3 Steps for a Seamless Executive Transition
The following FTI Consulting authors also contributed to this article: Rob Mindell, Ellie Sweeney, Anna Adlewska and Pablo Zarate.
Will the head of your company still be in charge one year from now? Executive transitions are common in any organization, but it’s the unplanned transition that truly stirs up stakeholders. This is also where companies often fall short of expectations. In fact, FTI Consulting recently conducted a survey and discovered that investors believe only 42 percent of companies are successful in handling an unplanned executive transition.
An unplanned transition can occur for any number of reasons: retirement, shareholder activism, personal scandal, malfeasance, a sudden illness or even death. But whatever the cause, the moment can quickly develop into a reputational maelstrom if not handled well. One key to ensuring a smooth transition and mitigating the risk of a communications disaster is to keep critical stakeholders informed throughout the entire process. Importantly, companies can get out ahead by developing a transition communications plan that takes a 360-degree approach to stakeholder outreach. And despite the assumption that investors’ and employees’ priorities may significantly diverge, our research found that they are remarkably consistent in many respects.
For those companies that find themselves in a transition without a plan, the following three steps can help keep your stakeholders feeling better informed during this sensitive period of change.
1. Identify Your Audience
Employees and investors agree that employees are the most critical stakeholders during an unplanned executive transition, with investors next, followed by customers, suppliers/partners and regulators. However, because the stakes are so much higher for employees and investors, these stakeholders expect more transparency and clearer lines of communication from the company and its leadership team throughout the process. To effectively satisfy these parties, companies must know their audience’s expectations, priorities and concerns as well as the best ways to engage with them during this time of heightened sensitivity.
InvestorsWhat to expect:
- The Board and other executives will be in the glare of the spotlight as investors look for guidance on any potential impact to business continuity resulting from the transition.
- Investors may expect to be informed on the timing of any strategic review to be conducted by the incoming CEO to mitigate market uncertainty.
- Investors see that employees need to be number one. Business continuity is seen as critical over other transition priorities such as engaging with the media (who are not regarded as a key audience by either employees or investors).
"86 percent of employees and 84 percent of investors ... believe a company should make an interim appointment."
Actions to take: Incoming CEOs will benefit from communicating with existing directors and Board members, even if time is limited, so they can quickly align on the direction they will be taking, any near-term issues, and communications strategies. In an unplanned transition, 75 percent of investors surveyed expect significantly increased involvement from the Board of Directors. The initial “shock factor” of an unplanned transition could leave investors in the dark and feeling unsure, so having a comprehensive strategy for informing those key stakeholders is critical.
EmployeesWhat to expect:
- Employees will seek clarification on who will be steering the ship, what their vision and strategy will be, and any implications for their work. Many employees will feel vulnerable in their roles and functions until they understand how the company plans on moving forward.
- Senior-level executives, particularly those closest to the departing executive, may themselves consider exiting the business, which will create further questions and angst.
- If the void isn’t filled with accurate information from the company, rumors and gossip will drive the conversation. Employees expect to hear directly and collectively from the company, with 73 percent of surveyed employees indicating they prefer a town hall meeting, 61 percent preferring email, and 59 percent preferring a direct conversation with their manager.
"Senior-level executives ... may themselves consider exiting the business."
Actions to take: Employees will want to see tangible results in the form of interim appointments or announcements. It is critical, particularly in unplanned transitions, that remaining company leaders and executives are present and available. Communication in writing and, preferably, a visible in-person presence across facilities is essential.
2. Develop a 360 Degree Approach
In today’s hyperconnected digital landscape, no one operates in isolation. Messaging meant for a single audience can quickly spread to another. Employees listen to investor calls. Investors monitor their social media feeds closely. Shareholder activists send letters directly to the marketplace. When chatter is everywhere, it can become challenging to maintain control and influence with key audiences.
Most companies do not carry a deep bench of stakeholder-facing talent. Particularly when a company loses a central authority figure who can communicate across audiences, the risk of stakeholders filling the void with rumors or misinformation may become a reality.
An interim appointment provides air cover to engage with and mitigate an audience’s concerns while the company finds the right long-term executive to fill the role. And this is exactly what stakeholders expect – 86 percent of employees and 84 percent of investors surveyed indicated that, in the event of an unplanned executive transition, they believe a company should make an interim appointment.
Luckily, the concerns to address with key audiences are similar – business continuity is the major theme for both investors and employees in a moment of executive change. Both prioritize succession and “business as usual” operations as the most critical elements in a transition.
3. Act Swiftly and Decisively
Swift, decisive action is indispensable during an unplanned executive transition. FTI Consulting supported a major U.S. insurance company when a leader of a critical business unit suddenly and unexpectedly departed. The Board was left with the daunting task of quickly replacing the executive while mitigating the fallout among stakeholders, including employees, investors, and customers. While a business unit leader departure might not seem as alarming as other members of the C-suite, it is highly impactful for employees, who ranked the departure of a business unit leader just below the CEO (and of greater concern than a CFO departure).
In the case of this unplanned transition, the company responded by quickly deploying a detailed plan to reach out to key stakeholders. It made an internal interim appointment and deployed messaging that reinforced the business unit’s strategies and progress toward corporate priorities. Thanks to the company’s ability to act quickly and decisively, it was able to appoint a new business unit leader in a matter of months, with stakeholder confidence in the new appointee bolstered by a smooth and swift outreach across audiences.
Ultimately, preparation is critical. Planning for the unplanned can mitigate a host of risks including market uncertainty and fluctuation, significant loss of value, flight of top talent, and the loss of key customers. And while unplanned executive transitions may not have the luxury of this foresight, transparent, direct communications to key audiences still win the day.