Felicity Morel-EdnieBrown, leadership and executive coach with Morel Consulting, explains why too often great potential CEOs are left to flounder and fail when, with some additional support, they could be top performers
According to Fortune magazine, about 40% of new CEOs in Fortune 500 companies fail within 18 months. This can be devastating to a company. It is costly, it is time consuming, it creates tensions and rivalries and it damages morale and customer relationships. At what point do you continue to support a CEO who is new? At what point do you call it quits?
Failure by CEOs is often presented as part of crisis management or as a performance review accompanied by strict mandates for improvement but signs of struggle are not necessarily signs of failure.
Intervention by a board or the chair when the struggle becomes evident, can equip a CEO to navigate these areas of uncertainty. The rationale for performance evaluation is all too often based on assumptions as to the level of expertise that CEO should have, and expectations of performance rather than an assessment of the qualities that the company requires. Unfortunately, assumptions about people's abilities often go unnoticed until they fail to meet expectations. Perceived failures, wrapped in frustration, often surface as a unilateral decision to replace the CEO. The board needs to pause and step back to make an accurate and unbiased assessment of the CEO’s capabilities in relation to the needs of the organisation, rather than merely venting anger.
Being a CEO is substantially different from being a good manager, even if that management has been of complex projects. The CEO who only manages multiple directorates and the executive team is only fulfilling the managerial aspect of their role; they are effectively, what I term, a hyper manager.
The CEO role is seldom certain. There is a fundamental difference between managing effectively to that of leading an organisation to deliver outcomes. Decisions have to be made on the best available information and there is frequently a degree of uncertainty. A new CEO initially may be in their comfort zone and do a brilliant job at creating organisational change, but may then, as the role matures, become unable to make strategic decisions based on the best available information at the time.
Some new CEOs are blindsided by the different level of thinking that is required. This is a particular dilemma if the CEO has been appointed based on their capacity to do the job rather than to lead the organisation. It is not that they are incapable of it but that it is new.
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