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There are three phases to communicating a CEO transition. I described the first, which runs from the day the decision is made until it’s announced, in my last post. I’ll cover the third phase, which begins at succession day, in my next post.
The second phase begins with the announcement of the succession plan and ends on the day the event actually takes place. It’s usually a period of three or four months – long enough that there’s no concern that something happened to or with the outgoing CEO, but not so long that the distraction lingers. The objective of communication during this period is to establish readiness for the actual transition by creating as much clarity as possible, because it’s a time of uncertainty, anticipation and suspension. While the CEO’s authority legally changes hands at a specific moment, on a practical level it’s a more gradual and confusing process.
Some managers may hurry issues to get the outgoing CEO’s approval or help; others may hold back to wait for the new CEO; still others may become frozen because they’re unsure of potential changes in direction. The level of conjecture on outcomes and impacts will be high. It can be an awkward, distraction-filled period and should be used to create the clarity that will allow the least disruption upon the actual transition.
This is also the period when the incoming CEO begins to own the company’s future direction, especially if he or she already works there. Important stakeholders will be watching for signals that the new CEO will preserve those things they believe make the company great and change others that keep the organization from thriving. Curiosity will be high on both fronts and the successor should begin to address both.
It’s also an important time to think about upcoming decisions and whether any should deliberately be announced before or after the transition so that they appear to be owned by either the outgoing or incoming CEO.
Activities to take place between the announcement and the hand-off of the CEO reins include:
Ramp up internal communication, particularly from the successor; this is when he or she at least starts to talk about the future. Provide as much clarity as possible on what’s going to happen when, including processes that will lead to decisions (e.g., strategic planning). The future CEO should start to establish a personal style and method of communicating with the organization.
Anticipate the questions and concerns that the transition will raise and provide as much detail as possible and appropriate to address them.
The incoming CEO should revisit critical stakeholders to begin establishing or reframing those relationships.
This is a great time to do perception research, particularly among employees and investors. The knowledge gained is typically very useful for an incoming CEO and the constituencies surveyed will appreciate having their opinions valued.
CEO succession is a high-stakes event that happens on average every six years. Which means most organizations will go through it regularly – but not regularly enough to get good at it. If they were better at it, they probably wouldn’t have to do it as often, and excellent communication can be a big difference-maker.
Why? Because the thoughtfulness and energy that goes into developing a successor isn’t matched when it comes time to nurture the transition. A huge success factor is how well the new CEO builds relationships and understanding early on, and communication is all about fostering both. According to Russell Reynolds, writing and sharing a transition plan and stakeholder communication are three of the five elements of a successful succession. I’ve seen the surrounding communication done well, giving the successor a great head-start, and I’ve seen it botched, tying an anchor around the newcomer’s neck.
There are three phases to communicating a leadership transition. While the overall goal is to help lay the foundation for a successful succession, each phase has a more specific objective. The three phases are:
I: Decision through announcement
II: Announcement through implementation
III: The first months of the new CEO’s tenure
I’ll describe Phase I here, and the others in my next two posts.
In Phase I (typically about four months), the objective is to create the conditions for a successful announcement. While the timing of the hand-off and the identity of the next CEO must remain a surprise to all but a very few insiders, you want those who are most important to the success of the company to feel sufficiently familiar with the successor to welcome or accept the announcement – or, at the very least, to give the benefit of any doubt.
The most critical tasks of Phase I are: for the successor to begin building new relationships with key external stakeholders, with the outgoing CEO’s help where appropriate (i.e., where he can lend added credibility because of his own); to increase the successor’s visibility and stature within the organization; and to begin redefining internal relationships that will change in important ways.
It is also critical to severely restrict and manage the circle of insiders who know the future plan in the period prior to its announcement. Not only do many companies face legal and regulatory ramifications, but loss of control over the timing, content and sequencing of the announcement is likely to cause misinformation, force a premature announcement and create avoidable problems that complicate the transition.
In general, these are the activities to be undertaken prior to the announcement of the succession plan:
Draft a detailed, step-by-step communication plan for the announcement as well as necessary materials.
Create a contingency plan and draft a standby statement.
Create a matrix listing people the successor should meet or get to know better.
Identify or create opportunities for the successor to share his or her views and insights, to demonstrate knowledge, experience, character and intellect.
Identify and resolve any remaining open issues related to the transition (e.g., reporting structure and executive responsibilities).
Remind informed insiders of the risk of premature, selective disclosure.
Provide any training to help the successor be fully operational on day one (e.g., media or investor relations training)
Next post: Phase II – announcement through implementation.
As a CEO, I like measurement and analysis. They help me understand what’s happening in our business and inform good decisions. I’ve also learned that a lot of what matters is tough to measure. For example, there is a delicate balance between the share of mind we give to client service and to our own operations that doesn’t show up in time sheets. We obviously have to focus on clients and pay attention to how we do things, but too much attention on the latter invariably hurts the firm. How much is too much? I can’t count it, but I can feel it.
Our profession is constantly challenged to provide measurement and demonstrate ROI, and we should do both. But I’ve also seen that demand carried to an extreme, and I worry about what I think of as “standardized test syndrome.” Just as the quality of education can suffer when schools teach for better test results, the impact of communications can be lessened when the tactics emphasized are determined less by an underlying strategy and more by what’s easiest to measure.
Babson business professor Tom Davenport apparently shares the broad concern. In a recent article on the critical but overlooked value of judgment in managing a business, he wrote, “Good judgment is another important virtue — if not the most important one (as Aristotle thought). Like love, it so far defies measurement. But we ignore it as a critical factor in organizational life at our peril.”
He also said, “So much of life cannot be measured yet is still lived and enjoyed. Is there a way to calculate the ROI on raising children? If there is, I for one would like to know it. (Yes, I know all about the human capital equations of economists, but I’m talking about real life here.) What about the satisfaction of serving one’s community or nation or planet altruistically? We can count Google hits, but they are hardly a proxy for reputation. The number of friends one has on a social network is no measure of the value of friends.”
I’m not saying measurement doesn’t matter – it’s critical and we, as a firm, have made a significant investment in our ability to measure the direct impact of what we do on our clients’ performance. I’m suggesting we not forget what every parent among us already knows: that there are things we can’t measure that sometimes matter most.
A friend who serves on the boards of a few large public companies recently told me about a frustrating boardroom debate in which one of his colleagues said “if we approve this, it may be good for the company but you can bet ISS will tell our shareholders to withhold votes.”
Shortly after this conversation I read an article describing “Six Ways to Tell if You Have a Bad Board.” According to Roger Martin, dean of the University of Toronto’s B-school, here are the tell-tale signs:
They complain about how hard Sarbanes-Oxley has made it to be a director. (Hasn’t it gotten harder for auditors, regulators, analysts and investors?)
They complain about how the fees for being a director aren’t high enough to compensate for the onerous work involved.
They’re paid in the top third of peer boards.
They’re excessively proud of being on the board. (Prestige isn’t an incentive for effectiveness.)
They’re enamored of the enjoyable social atmosphere of the board. (Ditto.)
They’re enthusiastic about the personal growth opportunities the board provides. (Ditto again.)
My friend told me his story in the context of his growing concern about weak directors damaging boards. Roger Martin’s signs of a bad board are actually signs that it has bad directors.
Each board has its own culture which, like any organization’s, is key to its effectiveness. In some cases that culture is clearly breaking down. An attitude like that of the director my friend quoted or one who fits Martin’s list is corrosive to a culture – and also doesn’t serve the interests of the company, its shareholders or anyone else. Kirkland and Ellis Partner James Sprayregen believes that board culture is a driver of company performance. According to him, bad board culture can lead to a long process of decline caused by non-feasance (as opposed to malfeasance) or by failure to address problems because the corrective action required is unpleasant.
The ramp up in regulations directors have faced in recent years can’t solve the cultural problem (which it exacerbated) because you can’t regulate culture. That’s the work of the chairman and the directors themselves.
I love the opening line of Darryl Scott’s song My Father’s House: “I was born and raised in my father’s house, can catching rain in the kitchen.” One line – about two-thirds of a Tweet in length – suggests a large, textured story of a mother-less home that’s not just broken, but permanently unfixed.
I love it because it’s a great example of two things. First, the most powerful way of understanding is to let our minds do what they most want to do with information – assemble it into stories. You can’t hear Scott’s line without building a story around it. And second, a short, simple story can contain a lot of information.
Researchers say the power of story comes from four factors: they mirror the way we think (which is in narrative structures), they define who we are, they build and preserve a group’s sense of community and they have universal meaning. That’s why they are so potent as translators of any organization’s culture.
Think about little stories that say big things about your workplace. I remember early on in my tenure at D&E hearing about a meeting with a new client in which the client CEO wadded up a draft of a document one of my colleagues had written and threw it at him in front of our CEO, who politely resigned on the spot. It happened over 25 years ago and I wasn’t there, but it still says something about our culture to me. The magic formula our founders created was to have sought-after professionals drawn to the chance to do great, sought-after client work and vice versa, in an environment of mutual respect. Letting the wrong kind of clients abuse us would eventually have chased away the professionals that were necessary to keep the kind of clients we were built for.
I also remember a client CEO who, after hearing his general counsel’s strategy for litigating some workplace cancer suits, told him that the company was responsible for the illnesses of these former employees and if they didn’t take ownership of that responsibility they’d be letting down every employee. It’s a client I was drawn to keep working with as I moved from account management to the CEO’s seat and that’s the story I’ve used to describe the company ever since.
I have another client whose CEO had a marble bathroom installed in his office the year the company barely missed the earnings goal needed to pay employee bonuses. It’s a story that’s still told there 10 years later. Fortunately, the CEOs who came before and after him are the kind that generate positive stories, so Mr. Marble Bathroom is seen as a leader the culture spat out.
I started my career as a writer of short fiction and magazine features, and have always been attracted to stories. One of the things that energizes me as a communication consultant is helping companies and leaders find and tell their stories. And I love to hear the little, powerful stories that people tell to describe their work cultures. Do you have one?
It doesn’t feel entirely right to pick on BP. Beside the fact that the Deepwater disaster is a human and environmental tragedy, BP has just made itself too easy to target. But there’s an important lesson about the tug of war between risk- and reputation-management that’s worth some thought.
First, back to BP as easy target: The company has failed to slow the leak since the April 20 explosion. Most scientists seem to believe BP’s estimates of oil leakage are far too low, yet it has resisted requests to install the sophisticated equipment needed for more accurate assessments. At various times CEO Tony Hayward has told reporters: “Almost nothing has escaped,” “The Gulf of Mexico is a very big ocean; the amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume,” and “I think the environmental impact of this disaster is likely to have been very, very modest.”
Now, on to the tug of war: if you’ve helped manage a crisis, you know it involves the need to balance multiple competing interests. Part of the ongoing debate among the BP team has to be how to walk the line between showing the public it accepts full responsibility without suggesting to the courts that it owns all liability. At stake are the huge remedial and legal costs the company faces on one hand (Exxon’s Valdez-related costs were over $4 billion) and the harder-to-measure reputational costs on the other. (InterBrand measured the value of BP’s brand at about $4 billion last year – it will be interesting to see how far it falls.) On the daily measure of market cap, BP has lost $56 billion in value since the explosion.
What started me thinking about the battle between BP’s risk- and reputation-management efforts was its blame-shifting Senate testimony; let’s just assume that strategy was crafted while its PR team was out of the room. As you think back over BP’s various actions and statements, imagine a political cartoon that shows an arm-wrestling match between BP’s general counsel and head of public affairs. Its very first press release after the explosion emphasized that Transocean owned the oil rig – the GC’s cartoon wrist has a slight advantage, as the public is still assessing responsibility. On May 4, the company pledges to pay all legitimate claims regardless of government-imposed limits – public affairs now has the upper hand. Until CEO Hayward added, “This is America — come on. We’re going to have lots of illegitimate claims.” The GC’s hand is now on top. By the time BP blamed Transocean in its May 11 Senate testimony, the spill was already branded in the public (and political) consciousness as BP’s— the general counsel’s wrist is pressing his opponent’s toward the table.
You get the picture – and you can play the game yourself up through today’s events and beyond. I’m not saying it’s an easy balancing act, but I don’t think this one is going to look like the model. The only thing wrong with the arm-wrestling analogy is that it seems pretty clear BP will lose in both the courts of law and public opinion. With both hands slammed to the table, we’ll wonder to what degree BP beat itself. Any guesses?
At first blush, you wouldn’t consider Mark Twain a model for business leaders. He squandered his considerable wealth on bad investments and ultimately declared bankruptcy more than 20 years after publishing his first book. Afterward he said, “To succeed in business, avoid my example.”
It’s a shame, though, because he actually knew a lot about leadership – particularly about the leader as communicator. Not surprisingly, he saw the value of clear communication (“The difference between the right word and the almost right word is the difference between lightning and the lightning bug”) and compelling language (“Anybody can have ideas—the difficulty is to express them without squandering a quire of paper on an idea that ought to be reduced to one glittering paragraph”). He also understood the power of praise (“I can live for two months on a good compliment”) and of having a clear vision (“You cannot depend on your eyes when your imagination is out of focus”). Finally, he knew the importance of setting an example (“Always do right. This will gratify some and astonish the rest”) and of creating a positive work environment (“Work and play are words used to describe the same thing under differing conditions”).
In addition to being a great writer – or maybe part of the reason he was a great writer—Twain had three qualities in rare amounts: a deep understanding of human nature, extraordinary common sense and powerful communication skills. All three are critical components of successful leadership. Though the ability to make good investment decisions helps, too. (Thanks to LeadershipNow for some of the quotes.)
Nature is full of ideas for the attuned innovator – and for the attuned leader.
The growing field of biomimicry has some great examples of nature-driven innovation: non-toxic adhesives inspired by geckos, energy efficient buildings inspired by termite mounds and resistance-free antibiotics inspired by red seaweed.
The Biomimicry Institute defines biomimicry as: “the science and art of emulating Nature’s best biological ideas to solve human problems.” I came across something written by the Institute’s president that made me realize nature also offers some good insights into solving organizational issues. Here’s what she (Janine Benyus) calls the “Nine Laws of Nature”:
Nature runs on sunlight.
Nature uses only energy it needs.
Nature fits form to function.
Nature recycles everything.
Nature rewards cooperation.
Nature banks on diversity.
Nature demands local expertise.
Nature curbs excess from within.
Nature taps the power of limits.
Think about some of the evolving traits of great organizations. They’re efficient and well-designed, close to and insightful about their markets, and increasingly are energizing and transparent, attentive to ethical and social values, diverse points of view and teamwork.
I’m not sure geckos and termite mounds offer the best organizational lessons, but it’s promising that I learned about this where I did: at a presentation at Case’s Weatherhead School of Management.
Do you see corollaries from nature in your organization?
A lot of leaders are talking about updating their brands, repositioning themselves or re-engaging as marketers as they come out of the recession. Some of these conversations sound a lot like those we had frequently in the early and mid-90s: companies talking about moving further up the value scale by positioning themselves as what used to be called “solutions providers.” In other words, they want to be differentiated by expertise rather than just products.
A lot of CEOs trying to make that transformation during the earlier period became frustrated that their people wouldn’t “stop selling boxes.” The change can be a great strategy for the right companies but there are a couple of things that many learned the hard way. First, consultative selling requires different skills, tools and incentives – either your box-sellers need different training or you need different people. The act of buying consulting involves different calculus than buying products – the selling has to adjust. Secondly, so does the marketing. It’s not that the four P’s don’t apply, but it’s helpful to consider a fifth one: perspective. Marketing intellectual capability is about demonstrating what you know and how you think.
IBM was a computer manufacturer that underwent a massive transformation and is now all about Building a Smarter Planet. Check out its website, which is heavy on thinking and learning, or its barely branded asmarterplanet.com blog (look for IBM hidden at the bottom). Dell is still selling hardware; its website is focused on products and shopping. To see the an extreme example of thought leadership, try the consulting pioneers McKinsey, whose site is a monster of knowledge management. (Interesting that ex-McKinseyite Louis Gerstner led IBM’s shift.)
Being able to solve customer problems can be a great differentiator, and every company wants to spotlight differences as they look to reposition themselves. They just have to remember that, to really make that shift, they have to act differently, too.
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I’ve recently been working with a client CEO on announcing a major change in senior leadership and with two others on the potential merger of their organizations. In both cases I found myself explaining a dynamic that most experienced communication pros intuitively understand is fundamental to announcing a major change: it matters a lot how and when people are told.
The announcement of any big change has a particular sequence to it, dictated by the formal rules of disclosure (especially for public companies and highly regulated entities) and the informal rules of the culture. The former are relatively clear and the latter are unique to the organization. What’s true in every case, though, is that the people affected – no matter how slightly—will reach conclusions regarding their importance to the organization and its leadership according to three factors:
• Immediacy – Employees and others will notice how close to the initial announcement they were told, and by whom.
• Order – They will take into account who was told before and after them.
• Frequency – Different constituencies will have different expectations regarding how often they are updated or asked for their input.
You can tell when an announcement has been sequenced wrong. The classic example is when senior managers learn something big in the newspaper – for example, that they have a new boss or are being combined with another business. Instead of focusing on the change, they’re distracted by concerns about how they were told and what the implications of that might be.
It’s a simple concept, but it gets very complicated when it’s ignored.