Predicting the Effects of Leadership Change on Your Organization
By Lori Deschene

December 5th, 2007 @ 4:59 pm

Categories: Strategy, Productivity, Leadership

Tags: Board, American Red Cross, CEO, Leadership, Corporate Governance, Management, Business Operations, Corporate Law, Lori Deschene

The American Red Cross has gone through five leaders in eight years, prompting David Hoffman, CEO of DHR Recruiting to comment, “I don’t know how an organization gains any type of momentum with such frequent leadership changes, because each one comes in with a new vision or strategy.” Obviously, its better for a company to shed itself of a bad leader than to put its fate in the wrong person’s hands just to maintain consistency of vision. But change in the CEO spot isn’t always catastrophic.

Roger Wery, a director in consulting firm PRTM’s operational strategy practice, suggests several factors help predict the effect of leadership change:
The industry. Fast-paced industries like retail, fashion and technology are more sensitive to C-suite churn.
The type of change previous management implemented. Frequent fundamental change hurts an organization. Companies with a strong culture can combat that. So does the quality of management under the C-suite.
Effectiveness of the board.According to Wery, “The more dysfunctional the board, the more unstable the CEO is. You want the board to be constructively skeptical, but you ultimately want a collegian board.”

Over the past decade, CEO turnover’s been on the rise (a 59 percent increase between 1995 and 2006) and it doesn’t show signs of slowing down. A near-constant revolving door in the C-Suite is slowly becoming the norm — meaning organizations must be prepared to deal with leadership transition to minimize the damaging effects of change.