New Ceos & the Senior Team
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RESEARCH STUDY NEW CEOS & THE SENIOR TEAM Fresh Faces in High Places WHAT WE THINK RHR and RHR INTERNATIONAL and all related logos are trademarks or registered trademarks of RHR International LLP. Copyright 2017 RHR International LLP. All rights reserved. RHR INTERNATIONAL RESEARCH STUDY Senior executive team members often become apprehensive when a new CEO is appointed. Is this anxiety justified? Research from RHR International sheds light on just what happens to those closest to the corner office when a new occupant takes up residence. While our studies show that the AVERAGE CHANGES IN SENIOR TEAM shared with us that they should have concerns of upper-level executives BY NEW CEO initiated personnel changes even may be warranted, thoughtful planning Outsider CEO earlier in their tenure, particularly as can create a senior team capable of 37% 37% 26% they related to executives who were achieving an organization’s strategic not living up to expectations. While the Insider CEO goals with minimal disruption. Easing CEOs expressed the desire to provide tensions and building harmony during 45% 45% 10% substandard performers with ample the transition period can accelerate time to prove themselves, the chief Percentage of Team Members productivity and maximize bottom-line executives also realized that they could results well into the tenure of the new Remain in place have significantly reduced the negative chief executive. Internal promotion/transition impact of these individuals on the Outside/external hire executive team, their direct reports, Making Their Move and the broader organization by taking According to an analysis completed by more immediate action. RHR International, it takes new leaders On average, Outsider CEOs move faster in on average less than four months to making changes to their executive team. First Things First begin making changes in the structure of They are also less likely than Insider According to the study, the first their senior teams. In time, a full 60% of CEOs to promote from within, preferring role likely to be reviewed by the those sitting around the meeting table to bring in new talent (although often CEO, on average, is the chief human will be replacements. Original members not “new” to them—many CEOs bring resource officer (CHRO) or head of might have a nodding acquaintance trusted colleagues with them from prior talent management. From a tactical with 35% of their new associates, as organizations). While internal promotions and symbolic viewpoint, this is they joined the team from within the make up 45% of Insider CEOs’ changes understandable, as it is likely a organization. But chances are they will to executive team membership, they reflection of the chief executive’s desire need introductions to a full quarter of comprise only 37% of the average to make the alignment between talent the assembled executives, since they Outsider CEOs’ substitutions. and corporate goals a top priority. will have been hired from the outside to fill perceived talent gaps among the In RHR International’s study on CEO Concurrent with our findings regarding CEO’s chief advisors. transitions, several chief executives the CHRO role, J.C. Penney transitioned Visit rhrinternational.com NEW CEOS & THE SENIOR TEAM 2 RHR INTERNATIONAL RESEARCH STUDY NEW CEO’S FIRST ROLE CHANGE NEW CEO’S SUBSEQUENT EXECUTIVE REPLACEMENTS1 1 LIKELY TO BE CHRO CFO, Finance, other Talent, CHRO 20% 27% 11% Chief Strategy Officer/ CMO, Chief Brand Officer 15% EVP Strategic Investment 36% Technology 44% (other than CTO, CIO 15% COO 10% 9% Sales (Commercial, Retail) 33% GC/Chief Legal Officer 10% CTO, CIO CMO, Chief Brand Officer 10% 18% 11% CFO, Finance other 10% Technology (other than CTO, CIO) Other (Combined) 15% 27% 11% Percentage of Companies Function or Business Unit Leader 18% 1 Percentages > 100% due to multiple simultaneous changes. 33% GC/Chief Legal Officer 36% its chief talent officer at the same time 44% that Ron Johnson came on board in Logistics/Global Supply Chain November of 2011. Of the entire J.C. 9% 22% Penny executive committee, only 20% of Sales (Commercial, Retail) the original team was in place at the time 27% of our study. Seventy percent of the new 33% members came on board from outside Chief Strategy Office/EVP Strategic Investment of the company. This would indicate that 18% Johnson was in the process of compiling 22% his own personalized team of star players Talent, CHRO 45% as part of his marketing and pricing 22% strategy overhaul. Ironically, the board Outsider CEO Insider CEO did not agree with his direction and he 1 Percentages > 100% due to multiple simultaneous changes. followed most of the original team out the door. Many of the executives Johnson brought in left as well, replaced in turn by new/old CEO Mike Ullman. officer (CMO) roles while Outsider CEOs style. In August of 2012, Mayer still have the CHRO in the lead spot, hired a new, external CMO while the A New Broom followed by CMO and GC. previous holder of that title was on When new CEOs follow up their first vacation. Upon her induction into replacement with subsequent changes, Former CEO of Yahoo! Marissa Mayer the CEO role at Yahoo! in July 2012, general counsels/chief legal officers is another chief executive whose entry Mayer transitioned out over half of her often join CHROs at the top of the list. into the position also reflects the executive team. The first replacement The origin of the CEO seems to make a findings of our study. Although highly was the general counsel and security difference in this decision: Insider CEOs publicized, she does stand out among position just 30 days after her arrival. are more likely to focus on the GC/chief the crowd for her swift and somewhat Mayer announced her resignation legal officer and the chief marketing avant-garde talent management from Yahoo! on June 13, 2017. Visit rhrinternational.com NEW CEOS & THE SENIOR TEAM 3 RHR INTERNATIONAL RESEARCH STUDY Assess, Analyze, and Act Senior executives, for their part, should Whether the new CEO is promoted make sure to stay current with their from within or hired from the outside, skillsets and industry knowledge, our study indicates that changes develop an agile mindset, and keep an to the top management team are open mind when first meeting their new inevitable. Before making such moves, CEO. Fine-tuned abilities, a professional however, chief executives should demeanor, and welcoming behaviors ensure that their team members have may give each member of the team a been professionally assessed against better chance to remain at the table. their organizations’ strategic plans. Assessing for the necessary skills Methodology and behaviors provides a scientific This study was based on an analysis foundation for the CEO’s talent of CEO/team trends from publicly management decisions. Additionally, available information on 20 global instead of building a team of star companies averaging 2012 sales of players from scratch, performance $41B with CEOs who transitioned into gaps could be addressed through the lead role between 2010 and 2012. a strategic and rigorous Executive Forty-five percent of these new chief Development Program that may executives were appointed from inside accelerate productivity more rapidly the company and 55% were hired from than starting over with a new roster. external sources. ABOUT RHR INTERNATIONAL RHR International LLP is an independent, global firm of management psychologists and consultants who understand the distinctive challenges and pressures that CEOs, board directors, and senior executives face. Its singular focus on senior leadership effectiveness, business outcomes, and research-based practice sets it apart from other executive and organizational development consultancies. For more than 70 years, RHR has been helping leaders and their teams transform themselves and, in turn, the performance of their organizations. RHR offers Board & CEO Services, Senior Team Effectiveness, Leading Transformational Change, Executive Development, and Executive Assessment. For more information, visit rhrinternational.com. RHR offers consulting services as RHR International LLP in the United States and through its wholly owned subsidiaries and affiliates including Europe, North America, South America, Asia, and Australia. Visit rhrinternational.com NEW CEOS & THE SENIOR TEAM 4.