Risky business: bringing in new leadership

You found product/market fit and kabam! your company took off like a rocket. You sailed past all your revenue targets growing more than double yearly. VCs threw themselves at you to invest growth capital. You are living the Silicon Valley dream. Then it happened. Everything started getting really complicated.

At some point in a growth company’s evolution, experienced senior management is needed to compliment the founding team. Eric Schmidt at Google or Sheryl Sandberg at Facebook are premier examples of seasoned leaders joining young, promising companies and profoundly influencing growth trajectory.

On-boarding an outsider as President/COO or other senior leadership roles is always risky business. First is identifying the right candidate. An A-list recruiting firm combined with good internal process should help minimize recruiting risks. But that is the only half of the equation. More important, is the manner by which the candidate will be integrated. It is here where things tend to go awry. However, with an awareness of the potential problems and a well thought plan, you can maximize your prospects for success.

Smacking into walls

Typically, a company bringing in new leadership has been growing fast, has an established culture but is experiencing HGSS, Hypergrowth Stress Syndrome. The founding team has done well but is hitting walls in many areas of the business, like accurately projecting revenue or grappling with new customer acquisition or managing runaway expenses. Many of these problems are self-inflicted simply because the founding team, no matter how smart, doesn’t have the pattern recognition to preempt or easily solve those problems. Still, many in the company may not understand what an experienced leader might bring to the table or are insecure about the concept of an outsider messing with the company mojo.

Aversion to change

Most people despise change. Humans are highly adaptive creatures adept at creating comfort zones even in adverse circumstances. However, once comfy, many folks get agitated when forced to confront disturbance of that comfort zone. In the case of leadership changes, a founding CEO’s direct reports will be very sensitive about no longer reporting to the CEO. It is a daunting thought to early employees.

Change is inevitable for any fast-growth company, so adapting and embracing it is a necessary core attribute. It will take some work, but an open dialog with the team to get as much buy-in as possible is a first step toward a successful process.

Prepping the team is just the beginning. Creating the circumstances by which new leadership can succeed is job-one, and the fuse is quite short.

Sixty Days

Respect must be earned, it cannot be anointed. Your people will be watching: antibodies poised and ready to reject. Within the first 30 days they will formulate their opinion of the new leader. Are they smart? A good fit? Do they indeed add value? By the end of the first 60 days that opinion will be immutable. The die will be cast.

I’ve seen many capable leaders flame out during this period largely because they felt the need to put their imprint on the organization before they had mapped the full picture. Nuance is everything and so is timing. Move too fast and risk alienation. Move too slowly and you appear indecisive. To properly calibrate, the earliest days should be focused on being a good listener.

Ears wide open

It is essential for the new leader to spend copious face time with the senior team and any key contributors. You should encourage your team to be forthcoming and candid. In many cases team members will be exuberant about the opportunity to vent and get their view into the mix. Let the lobbying commence! An experienced leader will be adept at filtering the signal from the noise and triangulate with other team members to distill the key issues. The new leader should also spend time in the lunchroom, engaging the workforce and making it clear he/she is accessible. This “listening tour” is an essential part of building trust between the team and the new exec.

Don’t break anything, yet

Some situations call for quick and dramatic action, such as a turnaround where layoffs and cost cutting must take place, but that is a topic for another day. In the case of a growth stage company who needs to evolve, the CEO and new leader should concur there will be no major changes made without an agreed upon plan. This also should be communicated to the troops so they know they will have plenty of input and can focus, remain calm and keep their troops in line.

Mirror Mirror

This period will be an important time of reflection for you as Founder/CEO. Typically, you would have previously agreed about what parts of the organization would now be reporting to the new COO. That means you will no longer be directly managing those areas. It may be difficult to give up control, but you will be setting an important example for those on your team whose roles will also be changing as the new exec makes changes and brings in new talent.

Keep a close eye on the earliest employees who are likely co-founders or friends. They may see these changes as a diminution of their power and influence. It will be hard on them. They may be inclined to sabotage the new leader or perhaps quietly be rooting for them to fail. This is where you need to step up to help align the organization. Be vigilant in sniffing out the formation of antibodies against the new exec. Stay ahead of it by explaining the importance of everyone pitching in to make the new structure a big success. Simultaneously be alert for any early evidence the new person might not be the best fit.

Knock-knock

No matter how good the plan or how great the candidate, be prepared for things that go bump in the night. It will start out innocently enough. A confidant or co-founder will whisper in your ear that people are upset or perhaps the worst comment of all: the new leader “doesn’t get it.” This will mark the beginning of your most difficult challenge — choosing between the new and old guard.

By definition, your organization must change. Sacred cows will need sacrifice. Your culture must evolve (read The Cult-ure Myth). New leadership will be your change agent and ultimately some people’s noses will be dislocated. Those people will make a beeline to you pleading for you to save the company from certain demise at the hands of the new exec. Then what? Nip it immediately.

The three-way

The most effective way of dealing with these issues is directly and with alacrity. Ask for specifics and if they ring legitimate, thank the person and then tell them you will schedule a three way meeting with the new leader. Pay close attention to their body language when you make that suggestion — if they stiffen or butt-twitch it is an important signal. Ease their mind by saying “we are all invested in making this a big success, I value your opinion and it is important the new leader hear your concerns directly. If you are unwilling to participate, then I’m not sure how to interpret your concerns.” If they back down, it is a personal agenda. If not, make the meeting.

Follow through with the sit-down but keep your role restricted to facilitator. Observe both of them. Make sure they are communicating well and not talking past each other. Most importantly look for any evidence of dismissiveness by the new leader, it could be a sign of issues. That said, it is essential that your team sees absolute support by you for the new leader and the process.

Failure is not an option, except when it is

There will be occasions when it just doesn’t work. Recruiting is an imperfect process. It takes time for the results of chemistry and human behavior to reveal certain truths. And sometimes the truth is you selected the wrong person. If things are not going well by the end of 60 days the chances of it turning around are slim and it will be time for a heart-to-heart conversation to see if course correction is possible.

You can improve your chances of success with frequent checkpoints and by enlisting the help of a Board member with operating experience or mentor or executive coach who can help you oversee the process. A set of been-there/done-that eyes in the mix can do wonders in helping keep noise from escalating into crisis. But if none of that works and it is clear you have irreconcilable differences then cut your losses after 90 days. This will prevent a recruiting error from metastasizing into a toxic situation.

What it takes — do you have it?

When the diligence period is complete, the new exec will deliver his/her thoughts on your organization and the plan/priorities. Their impressions will likely send chills down your spine. Close confidants may be targets for upgrading. You will see suggestions for completely new organizational approaches.

If the process has been run well, there should be no big surprises. You should trust their instincts even if it will change the world as you know it. After all, it was change you were after when you went down this path. A key attribute of any great CEO is their ability to frequently reinvent their organization and continually add experienced, proven leadership as the company evolves. That’s what it takes to build a company at scale. Successfully navigating through the addition of a president or COO will demonstrate you have it.

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