Great CEOs know that the transition to their successor will define their legacy and cement the strength of what they’ve built. Here’s how they do it right.
One of the most exciting athletic events in the Summer Olympics is the 4×100-meter relay race. The event, which was inspired by ancient Greek couriers handing off a “message stick” to one another, was introduced at the Stockholm Olympics in 1912. For the entirety of the 20th century, the United States team dominated the sport. Not once in the 21st century, however, has the US team brought home a gold medal, despite many of its members having done so in their individual events.
What’s the problem? Simple: bad handoffs. Consider New York magazine’s description of one such handoff at the 2020 Tokyo Olympics: “As the pair attempted to pass the baton, they looked more like Keystone Cops than two of the five fastest men in the world.”1 As a result, the team failed to even advance to the final. On the other hand, when well-synchronized handoffs happen, relay times are typically two to three seconds faster than the sum of the best times of individual runners.
When you’re a celebrated CEO who has successfully led a company through multiple cycles of performance improvement, it’s hard to imagine looking like a Keystone Cop at the end of your career as you pass the baton. Yet, as the transition gets closer, the reality that you’ve never actually done a CEO handover before can feel daunting. Unlike Olympic athletes who practice the timing, pacing, technique, and communication over and over with the grandstands empty—you’ll only have one very public shot at it, and you’ll be doing so while under emotional strain. As Caterpillar’s former CEO Jim Owens puts it: “In the end, the hardest part of the CEO role is leaving.”
The best CEOs are less worried about how their own reputation might fare in the transition, and more focused on how the change will impact the institution moving forward. Like track and field, the goal of the handover is to ensure the next person gets off to a great start and is well positioned to perform even better after the baton is handed off. Dropped batons, on the other hand, come at a huge cost. Poorly managed CEO and C-suite transitions wipe out close to $1 trillion in market value every year in S&P 1500 companies.2
Microsoft CEO Satya Nadella stresses the importance of taking an institutional view of transitions: “My dad, a civil servant in India, always used to talk about institution builders as those people whose successors do better than they did themselves. I love that definition. I feel that if the next CEO of Microsoft can be even more successful than I am, then maybe I’ve done my job right. If the next CEO of Microsoft crashes and burns, that may result in a different verdict.”
While the specifics of every transition differ depending on the circumstances, any CEO who’s excelled in the role but now senses it’s time to start thinking about the endgame will benefit from four best practices:
By Carolyn Dewar, Scott Keller, Vikram Malhotra, and Kurt Strovink
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