Chief Executive Officers and Business and Organisational Turnaround Success and Failures. Get a New CEO or You Keep Same One?

Chief executive officers, especially those of profit making organisations often called companies or business sometimes find themselves presiding over a struggling company or business. In some cases, the chief executive officers themselves bring it upon their own companies or organisations by commission or by omission. At some times it is because of factors completely beyond their control. In other times it is both. In other cases, a chief executive officers is hired to replace a chief executive officer who may have put the company or business into a loss making position. Even some organisations not for profit making may need a turnaround is it gets to a position where it is failing to sustain itself. Many such companies are found in government-linked institutions including state own enterprises. The only major difference is that chief executive officers of state owned enterprises can get away with it; they can remain in their positions while their organisations are bleeding and while they rely from government handouts. For private own companies and businesses; the situation is different. Private individuals and institutions that put their own money and energy into starting companies and business do not fold hands while they invested in is going up in smokes. There, in private companies, heads role. The only interesting thing, and fortunately for chief executive officers, the “golden handshakes” they often get after bringing down companies and businesses is spectacular. I am not sure about the differences in the severance package differences between a fired chief executive officer and the one who resigns though. At the same time, personally, I believe the chief executive officers deserve the golden handshakes for the sins of inability to keep their companies on a sustainable path because the position is very difficult and these people are not as well supported as they should be especially in terms of training, education and development. Can you imagine being in a job where there is no specific training, education and development for it and in which almost no one knows exactly what you must do to succeed in it? Even most of those who recruit chief executive offers use unsubstantiated and unproved recruitment and selection criteria such as the possession of a degree in business or finance. And here let me be clear! While to date there is no evidence whatsoever proving that the possession of a degree in business, commerce or finance is a predictor or ingredient of chief executive success, the same is being used to screen out potential candidates especial in corporate jurisdictions outside USA, Europe and Oceania.

Ceos and Turn Around Successes and Failures

When companies face challenges, they require what is traditionally called a “turnaround.” In many cases, it is the incumbent chief executive officer; the one who was at the helm when the company or business took a nose dive or a dip in results, who is expected to turn it around. In some cases, this demand for a turnaround is imposed by the board or the shareholders but it some cases, the chief executive officers volunteers and promises a turnaround in order to save her job.

Who is Best Suited to Take Charge of a Turnaround? The Incumbent CEO or a Different Chief Executive Officer.

There is a wealth of research on whether or not the incumbent chief executive officer is the right person to take charge of the turnaround of a company or business whose results crashed while he was the captain. The opinion is divided; some vehemently argue against allowing an incumbent chief executive officer to take charge of the turnaround. They argue that if the chief executive officers did not see the disaster coming and failed to prevent it from becoming a crisis, how can the same chief executive officer then expected to have a solution to the same problem? These people argue for the replacement of the incumbent chief executive officer with a new one.

Then there are those who argue that the chief executive officer who was in charge when the company or business results collapsed is the best person to fix it because she will have the motivation to restore her credibility and reputation. ?

There are pros and cons for both options. Personally, I do not believe in a template approach to this problem. I believe in a process-based approaches and there is a specific process to decide whether to have the incumbent chief executive remain and have a go at the turnaround or having a new chief executive officer. And traditional approaches in choosing a chief executive officer are very poor at predicting the performance of chief executive officers in difference situations and contexts. ?For example there is some research-based evidence that some chief executive officers who excel at starting a company or business are not as good when they preside over a stable growing company and also that some chief executives great at handling as stable successful company or business do very badly when given a role that requires a turnaround. This kind of theory is not well known and well used when it comes to ceo performance management.

The CEO or the Turnaround Approach?

When it comes to successful business turnaround, is the master key the chief executive officer or the turnaround approach? In my experience, both matter. In fact, the chief executive officer’s approach to the situation has a strong impact on the turnaround attempt. The following are critical key factors related to the Chief Executive Officer;

1.??????The chief executive’s experience with, or knowledge about turnaround situation

2.??????The chief executive officer’s attitude and mindset towards business turnarounds

3.??????The chief executive officers decision-making and decisions around the turnaround theme

A chief executive officer with some experience in business or company turnarounds can have an advantage or disadvantage depending on the experience. If you have been through some storm, you tend to do better when you find yourself in a storm next time. However, if you had a very rough experience with the storm, you are most likely to panic if you get into another storm again especially if you did not resolve the memories and the trauma from the previous storm.

Some chief executive officers take business failure very badly and become defensive. They close themselves off psychologically from help and support at the very point when they need it; they react exactly in a way that will make things worse than better. They believe accepting help with the turnaround strategies or ideas is a sign of weakness and an admission of failure. Others can actually be totally convinced that it all has nothing to do with them but the environment and this way they totally lose the psychological control of the situation.

Traditional Turn Around Approach

The major challenge is that most chief executive officers, whether they are incumbent or replacements are sold to the same old business turnaround template which is focussed on cutting costs (fire people, cut your marketing and training budget, cut salaries and other things-it is cutting this and stopping that) and in many cases in a very dangerous way that leaves the company worse than better even if it recovers. So in many cases, removing the chief executive officer who was in charge when the company collapsed is most likely going to bring back at least 50% of the fired chief executive officers turnaround mindset and turnaround approach.

Most of the turnaround approach is like in my opinion butchering companies and businesses instead of surgical treatment.

The Universal Turnaround Formula

The business turnaround formula bringing together all the key components that go into a successful business turnaround. The principle behind this formula is that any successful business and company turnaround starts with the chief executive officer. All the terms are important and they work together in some order. So the first key steps or stages have an impact on the subsequent steps and the subsequent steps can only execute if the previous steps.

The Environment

Many chief executive officers struggle to turnaround their companies or business because of mistaken beliefs especially the belief that the environment is responsible for all their problems. They then use the reason as an excuse and get themselves into a psychological space where they get stuck because there is no way anyone can deal the environment. So this belief about the environment is huge barrier to breakthroughs. This is why this formula is effective because it refocuses chief executive officers on what works. It focuses on what a chief executive can control and also puts the environmental factors into perspective.

Conclusion

Turning around a company or business is not easy, but it is much better and the chances of success are higher if one abandons the traditional approach.

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?Simon Bere, 2022