When a Business Founder Steps Down – Who Does the CEO Role, and How Do You Ensure Success?
You’re Letting Go – How Do You Transfer Management Successfully?
You’re a business founder who is stepping down, but you need someone to run your business for you. The CEO role is crucial to the continuing success of your business. Do you have someone inside your company who is ready to step up, now you have become a business founder stepping down? Or should you be hiring externally for the executive talent you need?
A Poor CEO Hire = Failure
In the last 20 years, 30% of Fortune 500 company CEOs have lasted less than three years. In research published by the Harvard Business Review, it was found that two in five CEOs fail in their first 18 months.
CEO failures are costly, and more common than you might think. They destroy confidence in your business internally and externally. Never mind the need (and expense) to hire and then onboard a replacement.
To avoid this, you must first define the CEO role for your business, hire your new executive, and then transfer your knowledge to them before stepping down (or back).
Who Is the Right CEO for Your Business?
Your new CEO will be the highest-ranked employee in your company, and probably the highest-paid with salary, bonuses, and other add-ons reflecting their responsibilities, which include:
- Being the figurative head of the company
- Leading the development of the business
- Managing daily operations
- Making major business decisions
- Managing the company’s resources
They will report to you and the board of directors, and should take full accountability for the performance of the business.
Now, fleshing out these responsibilities for the uniqueness of your business should be relatively straightforward. Your main question may be, “Does my prospective new CEO have the technical skills, experience, and knowledge to perform?” But if you only answer this question, you may hire a wrong fit for your business.
You have built your business, and it reflects your values, purpose, and ethics. You must hire someone who shares your vision and can lead your people effectively. Indeed, the HBR analysis concludes that the major reason for CEO failure is excessive pride, an inflated ego, and a leadership style that is out of touch with modern business.
11 CEO Traits to Avoid
In their book ‘Why CEOs Fail: The 11 Behaviours That Can Derail Your Climb to the Top and How to Manage Them’, David Dotlich and Peter C. Cairo set out the major reasons why CEOs fail. Bear these in mind when searching for your CEO:
- Arrogance: they think that they’re right, and everyone else is wrong
- Melodrama: they need to be the centre of attention
- Volatility: they’re subject to mood swings
- Excessive caution: they’re afraid to make decisions
- Habitual distrust: they focus on the negatives
- Aloofness: they’re disengaged and disconnected
- Mischievousness: they believe that rules are made to be broken
- Eccentricity: they try to be different just for the sake of it
- Passive resistance: what they say is not what they really believe
- Perfectionism: they get the little things right and the big things wrong
- Eagerness to please: they try to win the popularity contest
You should also avoid candidates who may be toxic. Any whiff of unethical behaviour could derail your business. Therefore, be careful to pay attention to allegations of fraud, bribery, sexual misconduct, or harassment. When hiring for the most senior roles, comprehensive screening and background checks are vital.
In short, look for someone with the technical ability, experience, and leadership skills to motivate your team. A leader who will be collaborative. It’s critical to be mindful of your people, too – especially the high performers who you want to stay.
Dovetailing the CEO into Your Business
Once you have selected your perfect candidate, it is your job to introduce them to your business and build the rapport between your new CEO and your leadership team. There are four critical elements to cover here:
1. Navigational Support
The CEO role is big, and your new business leader will need time to adjust to their new position. To help them do so, identify which of your senior managers and executives can undertake some of the duties you expect your CEO to do while they acclimatise to their new environment. You should ensure that these tasks are specific and time-limited, setting expectations for the CEO and the executives who will be doing the work.
2. Introduce Your New CEO to Your Team
Identify the key people in your company with whom your new CEO will be working most closely with and arrange meetings between them. Introduce the CEO to the entire company, and to your customers.
These introductory meetings should be more than cursory, and they shouldn’t be all business. Your team needs to work closely together – personal connections count.
You should explain the history of your team members within the context of your business, and highlight networks within your company.
3. Transfer Your Knowledge
During the handover period, work with your team and the new incumbent to transfer your knowledge of your business to them. As when creating a framework of navigational support, be sure to minimize the handover period. Your role here is to be a coach to the new CEO, not to do their work.
4. Ensure Communication Happens
It is essential for your leadership team and new CEO to communicate continuously. It is how trust is developed and expectations are aligned. Set out processes for communication to take place, including meeting schedules, and provide clarity about the purpose of all communication.
Finding the Right Person for the CEO Role
When stepping down as a business founder, finding the right person for the CEO role is crucial.
You must hire someone with the skills, experience, and personality to be successful.
You’ll need to ensure that they fit in with your team, and that they can motivate, collaborate, and lead.
You’ll need to dig deep in your search for the right person and conduct comprehensive screening to uncover any skeletons that could disqualify them.
It’s a difficult and time-consuming process, which is why most business founders in your position select to use an external executive search agency to cover the market for you and present multiple options. You should aim for a shortlist of around six candidates.
In the final article in this series discussing how a business founder steps down, we look at making sure of your continuing success even though you don’t run the business.