It’s your first day in a new CEO role. You’ve received your tech toys, required software, a functioning email address, access to the intranet, your new employee badge, and the required access to the board-level floor. Smooth onboarding, one would think. Not really, I’d say.
A recent study found that 70 % of CEOs are either underwhelmed by their onboarding process or have had no structured onboarding process at all (Byford, Watkins, and Triantogiannis 2017). What would please about 99 % of the employee population in a company is nowhere nearly sufficient for CEO-level onboarding.
A study from the Aberdeen Group looked into the onboarding processes of 282 organizations. They found the difference between organizations that get onboarding right and the laggard companies (bottom 30 %) is significant. Best-in-class companies (top 20 %) were able to distinguish themselves across key performance criteria (Lombardi 2011):
• 96 % of first-year employees were retained, as com- pared to 18 % of employees at laggard organizations
• 82 % of employees hired in the last twelve months met their first performance milestone on time, as com- pared to 3 % at laggard organizations
• 18 % year-on-year improvement in hiring manager satisfaction, compared to a 1 % decrease among laggard organizations
• Improvement in customer satisfaction by 12 % and customer retention by 10 %, compared to a 2 % improvement of each at laggard organizations
The competitive maturity assessment of the same study distilled the common characteristics of the best-in-class organizations, too. They involved a wide range of stakeholders, from individuals to company executives, taking ownership for their role in ensuring the productivity of newly hired employees.
The best-in-class also used a structured and standardized onboarding process that addressed both tactical and strategic elements. They also used metrics to measure and improve the process continuously, as well as partially automated certain elements of onboarding to free up resources to focus on engaging and socializing new employees. An interesting observation is 52 % of the best-in-class organizations involve their senior ranking executive leaders in the onboarding process, compared to 29 % of the laggard organizations (Lombardi 2011).
The Ripple Effects
Another study from the Corporate Executive Board (CEB) examines the ripple effect of high-impact leadership transitions. They examined over thirty thousand executive leader transitions, enriched further by hundreds of executive leader interviews. They found the direct reports of a struggling transitioning executive leader on average perform 15 % worse than those who report to a high-performing one, so a clear performance drag (CEB 2012).
Furthermore, in comparing the likelihood of the direct reports of high performing versus struggling transitioning leaders to be highly engaged or remain in the organization, they found a statistically significant difference of 20 %. If we add to this the set of executive peers whose productivity is enhanced because they depend on the executive leader and additional business opportunities that are generated, the ripple effects of executive transitions become truly magnified.
Lastly, CEB’s rich database suggests any large organization has seventy senior executives on average. With about 12 % being replaced annually, this results in eight senior executive transitions each year. Despite this predictable pattern, many organizations approach CEO transitions like mergers and acquisitions. We know one of the most commonly identified factors when it comes to failed deals is ineffective post-merger integration. Similarly, most executive transitions fail because of poor “integration” of the CEO into the new role in an organization.
The best organizations truly understand the ripple effects (both positive and negative) and orchestrate a structured and externally supported CEO transition process. This process would mobilize internal resources and apply innovative tools and systemic approaches to assist the newly appointed CEO with a set of high-impact transition activities.
Significant research has been conducted to evaluate the benefits of successful onboarding and executive transitions. Many studies have focused on benefits related to the CEO in transition. However, the benefits are threefold, benefitting at least three distinct groups of stakeholders.
Benefits for the CEO
A successful transition has proven to reduce the likelihood of derailment by up to 50 % (Wheeler 2009). A structured and supported CEO transition also mitigates key transition challenges and associated risks. In return, enhanced role satisfaction is a clear benefit for the CEO.
The other benefit that shouldn’t go unnoticed is baseline productivity levels are reached in a shorter space of time. This has been measured in many studies and the results are an accelerated transition that is up to 50 % faster than with the peer group who didn’t get the structured transition support.
Lastly, it becomes obvious how successful CEO transitions will pay a dividend in an area that has not been mentioned yet: the future trajectory of the CEO’s career, such as a higher likelihood to be promoted externally after one or more successful transitions.
Benefits for the Organization
The most obvious benefit is successful CEO transitions reduce the risk of high-stakes placements and potential costs related to mis-hiring. Studies show that mis-hiring at the executive level is highly costly, with an estimate of somewhere between 10 to 30 times the salary cost of an executive (Fatemi 2016).
Corporate Executive Board (CEB) research suggests that successful CEO transitions demonstrates that 90 % of leadership teams whose CEO had a successful transition go on to achieve their three-year performance goals. In those teams, the attrition risk is 13 % lower than the rest (Keller and Meaney 2018).
A successful transition also suggests the organization is making better—if not the best—use of the CEO’s unique talents and potential. It is a strong and clear demonstration of the commitment to the executive and their professional development.
Furthermore, if part of the mandate of the new CEO is to change the organizational culture, then a structured transition supported by an executive transition coach can facilitate the adoption of a new and supportive organizational culture and management style. Also, it helps to reduce organizational anxiety by sending signals of proactive and thoughtful leadership.
Benefits for the Stakeholders
The RBL Group, a Human Resources consulting firm, published their findings in “The Leadership Gap,” a study with 430 portfolio managers and institutional investors. They found the top three criteria for an investment decision are: how the company performs with 38.5 %, industry favor- ableness with 33.1 %, and quality of leadership with 28.4 % (Ulrich 2020).
What is particularly interesting is the RBL Group also measured the confidence levels these investors had in their ability to assess the three criteria. The lowest confidence intervals were shown at the quality of leadership with 3.75 or a standard deviation of 0.96 versus 0.58 for performing firms and
0.66 for industry favorableness. That means investors and portfolio managers have the lowest confidence level when it comes to being able to measure the quality of leadership.
Part of what makes the quality of leadership is onboarding the CEO effectively and minimizing their chances of derailment. With these findings, we are now able to relate financial investment decisions to companies with their executive transition process.
Another obvious benefit is the combined result of having a high-performing executive, their leadership team, and the organization. It exudes confidence to the management board and to investors. We can see how greater alignment of an organizational strategy with cultural execution can increase employee engagement levels and the business performance of an organization.
Successful CEO transitions also provide a platform for thoughtfully engaging external stakeholders. When we look at what the younger generations truly want from their organization, it becomes obvious some of the above are not “nice-to-haves” but indeed “must-haves.”
As we can see by now, transitioning into a CEO role is a critical period that can significantly impact the success of both the executive, the organization and the wider stakeholder groups. In the context of Kingdom of Saudi Arabia’s Vision 2030, these transitions become even more crucial as they involve aligning with the nation’s ambitious goals for economic diversification and development. Here are several strategies that boards and organizations can implement to support their CEOs during this pivotal time.
1. Adopt a Leadership Development Mindset
Boards should prioritize leadership development long before a transition is necessary. This involves identifying and nurturing potential leaders within the organization, ensuring they are well-prepared to take on the CEO role when the time comes. A proactive approach to leadership development can help create a pipeline of capable leaders who are ready to step up when needed.
2. Engage Early and Often
Early engagement with the board is crucial. This means involving the board in the transition process from the outset, ensuring they understand the strategic goals and the specific challenges the new CEO will face. Regular interactions between the board and the incoming CEO can help build a strong foundation of trust and collaboration.
3. Create a Transition Task Force
Forming a dedicated task force to manage the transition can help streamline the process. This task force should include key stakeholders who can provide support and guidance to the incoming CEO. The task force can also help coordinate various aspects of the transition, from onboarding to strategic planning.
4. Leverage Vision Realization Programs (VRPs)
Saudi Arabia’s Vision 2030 includes various Vision Realization Programs designed to achieve specific strategic objectives. Boards should ensure that especially new CEO who’s hired outside of the region is well-versed in these programs and understands how to leverage them to drive the organization’s goals. Familiarity with VRPs can help the CEO align the organization’s strategies with national priorities.
5. Foster a Supportive Business Environment
Creating a supportive business environment is essential for the success of Vision 2030. This includes investing in education and training for the workforce, promoting innovation, and ensuring that the organization is adaptable to change. A supportive environment can help the CEO implement new initiatives and drive organizational growth.
6. Ensure Cultural and Political Alignment
Understanding the cultural and political landscape is crucial for any CEO, especially in a country undergoing significant transformation like KSA. Boards should provide the necessary resources and support to help the new CEO navigate these complexities. This might include cultural training, political briefings, and access to local networks.
7. Maintain Open Communication Channels
Open and transparent communication between the board and the CEO is vital. Regular check-ins and feedback sessions can help address any issues early on and ensure that the CEO is on track to meet the organization’s goals. Effective communication can also help build a strong relationship between the board and the CEO, fostering a collaborative working environment.
8. Implement Structured Onboarding Processes
A structured onboarding process can significantly enhance the success of a CEO transition. This process should address both tactical and strategic elements, ensuring that the new CEO has the tools and information needed to succeed. Best-in-class organizations often use metrics to measure and improve the onboarding process continuously.
9. Provide External Support Through Targeted Executive Transition Coaching
External support, such as executive coaching, can be invaluable during a CEO transition. Coaches can provide objective feedback, help the CEO navigate challenges, and offer guidance on strategic decision-making. This support can help the CEO build confidence and competence in their new role. As an example, I am currently working with LVMH, the largest luxury group in the world to support them to set this up from scratch.
10. Monitor and Evaluate Transition Progress
Regular monitoring and evaluation of the transition process can help identify areas for improvement and ensure that the CEO is progressing as expected. This might include setting specific milestones, conducting performance reviews, and gathering feedback from key stakeholders.
Conclusion
Supporting CEOs in transitioning towards Kingdom of Saudi Arabia’s Vision 2030 requires a comprehensive and strategic approach. By adopting these strategies, boards and organizations can help their CEOs navigate the complexities of their new roles and drive the organization towards achieving its goals. A successful transition not only benefits the CEO but also enhances organizational performance and contributes to the broader objectives of Vision 2030.
The Business Case for Successful CEO Transitions is a no-brainer. Where are you on this journey?
