Whether it’s the longtime CEO’s retirement or the recent hire’s sudden exit, communicating the transition of the top executive is one of the most critical messaging tasks a company can undertake. So let’s discuss them both: the transitions that are well-planned, thoughtful and strategic, and those that are likely to catch investors by surprise. Here are three things to remember before your company changes CEOs.
1. Have a plan
If you know your CEO is preparing to step down, you have every reason to put a thoughtful communication plan in place before the day finally comes. The Board should have a comprehensive succession program already in place. This will enable it to select a successor well in advance, either hiring internally or bringing the individual on in a trial position, such as COO. It will be much easier to communicate your succession plan if you actually have one.
On the other hand, your Board and IR team should have a crisis plan in place, in case the CEO leaves suddenly – whatever the reason. The plan should detail who would step in on an interim basis, specify that person’s qualifications, explain the Board’s search process and have a timeline for when the process will be completed.
2. The first impression is the only impression
By hiring well ahead of the transition date, you present the CEO-to-be with the opportunity to build rapport with the investment community before stepping into the corner office. That means informal, low-pressure introductions at investment conferences and non-deal investor meetings and participation in quarterly conference calls. An external candidate will benefit from having time to learn about the company before having to demonstrate that knowledge to the outside world. But don’t take this time for granted -- the honeymoon period for new CEOs is agonizingly brief. Additional time behind the scenes will pay off in spades once the transition is made public.
In a crisis hiring, the company will most likely need to make two introductions, of the interim and permanent CEOs. You will introduce the interim CEO in order to reassure investors the Board is confident this is the right person to oversee the business until the permanent CEO is named. The announcement of the permanent CEO also seeks to reassure investors – that the Board made the right decision. Either way, an in-person meeting with the top investors and covering sell-side analysts will be crucial to the success of this transition. A shadow period will be improbable -- unless the interim CEO is a strong candidate for the permanent position – so he or she should be prepared for a crash course in corporate culture and operations to make the best impression in public interactions.
3. Communicate the plan
Once the succession plan is in motion, get the word out to investors and sell-side analysts as early as possible. The more notice you provide, the more orderly the transition will appear. And by effectively communicating the CEO’s transition, you will help alleviate investor uncertainty and garner support for the successor. Ideally, the company will make a series of announcements via press release, beginning with the hiring of the CEO-apparent, assuming this is an external candidate.
Communicating the plan in a crisis scenario can be even more important and also more difficult. In many cases, the Board will have very limited information about the timing for naming a replacement, and it’s unlikely it will already have one waiting in the wings. This still is an opportunity to sell the Board’s vision for the next CEO, though. So use the announcement of the current CEO’s exit as a de facto commercial for the position. List the qualifications and experience you are looking for and how these tie into the Board’s strategic vision for the company.
Once the new CEO is in place, you’ll have just a short time to demonstrate your progress on the CEO’s strategy. Take advantage by clearly outlining the new corporate strategy or explicitly affirming the existing one. Consider having an investor day within the first few quarters of the CEO’s appointment to communicate the strategy in greater detail and generate support from investors. Whichever type of transition you have, the goal for your communications strategy should be to present a thoughtful, orderly transition and to establish positive investor relationships with your new CEO. By walking through these steps, you’ll be in a solid position to give the new chief executive a running start.
Maureen Wolff is CEO and partner at Sharon Merrill Associates. She is a National Investor Relations Institute Fellow, Senior Roundtable Member and Honorary NIRI Boston Director. She is a trusted advisor to CEOs, CFOs and boards of directors on critical communications issues including corporate governance, shareholder activism and proxy contests, CEO succession planning and disclosure issues.