Handshake (3)

In previous articles for Fresh Business Thinking I discussed the boredom that afflicts many business founders once they get past the start-up stage, and the possible remedies besides a premature sale which is too often regretted. One path that a number of entrepreneurs I’ve worked with have chosen is a move from CEO to chairman of their business, either as executive or non-executive.

This article concerns CEO succession, once that decision has been made. A few people get lucky. There’s an obvious successor to head up the business, acknowledged as such by all, and ready and willing to step up to the job. That’s unusual in my experience, and getting lucky is no substitute for a robust strategy. Generally speaking, most founders will look at this as a choice between an internal and external appointment. An internal appointment has the advantage of choosing someone who knows the business from the inside, probably through many years of working for it. A good candidate will have earned the respect and trust of their colleagues and quite possibly of customers and suppliers as well. On the other hand, appointing internally also carries the risk that you lose one or more valued senior members of the team, who may well have harboured thoughts of taking this role themselves. Not prepared to wait or to serve under the new appointee, they quit the business for pastures new that offer a better chance of achieving their ambitions. In the worst case, they join the competition!

Appointing externally carries a different set of risks. To state the obvious, candidates don’t know the business from the inside, though they may well know of you and perhaps have done business with you. They may bring with them misconceptions or misunderstandings that only become apparent once they’re in post. Some people just lie and it often takes a shrewd and seasoned recruiter to spot discrepancies or nail exaggerated claims about achievements and experience. You also carry the same risk that disappointed staff leave the business.

So, what to do? Let’s reframe the problem. You’re investing in an expensive and critical business asset, equivalent to a new bit of costly equipment or a major systems upgrade and overhaul. You wouldn’t undertake either of these lightly, especially if you haven’t done this before. You’d think carefully and, in all likelihood, take professional advice. One very successful recruitment specialist I know makes two key points. First, there’s fierce competition for good talent and you need to know how to set out your stall to make yours an attractive place to work. Second, recruitment done properly is not a black art. It’s a rigorous, well-researched process. Many people think they can do it, just as most people in large-scale surveys rate their driving ability as above average [not only delusionary, but mathematically impossible]. In short, this is not a game for amateurs.

Another advantage in involving outside expertise is that you are seen to be operating a fair and transparent process, that allows for both internal and external candidates without fear or favour. Let the best person win!

Dos and Don’ts

Some time ago I convened a round-table of experienced business founders who had recruited CEO successors. Here’s a distillation of their hard-won advice on what and what not to do. This won’t guarantee success, but will shorten the odds of failing :


- Look for someone with skills and behaviour that complement your own. You need someone who enjoys the challenges of running a steady-state business, not managing a start-up or early-stage venture. For a typical founder, that means someone unlike you!

- Give the appointee time and space to breathe, and decision-making authority. It must be clear to everyone in the business that there’s a major change in place. Sometimes you simply have to remove yourself from the premises, so staff don’t automatically come to you, bypassing the new CEO and undermining them.

- Before you appoint, make sure the chosen one really understands what it’s like to work in an entrepreneurial environment. This is even more vital if they’ve made their career solely in big business. The support network they’re used to won’t be available.


- Over-react when they do things you wouldn’t do, providing their actions don’t put the business at serious risk. Their managerial style will be different. Frequently they will bring a level of professionalism that the business requires in order to mature and develop.

- Bring in a new list of complex performance measures by which to judge and assess them. Be clear with them about the strategy, the plan and the targets. And don’t fudge the consequences of failing to deliver these without good reason!

By David Molian, visiting fellow at Cranfield University