In the defining years of American business, founding CEOs were virtually synonymous with the companies they led. Walt Disney was Disney incarnate; Dale Carnegie came to represent the steel industry itself. These figures were not just company leaders; they were the gravitational center around which entire industries revolved.
Those days are gone. Though we still have echoes in modern chief executives like Tim Cook or Richard Branson, these figureheads, too, are becoming rarer. In fact, the average CEO tenure is the lowest in recent history. Over the past three years, CEO turnover has reached record highs, with 58 leadership changes in the S&P 500 alone. This pattern has prompted the C-suite to focus on a new leadership strategy: employing interim CEOs.
Eighteen percent of all new CEOs are interim appointments compared to 7% just a year ago. For most, they’re still seen as a lame duck or hired gun, sent to take care of the company’s rudimentary duties; at best, a suboptimal stand-in for a proper leader. The savviest companies, however, are no longer relegating interim CEOs to a holdover role. They’re instead empowering them to be dynamic doers, essential to transforming organizations and breaking stale patterns and enacting rapid, bold changes.
Interim CEOs Have Unique Opportunities To Enact Change
Interims occupy a liminal space in the risk-averse, C-suite business world. Their temporary position frees them from the common pitfalls others so frequently get stuck in: politicking, backslapping, and monitoring rather than doing. With the right instincts and a good plan, however, the best interim CEOs can assess internal dynamics, align fellow leaders, and make key decisions while laying the groundwork for their successor or becoming permanent installations themselves.
When James M. Cornelius was appointed Interim CEO of Bristol-Myers Squibb in 2006, he spearheaded expansive strategic partnerships and top-down initiatives to reduce costs and risk. His eight-month interim period was marked with such focus and urgency that it earned him full-time tenure, where he remained for years. Besides just righting the ship, he made decisions quicker than a permanent CEO ever could have. Whereas the previous three years saw negative YoY growth, Cornelius got BMS back on track with a near-double-digit YoY revenue increase.
With the confidence of their fellow executives and shareholders, interim CEOs have the opportunity to move forward with the expectation of growth and new horizons, free from traditional time-pressures and deadlines. They can manage change in the C-suite, making tough-but-necessary decisions without bias.
When Chipotle’s wunderkind CEO Brian Niccol departed for Starbucks, many wondered who could possibly follow his historic tenure. Rather than a superstar CEO from another organization, Chipotle brought on Scott Boatwright, an interim CEO from their own rank-and-file. Leaning on his prior COO experience, Boatwright erased bottlenecks and streamline decision-making from the top down, using his unique skill set to maintain prior momentum for a rock-solid year-end. These successful initiatives landed him a solidified seat atop the fast casual empire, where he still remains.
In both of these cases, a new permanent executive may have felt pressured to keep the ship on autopilot rather than turn the wheel. With interim CEOs, these companies gave their leaders the freedom to make substantive change, resulting in both a healthy balance sheet and a naturally proven successor—the two foremost goals of any leadership transition.
Interim Tenure, Genuine Risk
Make no mistake, there’s a myriad of reasons companies choose to play it safe by limiting the purview of interim CEOs. Leadership missteps don’t just jeopardize the new leader but can also create long-term impacts way beyond their tenure.
Take Reddit’s interim CEO Ellen Pao, who took the helm in 2014 when the company was on a steady path to an IPO. Pao implemented massive, top-down changes to the site’s rules and guidelines that went against Reddit’s founding ethos, causing upheaval among hundreds of thousands of users. She fired popular long-time employees, losing internal trust and community support alike.
While Pao may have started the trouble, it didn’t end with her. As is often the case, a period of poor management led to cultural decay that lingered for years. Reddit’s cofounder had to come in and right the company’s ship over the ensuing half decade.
Temporary Leaders Need Long-Term Vision
As CEO tenure continues to shorten and transitions become a fact of life, interim leadership appointments will become the ultimate inflection point for an organization’s future. Not every interim CEO appointment is doomed to fail—far from it—but Reddit’s woes show why executive buy-in and clear company goals are essential.
There’s a term in executive circles for this: leadership alignment.
Successful companies let the interim CEO take charge but also have everyone else in the C-suite define their boundaries and establishes immutable values by which they must still abide. Top organizations will even allow stakeholders and employees to weigh in on those values to inspire increased confidence in the new head honcho.
Some of the biggest companies have proven leadership alignment works. When Target was flailing in 2014, longtime executive John Mulligan stepped in to lead them into the future. As he said himself, the strong support and clear guidance from other executives was precisely what he needed.
Interim no longer has to mean “ineffective.” During a period of leadership transition, the ship still has to go somewhere.
So, the companies that give even their temporary leaders the mandate to navigate uncharted waters will sail ahead, faring far better than those who force them to drift with the tide.