Earlier this month, Starbucks announced that it is replacing CEO Laxman Narasimhan with Chipotle’s CEO Brian Niccol in an attempt to revive sales and appease activist investors.
As two of the world’s biggest brands navigate CEO transitions, the C-suite's role in maintaining stability and momentum will be critical to retaining consumer loyalty and business.
Leadership transitions can challenge even the most resilient organisations, and how these changes are managed can significantly impact employee morale, operational excellence, and business results.
Whilst each appointment is unique, there are often three prevalent challenges that present in each situation, regardless of whether you’re a global multinational organisation or an ambitious startup:
Impact on business performance
Regardless of whether the incoming CEO is charged with driving new growth or revitalising an underperforming company, the pressure to deliver results is extensive.
Cost
From hiring new talent to the associated opportunity expenditure, there are significant costs involved in leadership transitions. But costs aren’t just financial. According to a recent report from Korn Ferry, 11% of newly hired CEOs leave a company within the first year, and over 30% leave within the first 3 years.
Organisational and cultural shift
An often-underestimated challenge is the organisational and cultural shift that can take place when embedding a new CEO. Starting the moment the new leader is announced, employees at every level – especially the executive leadership – will be monitoring closely and sometimes holding back until they understand the new business culture and direction.
Yet, just as there are challenges to hiring and onboarding new leadership, there are also a wealth of opportunities that are often overlooked.
Three of these opportunities include:
Plan beyond the first 100 days
Finding the right leader is critical, and for transformative change, considerable financial results, and overall organisational success to happen, the new CEO’s ability to lead and navigate the business through growth is key.
However, for this to happen, thoughtful and strategic integration and onboarding must be paramount, yet too frequently the complexities of these are overlooked, resulting in missed chances to fully unlock the impact that a transformative CEO can have on a business and its growth trajectory.
Consider the wider organisational context
According to Harvard Business Review, 75% of new CEOs say they feel negatively surprised by the reality of the culture they encounter.
Successfully integrating a new CEO involves much more than simply choosing the right leader. It requires creating an environment that allows the new leader to excel and realise their full potential. This includes ensuring the new CEO understands the company's culture and promote a supportive and change-friendly organisational climate before the transition.
Both a thoughtful and strategic integration and a nurturing atmosphere are vital for a successful transition.
Prioritise the team – not just the new CEO
In the same Harvard Business Review study, new CEOs also reported that one of their biggest ‘asks’ was to swiftly build out their teams. When Brian Niccol steps into his new role as Starbucks CEO on Monday 9th September, he will become the business’ fourth CEO in just two years.
Against the backdrop of such turnover in leadership, one his key tasks will inevitably be to create a unified and synchronised leadership team and improve internal morale.
To ensure that new CEOs capitalise on these opportunities, strategic planning and preparatory work with the outgoing CEO (if feasible), the Board of Directors, the Chief Human Resources Officer, and others are essential.
To prevent a ‘standing start’ and demonstrate an aligned commitment to making the new CEO transition smooth and successful from the outset, existing leaders must collaborate on specific actions before the new CEO takes the helm. These include:
Start immediately to align the leadership team and avoid expecting any single individual – whether the CEO or someone else – to be a panacea.
When a new member joins a team, especially a new leader, it inevitably shifts the team dynamics. Navigating challenges such as power changes, a variety of perspectives, and achieving long-term alignment requires purposeful effort, strong leadership, and ample opportunities for building relationships.
New CEOs, along with their teams, must aim to create trust and encourage open dialogue. Additionally, they should leverage traditional coaching and onboarding practices for behind-the-scenes support to ensure a smooth transition and successful integration.
Begin with the "why" and show how it can be accomplished.
A new CEO and their leadership team must convey a unified purpose and vision for the organization. This vision should be crafted collaboratively by the ‘diverse many’, ensuring it resonates broadly.
It should serve as a compelling call to action, clearly articulating the benefits for everyone individually. This approach will focus and energise both the teams and the entire organisation, driving alignment and commitment toward shared goals.
Begin developing change capabilities across the organisation in advance of the actual change.
New CEOs inevitably drive change. Investing in leadership development, particularly in change and transformation, strengthens organisational capabilities and prepares the company for the changes introduced by the incoming CEO and executive team.
Additionally, this investment can promote cross-functional collaboration by providing innovative training experiences, ensuring the organisation is well-equipped to embrace and navigate the forthcoming transformations.
As your business marks your new leader's arrival, it is important to remember that their success isn’t solely reliant on their skills and abilities, but it ultimately depends on the alignment and shared vision of the entire leadership team
