This is the second article in our 4-part series examining the topic of CEO succession in the engineering and construction (E&C) industry and how to overcome the obstacles associated with new executive transitions (Read part one here). In the last article, we identified early warning signs of CEO derailment and how to make mid-course adjustments before it’s too late. Here, we explore why personal development is crucial, yet uniquely challenging, for a new CEO as well and show how to leverage available resources to ensure an effective transition.
Succession management is no easy feat for engineering and construction (E&C) firms. Despite an organization’s confidence that it picked the right candidate for a CEO role, there is still a 50% chance that person will leave the organization within the first 18 months—which can end up costing organizations 10 times the executive’s salary and in many cases, even more[i]. According to a recent survey of 588 senior executives who had recently undergone a transition, very few reported a lack of competence or managerial skills as the primary reason for failure (only 26% to be exact)[ii].
So why are so many executives struggling to transition into their new role, despite their confidence in competence? A former rookie CEO remembers his transition feeling “apprentice-like” when everyone expected him to be the master, juggling a finite amount of time with an infinite amount of demands and having a narrow group of individuals to support him[iii].
Developing and leading strategy, building key internal and external relationships, responding to shifts in the industry and markets, stewarding the vision across the organization, and serving as the face of the organization are all critical responsibilities of most new CEOs. These functions, on top of putting out day-to-day fires and working in the business, leave little time for CEOs to invest in their own personal development and reflection. Additionally, new CEOs find themselves with few individuals to provide direct and actionable feedback even though they often experience a feeling that all eyes are on them.
Tactics that Work
Here are a few tactics new CEOs should keep in mind that promote effective transition, despite the unique challenges and demands on their time, energy and efforts:
- Balance Competence with Vulnerability
New CEOs often report feeling a tension between demonstrating their competence to take on the CEO role and showing humility and vulnerability, or encouraging others to challenge their thinking and provide genuine feedback. While it is critical to demonstrate competence and confidence in their vision for the organization, those who show unawareness to their strengths and weaknesses may undermine their senior leadership team’s loyalty to execute on key business objectives or vision. One way to demonstrate vulnerability and self-awareness is by inviting candid and confidential feedback via a 360-degree tool prior to transition (or shortly thereafter), and then—after digesting the results—sharing high-level personal development intentions with key internal stakeholders.
- Put the Roadmap in Place
According to a recent study, companies that fewer than 20% of firms that have a transition process for new CEOs extend that process beyond the successor’s first week in the role. Based on FMI’s observations of executive transitions in the E&C industry, meaningful and successful transition for executive roles can almost never be accomplished in a week, let alone a few months. New CEOs should have a roadmap based on key transition milestones (e.g., strengthening strategic relationships in the market) plus areas for personal development. Ideally, the latter should be identified through objective assessments or a 360-degree feedback tool, and the overall roadmap should be established for the first 100 days, one year, and so on.
- Leverage the Board
With limited genuine internal feedback available, an external sounding board becomes even more critical for new CEOs—one potential channel for honest feedback is the organization’s board. Despite this needed venue for feedback, a recent study highlighted that 61% of new CEOs had very different expectations from the actual support their board provided during the transition and acclimation into their new role—many desired much more feedback and guidance[iv]. This challenge may be even more acutely felt in our industry. Most E&C boards lag when it comes to providing CEOs with supportive feedback, and new CEOs may garner little feedback. In response to these challenges, successful industry CEOs clarify specific areas where they need feedback early in the transition process, and actively seek out the feedback even if board members are hesitant to share it. Consistent communication, request for input, and openness to that feedback should improve the feedback loop between the board and new CEO.
- Have Multiple Mentors and Advisors
Given the complexity associated with stepping into the CEO role, mentorship is a highly effective tool to fortify personal development and prioritize that development. Often, support comes in the form of the ex-CEO, a board member, or a peer executive in another organization. In the senior leadership ranks, many executives find that mentoring and advising doesn’t come from one person, but radiates instead from a strong network of trusted and experienced individuals who can support and advise the new CEO on a variety of issues and challenges.
- Embrace Mindfulness
New CEOs are often tasked with implementing change, improving culture and accelerating growth, but these ambitious undertakings can leave new executives depleted and overwhelmed. Many successful executives find a balance through the practices of meditation and mindfulness, where leaders stop for moments at a time to acknowledge the present and calm their minds. Apple’s Steve Jobs, Salesforce CEO Mark Benioff, and LinkedIn CEO Jeff Weiner all suggested that the practice of meditation and mindfulness was pivotal to counteracting the stressors of their jobs, and inspiring creativity and strategic thought[v]. For the new CEO with an overload of demands, meditation and mindfulness provide simple, fast ways to reduce stress and self-reflect.
The key to successful transition requires the new CEO, and his or her support network to remain vigilant long after the initial CEO selection decision is made. The transition is a hurdle that nearly one-half of new CEOs struggle to get past, and in some cases ignoring personal development and self-reflection during the transition is the culprit for transition failure[vi]. With a healthy sense of humility, the help of the board, both internal and external support systems, roadmaps, and personal disciplines, a well-selected CEO can effectively prioritize personal development throughout the transition to ensure that he or she is well equipped for leadership success in the years to come.
[i] Nawaz, S. (2017). The Biggest Mistakes New Executives Make. Harvard Business Review. Retrieved from https://hbr.org/2017/05/the-biggest-mistakes-new-executives-make
[iii] Belvedere, M. (2016). The biggest mistakes new CEOs make and how to avoid them. CNBC. Retrieved from https://www.cnbc.com/2016/04/26/the-biggest-mistakes-new-ceos-make-and-how-to-avoid-them.html
[iv] Chief Executive Transitions Research Findings. RHR International. Retrieved from http://www.rhrinternational.com/sites/default/files/pdf_files/Chief%20Executive%20Transitions.pdf
[v] Asghar, R. (2014). Why The World’s Best Leaders Want to ‘Meditate on It’. Forbes. Retrieved from https://www.forbes.com/sites/robasghar/2014/10/29/why-the-worlds-best-leaders-want-to-meditate-on-it/#44a6260f3f7d