Volkswagen CEO Herbert Diess’ unceremonious ouster recently spells turbulent times for one of Germany’s biggest automakers. Diess, who had taken charge of the auto giant in 2015, is set to hand over the company’s reins to Porsche CEO Oliver Blume in a month. The change in guard puts the focus firmly on interim CEOs.
As a corporate coach, I often discuss with board members how to look for an interim CEO. And it’s all about steadily steering the ship till the new captain comes on board!
How does an organization choose an interim CEO?
A proven track record
An interim CEO is usually someone who already has a proven professional in the company with experience in handling critical projects. Often, the company chairman takes on the interim CEO role to ensure a smooth transition between the outgoing CEO and the new CEO. The volatility in CEO posts can be understood if one considers a study which shows that in the Russell 3,000 companies, the average 2019 rate of CEO succession was 9.4% for better-performing companies and 19.4% for worse-performing firms. For S&P 500 companies, the rates were 11.3% and 20.2% for better-performing and worse-performing companies. (Source: CEO Succession Practices in the Russell 3000 and S&P 500 (harvard.edu))
Stop-gap or permanent?
Interim CEOs are usually appointed from within the company, which means that the organization does not have to incur the cost of a full-time hire. With an internal person at the helm, the firm can continue its business while simultaneously expediting the search for the next CEO. Sometimes, companies choose to appoint the interim CEO as the next CEO. But primarily, the interim CEO is somebody who is not eager to take on a full-time CEO role. As is often the case, once an interim CEO shows interest in taking on a full-time position, the person cannot maintain the status quo. According to research, most interim CEOs stay for at least a quarter (92%), but just a third stay on for more than a year.
In tune with the board
It is important that the person appointed as interim CEO understands the board’s expectations and works in tune with it instead of laying out individual plans. As a result, interim CEOs tend not to take on major strategic reorientations during their tenure and instead maintain the status quo.
Benefits of having an interim CEO
An interim CEO has all the necessary skills to carry out projects and can lead the company to its targeted goals. In addition, according to research, having an interim CEO eases the transition period for an organization as it can search for a new CEO without any biases that the outgoing CEO may have.
Prerequisites for an interim CEO
People management skills: Who is the best choice to be an interim CEO? Someone who can ‘read a room’. An interim CEO needs to have inherent leadership skills, someone who can quickly assess the strengths and weaknesses of a team and a given situation. It has to be someone who can improve relationships within the team and make smart hiring decisions.
A good listener: Building trust is crucial for any interim CEO. Identifying problem areas and finding solutions are essential to leading the team. All this is possible only if the interim CEO is a good listener.
Strong ability to influence decisions: An interim CEO is an individual who can not only advocate their own decisions but can quickly adapt to changes when necessary.
Excellent communication skills: Communicating with the workforce, understanding their problems and relaying them accurately to stakeholders is vital for an interim CEO.
Strategic thinking: An interim CEO needs to understand what the organization is trying to achieve and what strategic shift is required. The ability to offer a fresh perspective and formulate an ineffective strategy are critical prerequisites for an interim CEO.
To sum up, Mona Pearl, Interim CEO, quotes, “An interim CEO serves as a mentor, a mediator, a factfinder and an implementer. We are expected ‘to be there for people’ but also to execute and get bottom-line results.”
