Source: Alan Fleischmann from Forbes
Kenneth Chenault, the stalwart CEO who has led American Express for 16 largely successful years, has announced his retirement. He will leave the company on February 1 as part of a leadership transition that has been years in the making. Needless to say, incoming CEO Stephen Squeri has big shoes to fill.
Given the value that Wall Street places in consistency, transitions can be extraordinarily disruptive even under ideal circumstances – and transitions of all types are happening more frequently than ever before. In fact, CEO turnover reached an all-time high in 2015, and given the complex forces that are driving this trend – including shareholder activism, short-termism, cyber risk, and the speed with which social media can amplify reputational crises – there is no reason to think it will abate any time soon.
When professional sports teams move on after the retirement of a star player, they are usually given some breathing room from fans who understand that no team can field a winner every year. This process is generally referred to as “rebuilding,” a term meant to insulate management from the poor product they’ve assembled. Companies don’t have this luxury. For example, customers wouldn’t stay loyal to Apple if the company had announced that the iPhone 10 would be slower and less functional so that the company could regroup and build a better iPhone 11 in a few years. Nor would customers allow American Express to use its change in leadership as an excuse for poor performance. "Losing" for any extended period of time is unacceptable, and consumers won’t forgive a drop in quality the way fans will (at least for a while) for their favorite teams.
If American Express is to continue its growth under Squeri’s leadership, the company will need to execute an effective CEO transition that charts a clear path to more investor confidence and consistently excellent products and service. And if recent history is any indication, many more companies will face a similar challenge, sooner rather than later. While every change in leadership is unique, I have advised clients on enough of them to offer some universal recommendations:
Succeed, don’t replace
New CEOs tasked with turning around an underperforming company are obviously hired, at least in part, because of the differences between them and their predecessors. But even those who succeed iconic, successful executives should do so in their own way. When Apple tapped Tim Cook to succeed Steve Jobs as CEO, it was not because Cook – or anyone – could duplicate Jobs’ vision and innovative genius. Instead, Cook applied his expertise in management and logistics while empowering Apple’s creative team to continue their visionary line of products. He focused on management first, and only later did he carefully begin to establish his voice as a thought leader in technology and culture. Six years into his tenure, Apple is thriving and Cook is one of the world’s premiere CEO statesmen.
Embrace your company’s history
Squeri is inheriting one of the world’s most recognizable and valuable brands. Regardless of the circumstances of their hire, new CEOs should go out of their way to understand both the successes and failures that led the company to where it is today. “Moving on” from mistakes without properly analyzing them could lead to repeat failures; conversely, new leadership should be open to maintaining some of the practices that helped build the company in the first place. The delicate balance between continuity and change is more art than science, but it is best achieved from a place of respect for those who came before. Gestures as small as singling out past accomplishments for praise or continuing quirky office traditions send a signal to employees, investors and customers that the new boss is focused on his or her changes, rather than on creating disruption for its own sake.
Be strategic about your public profile
Recently I wrote about the price Equifax and now-departed CEO Rick Smith paid for their lack of investment in strategic positioning. Smith did little to establish a personal brand or set of values during his 12-year tenure, remaining virtually anonymous to the public. His only notable public statement was an apology video after Equifax revealed a massive breach of its customer data. Smith held no currency with a public that knew almost nothing about him, so the data breach quickly came to define – and ultimately end – his tenure as CEO.
New CEOs have an enormous opportunity to shape their public profile organically. Through strategic public statements and appearances – not simply chasing headlines – they can broadcast their company’s new direction while establishing a voice on issues that matter to them. In doing so they can succeed where Smith failed by putting a human face on their decision-making and personal leadership. Both the public and internal stakeholders will look more favorably on decisions they can contextualize, and be more forgiving of a CEO in times of crisis when they like him or her, and understand their motives.
Engage early and actively
The transition period is a critical time for new leaders and existing stakeholders to establish an open and frank line of communications. Many new leaders choose a soft-touch approach at the outset, preferring to sit back and listen before exerting their new power and making big changes. This is admirable, but rarely the right approach. Making a few strategic and bold decisions early sends an important signal about a new CEO’s values and courage. When a new CEO reorganizes a team or brings in high-profile new talent, it can be an incredibly effective filtering mechanism: disengaged, low-performing employees will be threatened by the changes and may volunteer to move on, creating more opportunities to recruit new talent; while committed and visionary employees will rise to the occasion and join in the excitement of the company’s new vision.
Empower your team
In order to lead effectively, a CEO must inspire loyalty from his or her staff. Typically a new CEO will inherit a support team, at least temporarily. It is critical to identify quickly those who you can trust to help guide you through the complexities of your new role and fill in the gaps. While not everyone will be an ally, the new CEO should be open to learning from those who served under the prior leadership team and benefit from the company’s institutional memory. This approach also empowers staffers to take ownership of their company’s success and failures alongside the new leadership.
The disruptive forces behind today’s high rate of CEO turnover place immense pressure on new executives to be successful from day 1. Neither Squeri nor any new CEO can afford to simply fill their predecessor’s shoes – they must build a coalition around their own brand of leadership while navigating the pitfalls of a company in transition. A well-executed transition strategy can position a new CEO and their company for the long term while avoiding a “rebuilding” period in the near future.