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- Effective CEO transitions require boards to move beyond standard position descriptions and establish success criteria prior to recruitment.
- Early performance monitoring should focus on leadership behaviours, cultural alignment, and root-cause strategic decision making rather than immediate commercial outcomes.
- Boards need to ensure robust onboarding plans and independent culture audits are in place.
Incoming leaders are often joining an organisation at a time of reset, whether after a crisis or an unexpected exit, or ahead of a strategic pivot. Boards have the power and responsibility to lay a clear path that supports success.
In the weeks after the arrival of a new CEO, the corporate dance can be exhausting for everyone. The incoming executive is forming their view of the business while employees – and perhaps even the board – are busy assembling a definitive view of the new hire. Governance experts argue the foundation for a successful transition rests squarely on the shoulders of the board, well before the CEO has their feet under the desk, and it needs to be more than a position description.
“Boards should carefully prepare a success criteria document,” says Julie Garland McLellan FACID, CEO of board advisory The Director’s Dilemma, noting boards frequently fail to distinguish between what a CEO does and what they must achieve. Providing candidates with a comprehensive success criteria document during the recruitment phase leads to better interviewing, too.
Asking ‘how do you lead change’, she says, “gets a wonderful waffly answer where the better sales person comes out on top – and they might not necessarily be the better CEO”. Instead, ask a question that goes to specifics. Her sample grilling: “We’ve recently gone through an austerity program and the government has cut our budget by 15 per cent. How will you rebuild staff morale following these events?”
This precision cuts through prepared answers and reveals the true talents of the candidate. “You’ll get a much better answer from someone who really knows what they’re doing, but you’ll only get that if you, as a board, have put the time into thinking what the CEO needs to achieve.”
Make your great expectations known
Garland McLellan says the success criteria should map out clear expectations across explicit milestones, detailing what needs to be achieved in the first month, three months, six months and year. Without this plan, directors risk evaluating superficial activity rather than true progress.
“If you know what success looks like, this gives you a better picture of whether they’re ahead with some things or behind with others,” says Garland McLellan. “If you’re not tracking whether they’re achieving those results you’re just looking at activity and basing your response on whether you like the person or not.”
While it sounds like an obvious process, Garland McLellan says it’s surprisingly rare for such detailed success criteria documents to be part of the recruitment process. “Boards that use professional executive search are more likely to have a more nuanced position description, sometimes with a complete success criteria document.”
Vetting is another commonly underdone process. “Most modern references are not worth the waste of paper to print them out,” says Garland McLellan. She recommends conducting at least six rigorous reference checks – two chairs or directors, two peers and two subordinates – with each conversation lasting around 90 minutes.
This deep dive should yield unvarnished views on a candidate – and even weaknesses can be constructive. “You’re interviewing the references to find out ‘how do I remove the blocks and put the booster pack on and make this CEO successful from the moment they sign on the dotted line’.”
Transparency is a two-way street
“Particularly when there’s a new CEO coming in, boards have a responsibility to offer real clarity around where the issues in the organisation are,” says Georgia Henry GAICD, CEO and founder of culture and leadership advisory Henry Reed.
“An independent assessment of culture when a new CEO comes in also gives the board independent information to have effective oversight of whether the CEO is putting out fires or addressing the root causes of the issues.”
Such a proactive culture audit also serves to give a CEO confidence. “They’re not coming in relying on what people are telling them, or on evidence or insights that may be flawed or biased,” she adds.
“In transition or turnaround situations, the board has a responsibility to understand what is happening in the organisation, to be able to give that clarity of mandate and also to provide support for the CEO,” says Henry.
“There will likely be tough strategic decisions to be made, and if the board is not fully aware of what is going on inside the organisation, it may limit the effectiveness of decision making. Quality of information, clarity of purpose and encouraging an open, trusting relationship is something the board needs to provide, as well as the CEO.”
Red flags and green lights
Evaluating early success requires patience. Henry notes boards often look for rapid commercial outcomes at the expense of long-term cultural stability. “For me, it’s about behaviours, it can’t be about results too early,” she says.
Signals of success should centre around whether the CEO is bringing clarity of understanding, the quality of their decision making and how the rest of the executive team is behaving – are they more or less engaged?
“Understanding where the CEO is spending their time, are they internally or externally focused,” says Henry. “One of the biggest indicators of early success is who the CEO is keeping in the organisation – who are they elevating and who are they exiting? Also, looking at the endorsed behaviours that influence the culture of the organisation.”
During the probationary period, directors must be highly vigilant around behavioural disconnects or integrity issues. Ultimately, a robust onboarding framework acts as a vital safeguard against early failure, as does staying close in those early weeks or months. “A mistake I see boards make is to bring on a new CEO, have a quick induction and say ‘off you go’,” says Henry. “They lose that opportunity to provide strong support and direction for the incoming CEO, and to build a strong relationship.”
Garland McLellan notes that while there’s no “perfect CEO”, it’s the job of boards to get the most out of the leader they hire. “One person will struggle where another will excel,” she says.
“You’re constantly looking at where the downsides of your choice are and how you’re going to support, educate, guide and monitor them. Where are the upsides? How am I going to get out of the way and make sure they pass on some of their brilliance to the people under them?”
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