BOARD CORNER: When to Change your CEO…Red flags

“What are the Red Flags that tell you it is time to replace your CEO?

Recently I had the chance to facilitate a group of investors, board members, and trusted business advisors on the topic of “when do you know it is time to change your top executive?”   Here is a summary of the reasons why and advice on letting go of a Chief Executive.

If you are a CEO…beware!  If you are a board member or investor, then take note.

1)    OPAQUENESS:  Not transparent with the board.  Lack of full disclosure and hiding things.  Boards do well with good news or bad news, but not NO news.

2)    STRIFE…Trouble getting along with other people who are believed to be of quality in the organization.

3)    ROSE TINTING: When they always seem to skew the facts in a favorable light.  If they skew the facts to the board, then they probably do it internally and to themselves, which leads to poor decision making

4)    DISORGANIZED: When they seem to have trouble getting organized and prioritizing for themselves and others on their team.

5)    DELEGATION DYSFUNCTION:  When they have trouble delegating.  There is simply too much for a C-level exec to do to be an effective micro-manager, attempt to do it all themselves, or abdicate instead of delegate.

6)    MISSING STEERING WHEEL:  Lost control of business metrics and thus clear understanding of what is driving the business.  Cannot quickly explain the financials or the business drivers.

7)    ATTITUDE!!  I will let you fill in your stories here…everyone has some!

Once you have decided to implement a change, here are some key guidelines for a implementing your decision.  Our advisors were quite emphatic about these points:

NO FEAR.  One seasoned attorney reinforced the concept that it is better to move quickly than to delay due to fear of employee retaliation, noting that reasonable heads always prevail and work things out.  He concluded that a little incentive up front to leave on good terms was a great investment for both parties.  Departing executives who turned nasty rarely benefit as much as those executives who worked to keep the transition as positive experience for all.

NO EXCUSES.  Lack of succession planning is not to be used as an excuse for slowing down a change.  Find other options…quickly.  Have a team of executives you can call at any time to bail you out in any business investment.  Build a relationship with a search consultant dedicated to adding value to your business portfolio.   Tap into talent on the Board of Directors.  Give someone on the executive team an unexpected opportunity.  Just don’t delay.

BE COMPASSIONATE YET FIRM.  More advice from a turnaround expert and nine-time interim CEO: “Be hard on the business situation, and compassionate with the individual.”  Make the changes required to benefit the business, and be respectful and considerate of each person’s dignity and emotions.

MOVE QUICKLY.  What was fascinating was the unanimous opinion that owners never regretted moving quickly to make a change at the top, and yet always regretted moving too slowly.  Some owners also believed that moving quickly was easier on the failing executive, as well as themselves and the organization.  If you are asking the question…you already have your answer!

I appreciate the work and sharing of the advisors in creating this article.  Please add your thoughts and comments below.  Thank you.

Paul Herrerias, Managing Director – San Francisco, Stanton Chase International 

With expert input from:

Tom Barber, Managing Partner – Spanos, Barber, Jesse & Co.

Investor and member of many Board of Directors.

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