In this episode of the Inside the Strategy Room podcast, two authors of a recent article on the CEO transition discuss how incoming leaders can make the most of their first 12 months in the role. Carolyn Dewar, who coleads McKinsey’s CEO excellence work, is a coauthor of last year’s bestseller CEO Excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest. Kurt Strovink is coleader of McKinsey’s global CEO services practice. For more conversations on the strategy issues that matter, follow the series on your preferred podcast platform.
Sean Brown: How did your research for the CEO Excellence book inform your views on the topic of CEO transition?
Carolyn Dewar: For the book, we had the privilege of sitting down with about 70 of the world’s best CEOs as judged by their performance in the role, and more than two-thirds told us that the role wasn’t what they had expected it to be. Most had had leadership roles before—as COOs, CFOs, P&L leaders, or geographic leaders—but the CEO role is unique. You are the face of the company, the ultimate integrator. It comes with new responsibilities and stakeholders. Since 90 percent also said they wish they had managed the transition differently, we wanted to know what they wish they had known, because you only get one chance to make a first impression and to set the tone for your tenure.
Sean Brown: What was the main message that came out of that new research?
Kurt Strovink: It reminds me of that old quote, “Well begun, half done.” There is a profound opportunity not only for personal renewal but institutional renewal. CEOs have to adjust to the fact that their voice is immediately much stronger than before, and they have to learn to regulate that. They also have to work with peers in new ways, including candidates for the CEO role who may now be members of the senior team. Everybody is looking for the tone the person will set and what they value. From a group psychology perspective, moments like these can “unfreeze” organizations, reaffirm what’s valuable about the culture, and innovate for the next chapter.
Sean Brown: Are there particular pitfalls new CEOs should avoid?
Kurt Strovink: One failure mode is not fully calibrating the mandate the board has given you. You also have to find the right balance between leading and being open to the board’s input without just taking their instructions. Likewise, it’s important to get the right balance between listening and asserting to the broader organization. Sometimes leaders come in with too much of an assertive position without fully understanding the context. Alternately, they may shy away entirely from any early point of view. Either extreme can be a failure mode.
Carolyn Dewar: I would add another pitfall related to research Kurt led a few years ago on externally recruited versus internally promoted CEOs. Outsider CEOs have an advantage in bringing a fresh eye and they tend to move more boldly and quickly to challenge orthodoxies. Whether you are external or internal, it is incumbent upon you to take that outside perspective on people, strategy, or execution.
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Sean Brown: What, then, are the common ingredients of successful CEO transitions?
Kurt Strovink: Generalizing about CEO transitions is difficult because context is important, but we distilled four elements that apply regardless of situation. The first one is not confusing yourself with the office. There is a lot of focus on you as an individual going through this transition and that can distort reality. As Brad Smith, former CEO of Intuit, said, “We all get a couple of inches taller and our jokes get funnier the day we assume the role.” You need to see the world as objectively as you can, which sometimes involves pulling together a process of discovery with people who may challenge you, and getting external perspectives. As I mentioned, there is a profound opportunity for institutional renewal, so focus on the organization’s needs rather than asking, what will my legacy be? How do I find people who complement my weaknesses? These are not bad questions, but they can be reframed to focus on the organization: What organizational purpose do I serve? What does the company need from me?
Sean Brown: Aside from focusing on the institution rather than yourself, what else should incoming CEOs be mindful of?
Carolyn Dewar: Kurt already hinted at the next one, which is listening before acting, although you need to do both within your first months in the role. You need to genuinely listen and learn, because the organization will sense if you are asking questions but not interested in the answers. At the same time, you are testing your ideas or validating your insights. During this period, your stakeholders may tell you things that they will not tell you a year or two later, or that they were not willing to tell your predecessor. They know that you are coming in fresh and don’t necessarily own past decisions, so they tend to be more honest. The listening tour should not just involve your employees but your customers, regulators, the board, and other stakeholders. Ask yourself, “What are people not telling me that they should be telling me?”
In parallel with asking questions, you are also gathering facts. Many new CEOs find it helpful to put together an independent fact base on the organization’s starting point. You may get different sets of numbers from different groups or different storylines of performance, cultural health, and stakeholder relationships, so you need multiple inputs. Where do you see opportunities? Where do you see threats? Then you need to dig deeper into things that don’t make sense. The external CEO has a slight advantage because they can ask the basic questions; everyone expects them to be probing and learning. We would encourage those promoted from within to take the same lens.
During the transition period, your stakeholders may tell you things they would not tell you a year or two later, or that they were not willing to tell your predecessor.
Mary Barra is a great example. She was promoted from within and in her first budget cycle, a team requested resources for a country where GM had been operating for 25 years but had never made money. She called a time out: “Why do we continue to double down here when there is no line of sight to making money? Just because we have done so to date doesn’t mean we should continue.” GM ended up withdrawing from that country, which was quite a bold move. Mary said no to a number of other initiatives as well, partly so she would have the resources to invest in new priorities. For example, she thought electric vehicles were the future and she was able to move GM in that direction because she had the courage to say no to other investments. That was one of her early bold moves that set the tone—not just for the strategic direction but her tenure as CEO.
Sometimes the bold moves relate to people and culture. Satya Nadella not only signaled a move to the cloud and other pivots but also a big cultural shift toward a growth mindset.
Sean Brown: If an executive feels confident that they are the heir apparent, should they lay the groundwork for those moves before they are designated CEO?
Carolyn Dewar: It is a terrific time to take early steps on the listening tour, although you cannot be too obvious about it. You can also invest in your own development. Are there enterprise priorities that you can help lead so you understand what it takes to drive change across the business? Are there parts of the business you need to learn? But I would be hesitant to take other actions until you have the official mandate.
Kurt Strovink: My recommendation would be to do your job. Do not campaign. That weakens organizations. You could consider what the organization most needs. Can you role-model collaboration and first-among-peers leadership to make the top team function better? I also find that boards notice when people have followership from parts of the organization that do not report directly to them, so think about the network you have, not just within formal chains of command. Are you leading horizontally, not just vertically, within the organization?
Sean Brown: The next point you make in your article is about “nailing your firsts.” What does that mean?
Kurt Strovink: It starts with dialing in emotionally to the people you are meeting, either for the first time or ones you know from before you took on the CEO role. People want to see whether you are approachable and seem interested in them. In an article Carolyn and I wrote about effective leadership during the pandemic, we observed that many CEOs were finding they needed to be more emotionally connected and to have to-be lists, not just to-do lists. That relates to understanding people’s “why.” What moves them? What gives them energy? Knowing that will help you to diagnose the organization’s starting position and morale while also getting people on side for your journey.
Next, you need to find a single narrative. Transitioning CEOs have an opportunity to put down markers. Those could be phrases around growth or learning to build on the strengths of the previous era. Sometimes it’s about new stages of a process: up to this point we have worked to become an investable business; now we need to become a strategically advantaged business. Most CEOs who transition well pick two or three such themes for the first year.
The third element is candor and authenticity. You want to reveal where you come from, your authentic biography. That requires the same kind of sharing that will help you learn more from the organization. Lastly, you should invest in moments of truth. These could be investor presentations, board meetings, or town halls. Over-prepare for those.
Sean Brown: You call the fourth ingredient of a successful transition “playing big ball.” Can you clarify?
Carolyn Dewar: To play big ball rather than small ball is the notion of doing only what you as CEO can do. There will be unending demands on your time, so you need to focus on the things with the highest impact. In the first few months, most new CEOs are drinking from a fire hose. You are trying to learn, build relationships, make decisions. Eventually, every new CEO realizes that the operating model they had for the first few months can’t continue. For former Mastercard CEO Ajay Banga, that period lasted a couple of years. He told us about waking up in Singapore and finding 2,000 unread emails. He had promised his team he would always answer email personally and he realized he had become a bottleneck because everything was funneling up to him.
Your discovery process is partly about showing that you are a student of the company’s unique circumstances, context, and culture. When external CEOs surprise positively on this front, they earn a tremendous amount of early trust.
There are three levers that successful CEOs use to play big ball. First is talent. The number-one regret we hear from CEOs is not moving on people faster, especially as new CEOs—not just because of the broad importance of talent but because these jobs are too big for any single human. Being a CEO is a team sport, and you need to quickly establish a leadership team that is rowing in the same direction and can execute at a high level. By the six-month mark, you should have your team in place. By 12 months, you want that team operating in a rhythm and able to lead the organization day to day. You should also think about talent beyond the top team. What are the pivotal roles further down in the organization where you need A players?
Your own time management is another lever. I was surprised how intentional the CEOs we spoke with were about their time. They have various versions of calendar color coding or agreements with their chiefs of staff or executive assistants on their priorities. They go back each month to see if they spent time on the things that they had said were important. If you don’t know what you should spend your time on, it’s hard for your team to help you, but if you can articulate five or six priorities or the mental rubric for how you think about where to lean in, your team can help you execute that.
That keys into the overall operating rhythm—not just for you as an individual but your team and the broader organization. CEOs promoted from within often think they have to adopt the operating rhythm of their predecessors, but you have an opportunity to reset the progress indicators given your priorities and where you are taking the business and the culture. How often should you meet? How will you make decisions? Who will be involved in those decisions? You need enough visibility to know where and when hot spots require your intervention. All of this takes time. Most CEOs don’t get it right from day one.
Sean Brown: How long should a person consider themselves a new CEO?
Kurt Strovink: Much is made of the first 100 days, but I think it’s better to think about one week, one month, and one year. The reason is that you send signals in your first week by what you do on the listening tour—by a brief statement about the process, for example, or questions that you address. In the first month, you start to operationalize some things and people will see you in different contexts. One year in, you will have learned a lot and will play that back to the organization in the new direction you set.
Carolyn Dewar: One CEO talked about the importance of setting the metabolic rate for who you will be as CEO within that first year. He knew that a big industry shift was coming but he was taking over a storied institution and was hesitant to make big changes—he wasn’t sure he had earned the right. By year two or three, however, the organization wasn’t ready to follow him in a new direction because people saw him as slow and steady in the first year and didn’t perceive a bold vision or a radical pivot coming. Multiple CEOs, especially those taking over well-run institutions, have told us that they look for ways to signal early that they are willing to make strategic changes so if those materialize later, they don’t surprise the organization.
Sean Brown: Should an externally hired CEO approach the transition differently than someone promoted from within the organization?
Kurt Strovink: As an outsider, you have to understand the culture of the company you are inheriting. You may have a theory about what the next phase should be, but your discovery process is partly about showing that you are a student of the company’s unique circumstances, context, and culture. When external CEOs surprise positively on this front, they earn a tremendous amount of early trust. The challenge for an insider CEO, conversely, is to not be trapped by the past and feel tied to ongoing initiatives, some of which you may have had a hand in creating. You also have to evolve the relationships with people who were peers and now report to you.
In the first few months, most new CEOs are drinking from a fire hose. Eventually, every CEO realizes that the operating model they had for the first few months can’t continue.
Sean Brown: How should internal CEOs engage with those former peers to determine who is in sync and who isn’t, especially among those who may have been rivals for the CEO job?
Kurt Strovink: When somebody is unhappy that they didn’t become CEO, it can be difficult for them to make common cause with the chosen CEO’s agenda. If that situation idles, it can end up in an unhappy divorce. You need to have an early conversation about what you need as a CEO and whether that is a good fit for them. You should be thoughtful and generous but also resolute about the path ahead.
Sean Brown: How do you best leverage a departing CEO’s expertise, especially if he or she becomes the board chair?
Kurt Strovink: First, diagnose where that former CEO is in their own life. Then have a conversation. “I’m going to be looking for your input, as I will for input from other board members. When we have a difference of opinion, I will make the best decision I can and I hope you will support me in that, as you would have expected the chair to do when you were CEO.” Third, try to maintain strong relationships with other board members. I have seen cases where the previous CEO and now board chair has a harder time appreciating certain factors than the rest of the board.
Sean Brown: How should a new CEO navigate another challenging scenario where some board members are opposed to a change the CEO wants to implement?
Carolyn Dewar: There is a reason why you were hired, so I would ground yourself in the early conversations about your mandate. Also, cultivating a great relationship with your board chair is critical. Most successful CEOs we interviewed talked to their board chairs weekly. That person can be a powerful ally in bringing along other board members. Another idea is to share with the board what you are learning during your listening tour, to make sure everyone has a shared fact base on the state of the organization you have inherited. Finally, you are on a journey with the board. You can’t just announce at a board meeting that you want to take the company in an entirely new direction. They are a stakeholder group that needs to have enough context and information.
