO change results from an internal promotion, the percentage climbs to 22%, but when the new boss comes from outside, the turnover jumps to 33%. When factors not directly related to the change, such as family emergencies or planned retirements, are removed, the numbers, which now directly arise from the change at the top, become even more dramatic; they range from 12.5% in the case of an internal selection to more than twice that – 26% – when the new boss is an outside hire.

There are two lessons in this. One is provided in the referenced item: If you are concerned that you might be replaced, take the initiative to clarify the issue yourself before assumptions turn into action. Decide if you want to stay on the top team under its new boss, and if you do, tell her or him so. Present yourself, brief your responsibilities and the state of your portfolio, and announce that you are ready for action under the new command. Often, the new boss is fully as relieved as you are to find that your experience and judgment can be retained.

Another relates to the question of outside hires for the CEO position. As we discussed last month, Peter Drucker advised against hiring from the outside for either the CEO position or for someone to head an new initiative, such as a new organizational element, product launch, or operational process. Certainly, it is important to hire managers at entry and middle levels from outside, periodically, in order to avoid intellectual inbreeding. In these two key cases, however, promotion from within is important to ensure that someone who knows the company, its challenges and opportunities, and its culture – and who is known by the company, as well – will be able to take firm control at the helm with a true and deep understanding of what must be done and of the means available to do it.

As we discussed in a previous post, outside hires are often brought in to relieve apparent emergencies, and are thus viewed as threats by the staff, who fear that the new boss will see them as merely the source of the problem. Mutual suspicion often grows and dooms everyone’s efforts to failure – in particular the new CEO’s. Moreover, we often find that beyond traditional “cut costs,” “reorganize the firm,” “form alliances,” and other such stock solutions, the new CEO really doesn’t have any strategically enduring new ideas at all – just tactical tricks that superficially address the apparent crisis that brought him or her in.

So, there’s no real reason to try to discern your new boss’s intentions by trying to read the omens – just ask. What’s more, there’s no real reason for a board to bet the firm on the next draw – there is undoubtedly diversity in the top management ranks in your firm that is ready to address your concerns, and that perhaps has been attempting to all along. You will be much better off going with the cards you were dealt – they’re probably a lot stronger than you thought. And, whether you are a director or a manager, stability in the top management ranks will serve you well.