In business, like in life, change is a constant. One such change that has been significantly more prevalent of late is the resignation of the CEO. According to CNBC, between January and September of 2023, for example, there were nearly 50% more CEO resignations than over the same period in 2022. According to executive search firm Spencer Stuart, the consumer and healthcare industries had the highest CEO turnover during the year (11%), while the financial services industry experienced the lowest level at only 7%.
What caused such dramatic increases in top-tier resignations? There are a variety of reasons, but a significant one is the relatively more stable business environment. In comparison, over the last several years, there’s been a global pandemic (in case you missed it), an invasion of Ukraine that has impacted markets worldwide, and a changing domestic (and foreign) landscape. By the beginning of 2023, things were starting to feel a bit more settled, and corporate leadership began to feel that they could take a step back.
Crises create a desire for familiarity. As such, businesses often prefer that leaders remain in their positions during times of turmoil, utilizing their experience to effectively manage complex situations. But, when those situations end, how do those in leadership positions effectively transition to the next leader, and how do these changes affect internal and particularly external stakeholders?
We recently read an article from McKinsey & Company about some key considerations for businesses when transitioning to a new CEO.
1. Make a firm decision regarding when you’re leaving
This is an important step in having an orderly succession process. By having a set time frame that you’re planning to leave, others around you can prepare for their next move. Further, the potential for any questions regarding the future of the CEO (or any leader) have already been answered – there’s no going back and forth.
2. Adequately prepare successors
Without having a proper replacement in line, organizations cannot move forward efficiently or effectively. In the article, one executive highlighted regular succession plan discussions each quarter throughout his 11-year tenure as CEO. Further, stakeholders were keenly aware that a transition would eventually occur – there were no surprises. Treating succession as a normal part of business operations is an invaluable asset of any organization. This is true even in times of crisis; the crisis could end abruptly, drag on for several years, or engulf key people at the organization.
Effective communication is also essential. By communicating clearly and frequently with both internal and external stakeholders, issues that could potentially result from a change in leadership, such as unmet expectations or how business is conducted, can be greatly minimized.
While we’ve discussed internal stakeholders, external stakeholders, particularly partners, are also very important to consider when assessing the effects of turnover. For marketing agencies like ours, working with companies going through such an overhaul can have a significant impact. What one CEO (or even CMO, in a case like this) might value in an agency partner, another may not. While one CMO may have had a specific vision for a brand, another may have a completely different view. Agencies who have helped bring that vision to life may find it difficult to adjust to a new approach. Without a smooth transition, a sudden change of this nature can upend even the best brand work.
Significantly, key relationships are generated between clients and their agency. Over time, they become comfortable with one another, learn how to communicate effectively, and create an effective flow. When the makeup of these partnerships is impacted, it can alter things significantly and lead to breakdowns in these important relationships and the work. As a result, major changes within a brand’s (or agency’s) leadership can represent a real threat to ongoing business between the two parties.
Again, anticipating and preparing for change is important for both clients and agencies to navigate a successful transition. Given the current average tenures of a CEO (7 years) and CMO (4 years), there is a good chance that a leader will change early in a partnership or multiple times during a longer agency relationship. Our advice to clients is to prioritize an assessment of external partners before, or during, a leadership transition with the goal of preserving the relationships that are successful. Too often, external partnerships are an afterthought and can result in some unintended collateral damage after a transition. Our advice to agencies is to continually plan for client leadership changes, view them as an opportunity to do even better work, be nimble and flexible, and always be prepared to support your contributions with hard evidence of past results.
So, how does one lead effectively through change? Ultimately, the key is expecting and preparing for change. By preparing others and creating a strong base for the organization to continue to lean on, leaders can help to foster a successful future.
Leadership Through Change
