2011 Issue 9
BoardWorks International
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When There Is To Be a Leadership Transition Consider Appointing an Interim Chief Executive

Chief Executive transitions are seldom smooth, orderly processes. With the exception of planned retirements, the need to replace a chief executive often occurs with little warning. This can be very disruptive. Consequently, boards often feel pressured and rush to find a permanent replacement. This greatly increases the chance of them making a poor choice.

Instead of the customary haste, boards faced with this scenario would do well to take a different tack. Slowing things down is counter-intuitive but the loss of a chief executive, even one who will be greatly missed, presents opportunities. One of these opportunities arises with the appointment of an acting or interim chief executive.

Even if an outgoing chief executive is able to serve out a reasonable period of notice (say 3 months) this is seldom sufficient time to find a permanent replacement. Replacement processes, especially those that result in an external appointment, are likely to take far longer. Therefore, whether it is the board’s inclination or not, it is often forced to appoint an acting chief executive.

That is not necessarily a bad thing. It can buy time to better inform the recruitment process. A thorough pre-recruitment process increases the likelihood that the eventual new hire will be an effective performer and a good fit for the organisation. Having the role satisfactorily covered in the meantime allows the board to carefully assess the current state of the organisation, the challenges facing it and the type of executive leadership capabilities those challenges demand.  The board can then enter the search process with a great deal more confidence about the type of person it is looking for. It can also use the time to embrace key stakeholders in the process. This not only enables the search process to be better informed but the relationship with those stakeholders – who are usually delighted to be asked to contribute their thoughts – to be enhanced.

Who will be the interim chief executive is also a critical choice for the board. A good choice can help stabilise and even enhance the performance of the organisation during the transition process.
The choice of an interim chief executive is typically between an existing executive and someone from outside the organisation. For most boards the initial impulse is to give the role to an existing staff member.  This can be appropriate if:

  • the organisation is in a sound financial and operational position and is likely to be very stable over the recruitment period;
  • there is no internal or external unrest or pending threats;
  • strategic and business planning is such that operating staff have a clear understanding of what is expected of them in the meantime;
  • the organisation's recent performance has created sufficient momentum that it can 'coast' for a few months; and
  • the internal interim chief executive will not be a candidate for the permanent position.

Even in these propitious circumstances, however, there can be additional benefit in buying in an interim chief executive who is used to performing in such roles from outside the organisation.  An internal executive who becomes an interim chief executive, particularly in smaller organisations, may be relatively unprepared or unqualified to perform the chief executive role.  An internal acting chief executive usually comes from a functional rather than a general management position.  Their normal position is likely to require an inward-looking, operational perspective and call on a more narrow set of perspectives and competencies than is required of a chief executive.  Another consideration, not often recognised, is that an internal interim chief executive's relationship with their colleagues is unavoidably altered.  They must now serve, at least temporarily, as a supervisor over people they once dealt with as peers and probably as friends. Knowing they may need to return to their prior relationship can distort their decision making and behaviour in the acting chief executive role.

Apart from these general considerations there are particular circumstances when a board should consider using an outsider. For example:

  • when it would be necessary to select an interim chief executive from among current executives who are likely to be candidates for the permanent appointment;
  • when the board could benefit from having an outsider who would not only fill the chief executive role pro tem but, with ‘fresh eyes’, serve as its independent, external consultant to assess the state of the organisation and suggest the type of changes that may be required;
  • when the outgoing chief executive is departing under a cloud and a shadow may also be cast over those who have been working with him/her;
  • where the nature of the outgoing chief executive’s departure was associated with high levels of distraction and emotion and a stabilising and calming influence is needed;
  • where other executives on staff are not judged to have the ability to step up into the role, even temporarily;
  • where the organisation has a major project, event or circumstance to deal with that would benefit from importing an interim chief executive with particularly applicable skill sets or experience; and
  • where the organisation faces critical planning or management decisions that may be highly unpopular (e.g. ‘restructuring’) but that could be made and implemented by an interim chief executive to leave the way clear and ‘clean’ for the new chief executive.

This list illustrates the range of tasks an external interim chief executive can undertake for the board. The acting chief executive can also add another dimension to the recruitment process. He/she can do this through such activities as:

  • assisting to articulate and focus the recruitment brief;
  • exploring (and even influencing) staff expectations of the new chief executive;
  • assisting in the selection and management of recruitment consultants; and
  • preparing an induction strategy, shaping its content and assisting in its implementation.

The interim chief executive can also be extremely valuable to the incoming chief executive by ensuring that he/she gets a completely unvarnished view of the organisation and its people (including the board!).

One of the situations many interim chief executives encounter is a need to recalibrate the board/chief executive relationship. Chief executive failure is more often the result of low board competence and individual board member behaviour than might be commonly supposed. A poor level of understanding and execution of the governance role (and therefore inappropriate interference in the chief executive’s job) has to be ‘sorted’ for the benefit of both the board and its new permanent chief executive. An interim chief executive can work with the board and staff to break old or bad habits and to model desirable new behaviours.

In most countries there are interim chief executives for hire. They are very competent people with chief executive experience who can make the kind of contributions described above. It is important, however, for the board to be clear in its brief because there is a wide range of approaches an interim chief executive can adopt. People used to these roles will be able to meet a wide range of board expectations from “just come and keep the seat warm” to “what we need is a hired gun to shape this place up before we recruit.”

Because the interim appointee will not have to live with the consequences of his/her decisions boards are typically reluctant to give carte blanche to a short-term appointee. Depending on the circumstances, however, the opportunity to ‘make the hard decisions’ and deal with difficult issues can be missed.

Whichever role the board decides on, the appointment of a professional interim chief executive will help it access a greater level of understanding of the shape the organisation is in and the opportunities that exist to improve its future performance. It will provide the board with confidence that not only is the organisation in competent hands but it is being proactively readied for a new chief executive.

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