Successful Leadership Transitions

Executive transitions are difficult. The company is losing institutional knowledge and has to begin the process of identifying and training a new person. Executive transitions also impact the productivity of the team experiencing the change, can carry revenue implications in the short term, and affect the culture of the company. How can you ensure successful leadership transitions?

In a recent McKinsey article, Successfully transitioning to new leadership roles, the importance of getting it right was highlighted. When a new executive is successfully transitioned, their teams are far more likely to hit their three year performance goals (90%). They generate 5% more revenue and profit, put forth 2% more discretionary effort, and have a 13% lower attrition rate for the team. When the transition doesn’t go well, performance is 15% below average and disengagement is 20% below average leading to higher attrition rates.

Beyond performance, executive transitions have costs associated with them. Per McKinsey, “Successful or not, transitions have direct expenses—typically, for advertising, searches, relocation, sign-on bonuses, referral awards, and the overhead of HR professionals and other leaders involved in the process. For senior-executive roles, these outlays have been estimated at 213 percent of the annual salary. Yet perhaps the most significant cost is losing six, 12, or 18 months while the competition races ahead.”

Between 27% and 46% of executive transitions fail. The main reason (68%) is politics, culture, and people. The challenge is almost as acute with internal promotions as it is with external hires. Regardless of the success factors that got the candidate to this point, it is obvious that there will be new skills (both soft and hard) to succeed in their transition.

We know that technology has increased the pace of change in corporate America, “CEO turnover rates have shot up from 11.6% in 2010 to 16.6% in 2015. Since 69% of new CEOs reshuffle their management teams within the first two years, transitions then cascade through the senior ranks. 67% of leaders report that their organizations now experience “some or many more” transitions than they did in the previous year.”

Despite the acceleration, less than one third of leaders feel the organization can support their transition, while three quarters of them feel unprepared to succeed in their new role. Per McKinsey, executive leaders should understand and then take action in five key areas:

  • Strategy and operation of the business function
  • Corporate culture
  • Team
  • Themself
  • Other stakeholders that need to be managed

The key is to be honest and specific about your specific situation. For some a complete overhaul may be necessary. For others, their areas may be running well and just need some refinement. Two pieces of advice from the article to improve your success rate are to be clear and to be impact focused. Being clear means knowing what needs to be done and what needs to be stopped. Just because the company has been doing something, doesn’t mean you have to continue doing it. Make decisions and consider “stop doing” lists along with your “to do lists”. The second tip is to forget about 90 day performance windows. Artificial timelines can hurt productivity and result in less focused work. Change can take time and effective boards know this. Act with a sense of urgency and the impact you want to achieve.

For more advice and help with your leadership transitions, send us a note. We’ve worked with hundreds of companies to ensure successful executive placements. Our approach is specific to your needs and encompasses current best practices as well as ongoing leadership support with our unique onboarding process for newly hired executives.