The board of one of our clients underwent a comprehensive executive search process to recruit a new CEO. We defined solid search criteria, evaluated multiple candidates using a thorough interview process and negotiated a compensation package that pleased all parties.
Board members were confident that they had hired the best person for the job and looked forward to a great working relationship with “David,” the new CEO. They had gotten along well with him during the interview process (one of the reasons they selected him) and looked forward to great performance by the business.
The first few weeks of the honeymoon period started out all right but soon things began to sour. David started making decisions that board members thought they should be consulted about.
They began to call advising him on various aspects of the business, which he resented.
Another issue arose when David terminated a long-term employee for “behavioral problems” and the individual complained to the board about maltreatment and threatened to sue.
The board stewed about the situation for more than six months, asking among themselves whether they had made a mistake in hiring David. Tensions grew, until the board and David began to avoid communicating with each other.
Finally, the chair met with him about the board’s concerns, which culminated in a heated exchange, with both expressing disappointment about the working relationship.
While a good search is critical, it is only half the equation for success. Many boards do not take the equally critical step of positioning the new CEO for success once he or she is on board and functioning.
In fact, surveys repeatedly show that 40-60 percent of new CEOs fail in the first two years, mostly due to a lack of alignment between the CEO and the board about roles, authority, communication, performance expectations and values. This misalignment usually starts early on and progressively worsens, until finally the CEO leaves or is asked to leave.
Most boards don’t have the knowledge and experience for managing the transition of the new CEO into the organization, what we call the onboarding process, since they rarely transition CEOs. And the new CEO might be reluctant to risk his or her small pool of initial political capital with the board to press for clarity for fear of overstepping boundaries.
Thus, it helps to have an objective, third-party adviser to the board and the new CEO to ensure that they are aligned right from the start. We recommended the following process to the board chair:
• Orient the board and the new CEO to the onboarding process.
• Interview the board members and the new CEO about their preferences.
• Summarize the interviews into a document.
• Connect with the board about the topics (e.g., roles, authority).
• Align the board and the new CEO.
• Check in on progress during three to six months.
• Make recommendations to adjust onboarding if necessary.
Both parties were surprised by how many incorrect assumptions they had made about the preferences of the other. For example, David assumed that the board was comfortable with his decisions as long as the business performed well.
In addition, the board members assumed that they had a right to advise David because after all, they were business leaders themselves. But they were disappointed when he did not follow their advice.
This resulted in the board and David misinterpreting the intentions and behaviors of the other, and led to mistrust.
David remains with the organization, and the board is happy with his and the company’s performance. The board chair and David make it a point to meet every six months to discuss the status of the working relationship between David and the board, and the board created a handbook outlining a new onboarding process for the company should the board ever need to hire a new CEO.