Being a CEO entails constant pressure to deliver, long hours to get through and all those critical decisions you must make every day which in turn will affect your company’s bottom, investors, employees and clients. The tremendous responsibility and level of scrutiny you shoulder can be crushing.
Related: What It’s Like to Transition From Founder to CEO
That’s because the success of any CEO is directly linked to the success of the company he or she leads.
In 2013, according to statistics gathered by Credit Donkey, there were over 248,000 CEOs in the United States, and their average tenure was 9.7 years. Since then, the average CEO tenure has decreased to approximately five years. Toward the end of 2017, 38 percent of CEOs had been in their positions somewhere between one and five years, while only 26 percent had a tenure of between five and 10 years — a decrease from 2013 of 0.3 percent.
In business as in life, transitions are inevitable. Everyone moves on, but it’s especially critical for CEOs to put the proper strategies in place for a transition to run as seamlessly as possible. It’s not just a matter of when the transition will take place, but also a matter of how and how well managed the entire process is handled.
Disengaging from the company you’ve been a part of, or even created, can be a difficult process — mentally, physically and emotionally. But, certain steps can be put in place in order to have a seamless and successful exit. Here are five of them:
Take the lead.
If you’re the CEO of a publicly traded company, the executive board has the responsibility to name your successor; however, there’s nothing that says you can’t be involved in the process. In fact, it’s the responsibility of the CEO to craft a plan for a successful transition, and eventually, an exit.
A survey by the National Association of Corporate Directors (NACD) revealed that CEO succession ranked fourth on a list of top priorities for directors. Also, fewer than half, or 48 percent, of directors believed their boards were spending enough time on CEO succession, down from 62 percent in 2014, according to a survey by PwC.
Related: Starbucks’s CEO Transition Is Unlikely to Disrupt Growth, Analysts Say
In a publicly traded company, the CEO answers to the board of directors, whose members, in turn, answer to investors, stockholders and shareholders. As CEO, you should create a skeleton plan to share with at least one board member, preferably the chair, before you share the plan with everyone else. Once you create a detailed plan, share with the rest of the board first, then upper management and so on, until the entire company is aware of the plan. It should be clear how board members and managers can contribute.
A well thought-out plan will make board members feel confident that there won’t be too much turmoil throughout the exit process and will maintain goodwill after the transition has taken place.
Plan early.
When is the right time to begin planning your CEO exit? The answer depends on the company, but the short answer is: Start as soon as possible.
The time frame to execute the exit plan will vary due to a number of factors, but ideally, the plan should be executed in a two-to-three year time span. The succession of a CEO is a lengthy process, especially if the exit pertains to a founder or a long-tenured executive. Anything under two years might seem rushed and could make for a sloppy and messy transition. A Korn Ferry Institute study found that 66 percent of respondents named “starting too late” with a succession plan one of their top three or four risks. Seventy-two percent of those surveyed were fearful of starting the process before agreeing on a strategy.
Work with the board to outline a succession policy that deals with a number of scenarios as well as a backup plan for the CEO position. Think of these moves as being almost a crisis communications plan: Plan for all sorts of scenarios, both likely and unlikely. If you never use it, it’s still good to have. That’s better than needing something and not having a document in place already.
Step up your game.
As someone who is departing the organization, you’ll be juggling a number of things simultaneously. However, two things stick out as essential throughout the process: 1) You must prepare the organization for the transition; and 2) You should prepare yourself for your next role, whatever that may be.
Part of stepping up your game involves getting everyone at the company — from board members, to senior staff, to managers, everyone, to step up. This is bigger than just you. Here’s what you can do:
- Encourage the board to assess the organizational plan currently in place. If you don’t have one, it might be a good time to start creating one
- Assess the roles and responsibilities of the job. Is there anything that needs to change from the way current or past CEOs did the job? Don’t dust up an old document; this is the time for change.
Resist the urge to maintain the status quo. One thing that sticks in my craw is when people say, “That’s the way we’ve always done it.” To me, that’s lazy. Avoid falling into that trap. Change is good!
Keep your word.
Once the departure date has been determined, it must be adhered to. If the goal post keeps being moved, there’s a risk of losing every bit of momentum gained and the CEO’s personal reputation may also take a hit.
However, if as the outgoing CEO you agree to remain in the organization in an advisory role, this can have a long-lasting, positive impact, according to a Bridgespan Group survey. The survey revealed that for long-term CEOs, 80 percent of their organizations reported a more successful transition when the CEO stayed on in an advising role than when the CEO made a clean break (64 percent).
The study also found that a smooth transition increased the tenure of the successor as well as revenue growth.
Whether you as CEO are making a clean break or continuing on as an advisor, make sure to keep your personal brand and your reputation intact. Those are the only two things that will travel with you wherever you go and will follow you throughout life. A positive reputation helps you establish credibility and trust with everyone within the organization, top to bottom. Don’t risk losing those valuable things by not sticking to your word.
Execute the handoff and close the door.
You started the plan; you set everything in motion with the board, your successor, employees and investors.
Now, it’s fine to hand them the keys to the kingdom and walk away — no muss, no fuss. Once you’ve handed the keys to your successor, walk away. Say your farewells, hold your head high and close the door behind you. Make a graceful exit. While emotions may be overwhelming, especially if you were the founder, you need to let that door close. It’s the only way you’ll be able to open the door to the next chapter of your life.