New CEOs — Be Bold

June 02, 2016

New CEOs — Be Bold

report from McKinsey Quarterly on New CEOs has some very valuable information. Looking at what 600 CEOs and the strategic moves they made in their first two years, the researchers found that there were more similarities than expected. They looked at new CEOs from S&P companies who left between 2004 and 2014.

Their overall conclusion was that most CEOs focus early on a few bold moves and work to bring an outsider perspective to the company’s challenges, regardless of whether they are an insider or outsider CEO. To make it a fairer comparison, they looked to see how the companies did prior to the new CEO’s arrival — was it a well-performing company, a poor-performing company or a fairly well-balanced company in stable shape? They found no real differences between CEOs in different performing companies in the kinds of strategic moves that the CEOs made.

Screen Shot 2016-06-01 at 9.23.55 AMThe most common strategic move among new CEOs was a management reshuffle, followed by a merger or acquisition and a cost-reduction program. According to the report, poorly performing companies did better when their CEOs restructured their management teams which was not the case for higher-performing companies. The greatest difference in new CEO moves in well-performing and under-performing companies was in strategic reviews where the latter was more likely to take this route.

Even more interesting to me was what they learned about bringing in an external CEO vs. an internal CEO in terms of performance. External CEOs were much more likely to make bold moves than internal CEOs — moves such as organizational redesign, cost-reduction, geographical contraction and business/product closure. External CEOs have less allegiances and have a greater ability to bring an outsider’s perspective to the business at hand.

The report offers great lessons to be learned for new CEOs:

1. Adopt an outsider’s mind-set. Regardless of whether you came to the position from inside the organization or outside, try to build your outsider point of view.

2. Don’t follow the herd. They suggest looking deeply into the context of your company’s performance and quantifying how best to start making moves.

3. When you’re behind, look at the whole playbook. A bias for action is recommended. Aim high and plan the year ahead.

 

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Leslie Gaines-Ross
Leslie Gaines-Ross
lesliegainesross@gmail.com

As Weber Shandwick’s Chief Reputation Strategist, I focus on the ever changing world of reputation. For the past 25 years, I have relentlessly observed, researched and commented on the rise and fall of reputations.

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