Big Red Car here in the ATX waiting on another dawn and another great day cause this is Austin by God Texas. On Earth as it is in Texas!
So, today, we chat about the orderly change of command when you get a new CEO. This is really targeted on current CEOs and to be new CEOs.
Nobody ever talks about how CEOs hand companies over to new CEOs because it is often accomplished at the end of a plank when a CEO is unceremoniously deleted — no, I meant “fired” or “terminated” or sent to “pursue other interests.” No, I meant fired. Sorry.
Army days, company commanders CEOs
The Army is very good at changing commanders. They do it frequently.
The basic combat unit of the Army is a company. In the combat engineers (glorified infantry who get to blow shit up as part of their jobs and force river crossings amongst other very cool stuff), a company is just less than 200 men organized into three line platoons and a headquarters platoon.
The company commander of a combat engineer company is a Captain though lots of First Lieutenants get companies and grow into their rank. The first time The Boss was a combat engineer company commander he was a First Lieutenant.
In wartime, they do it on the fly on the battlefield. The CO (commanding officer) goes down and the XO (executive officer, second in command) takes over.
Usually works like this, “Sir, the Old Man is dead/wounded/missing/out of commission, you’re it.” [You call a company commander the Old Man even if he’s 25. It’s an Army thing.]
The XO radios the platoon leaders and it’s business as usual. [XO gets killed then the senior platoon leader takes over. The Army has a system.]
In peacetime, they do it at a change of command ceremony.
Typically, the battalion commander (fire teams, squads, platoons, companies, battalions, brigades/regiments, divisions) takes the company flag (guidon) from the outgoing company commander and hands it to the incoming company commander thereby symbolizing the formal change of command. [Behind the scenes, there are written orders issued assigning and reassigning the appropriate officers. Unless somebody has gotten summarily relieved, you know about the change a long time ahead of its actual occurrence.]
There are a couple of speeches and then everyone goes back to work.
Sometimes, if you’ve been the company commander for a long time it is quite emotional and if you’ve been a good one the officers, sergeants, and troops buy you a nice present. The best gift The Boss ever got was a WWII vintage demo knife mounted on a plaque with a sentimental inscription. [I wonder where that damn thing is.]
In business, new CEOs
Businesses change their CEOs in a slightly different manner.
The manner in which the change takes place will color the nature of the transition and underpin the potential for the long term success of the incoming CEO. If it is done with drawn swords then there will be a low probability of any continuity being built between the former and new CEOs. Amongst professionals, this should not happen but, alas, it always does.
Here are some things that should happen if it is done correctly:
The incoming CEO should know exactly why the outgoing CEO is “outgoing.” Check the outgoing CEOs version v the board chairman’s version of things. Know what it takes to get fired or replaced in this company. Know this.
The outgoing CEO should write a Continuity Memo outlining all the “in progress” and current issues that are going to have to be attended to by the incoming CEO. This memo should identify all short term temporal issues — the “hair on fire” issues.
This can run to several pages and should take a few hours to complete. Pertinent files — paper or digital — should be identified, attached, linked as appropriate. The Chairman of the Board should receive, review, and approve this document as part of the outprocessing of the former CEO. No severance payments until this is finished.
New CEO should sit down with the former CEO and go through it. Make sure you know if the building is on fire before you arrive for your first day of work.
The outgoing CEO should introduce the critical staff — COO, CFO, C suite folks, operating division heads — personally to the incoming CEO. The staff is going to want to see the dynamic between the former and new CEOs.
Learn who the former CEOs favorites are.
The incoming CEO should have an individual one-on-one “meet and greet” as quickly as possible with each of his direct reports. This is a 3 step process, so don’t try to write War & Peace while eating barbecue. It’s not fair to the barbecue.
The incoming CEO should immediately review the organizational documents of the company and ensure she knows what they say and mean. Take particular care to understand the cap table and how it relates to board composition.
The incoming CEO should pour through the financial statements, the audit, and budgets/projections/forecasts. Know the numbers and talk to the auditors. [Likely the last and only time you should be talking directly to the auditors, not outside accountants, auditors.]
The incoming CEO should immediately review the board charter, the board committee charters, and get some intel as to who is on the board. [New CEOs — if you’ve been recruited by a boardmember to this position know the board picked the guy most likely able to make the sale. He is unlikely to fairly represent the actual tone or nature of the board.]
Meet all the board members and take their measure. These are the guys who will one day fire you. Know this. Deal with it. Get comfortable with them.
Get it in writing. New CEOs should demand an Employment Agreement. This will be the high point of your negotiating power. Get it done now. Make sure your agreement anticipates being fired or replaced cause, guess what, that’s how YOU got the job. Big consideration.
Make sure your Employment Agreement addresses the powers you have received, to whom you report, change of control provisions, and mandates annual performance and compensation reviews. Read some Big Red Car on this stuff.
Visit every operating unit in the first month of your ascension to the throne. Better still if you can do this BEFORE you take the job.
Conduct an Anonymous Company Survey in the first two weeks of taking over. Consider this a baseline measurement. Take your time developing this survey. It is important. Read some Big Red Car mojo on anonymous company surveys.
Have a Town Hall style meeting with the HQ staff after you have the Anonymous Company Survey results in hand. Be prepared to answer questions and don’t go home until the last dog dies cause this is your debutante party, new CEO. One chance to make a first impression.
Make it clear as to how you intend to assess performance and if the company does not have a robust performance appraisal system, develop one immediately. This is always a problem. I have never seen a company which could not improve its performance appraisal system and the ability to drive objective attainment through performance appraisal is huge. Do this.
Evaluate the company’s compensation v market comp. This will turn out to be a big thing.
Get with your senior HR person and start chatting about the company culture but not before you’ve reviewed the company handbook and policies. [No company handbook, onboarding process, policy manual? Make one. Right away.] New CEOs can gain support from a broad swath of employees by immediately revising bad policy. It is a critical opportunity.
Check with several people as to whether the HR view of the culture is correct. Many times what the HQ thinks is not what the grassroots thinks. A bit of a gap is fine but opposite sides of the mirror is not.
In the first month make a concerted effort to be seen. Introduce yourself, get the names down right, chat them up, and tell them you don’t know everything but you’re going to learn it.
Dress a little nicer than normal. Do not wear your khakis more than one day. Get a haircut.
Get to work early. Be the first one there and park where they can see that. Take the most “humble” parking spot and if there is a sign that says “CEO” on your parking space, take it down and park with the folks.
Make your first board meeting perfect — clear agenda, agenda delivered ten days before the meeting, board book delivered digitally a week before, phone call to every boardmember before meeting, crisp execution at board meeting, lunch or dinner social time with board, immediate board notes/minutes, follow up calls to every boardmember.
Woo your board. Seduce them.
A lot of the first board meeting prep and execution is to set the tone and to discipline the relationship with the board. It is hard, very hard, to correct things after the fact with a board.
Conduct an Anonymous Board Survey after your second board meeting when you have a feel for them and they have a feel for you. Review the BRC mojo on anonymous board surveys.
Buy a lucky silver dollar that is exactly 100 years older than you.
Good luck. If you need any help, ping The Boss. He’ll help you. [email protected]