Lead from the front, or manage from the grave?
In the past couple of months, several companies have gone through extreme and very public upheaval. Such transitions offer opportunities for fundamental, board-led change for the better, but they are also fraught with significant risks. Recent developments at RIM and Yahoo help illustrate three pitfalls: â€œmanaging from the grave,â€ sequence and timing, and misplaced suspense.
Managing from the grave
One of the big risks at a time of transition is that those who leave the helm of the company are tempted to â€œmanage from the grave,â€ being more concerned about their own individual legacy than that of the company.
For example, BlackBerry maker Research In Motion (RIM) has finally rid itself of its foundersâ€™ disastrous co-CEO/co-chair setup. Yet the stamp of the old management team is still very much in evidence. The founders continue to have a strong presence in the company, with both remaining as board members, and Mike Lazaridis staying on to head a newly created innovation committee.
RIM needs revolution, not evolution, and yet it has chosen to replace its co-CEOs with a company insider, Thorsten Heins, one of RIMâ€™s two chief operating officers. While this may provide some continuity, what RIM needs right now are fresh eyes and ideas.
RIMâ€™s newly appointed independent chair, Barbara Stymiest, has been on the board for five years, and though she comes with strong credentials, she may be too closely associated with past failures to be truly independent. Only time will tell if the former co-CEOs and co-chairs can truly let go and give the company the freedom it needs to right itself. Also in question is whether the new CEO and the board can resist being deferential to the founders or the pull of past strategies. To make the decisive moves needed to stop a death spiral, they must do both.
In another case, Yahooâ€™s decision to hire a new CEO before refreshing its board may prove to be a real detriment to fundamental change, again demonstrating a desire to â€œmanage from the grave.â€ Jerry Yang may have left, and several other board members may be leaving as well, but by appointing the new CEO itself, the outgoing board has set the company on a path that a new board with fresh perspective might not see as the best way forward.
Getting the sequence wrong
This brings into a focus a second risk: getting the sequence of renewal wrong. By choosing to appoint the new CEO before a new board takes over, Yahooâ€™s existing board may have made a fundamental error for the company.
By making this move Yahooâ€™s current board has lost a significant amount of trust not only in the investment community but also among other stakeholders. The new CEO is potentially less credible to the market, and the new board may find it hard to work with him â€” or worse, decide that he is actually not the right choice for the job.
Had a new board hired the CEO, it would have signaled that long-term chemistry and commonality of purpose and vision was in place. Instead, this CEO will always be perceived as â€œof the past boardâ€ and will have to work that much harder to build trust with the new board and investors.
Keeping the world in suspense
One last danger is worth highlighting: Both RIM and Yahoo have dragged their feet on making decisions and sending a clear message to the market.
RIM promised to make changes to its governance structure months ago, and by not following through quickly and decisively, it shook the faith of investors and made people irate. It will have to work hard to regain the trust that has been lost. Most worrying, the changes may be too little, too late, and the announcements so far have not done much to quell concerns.
Yahooâ€™s board continues to leave everyone in suspense as to how many and which board members will be leaving the board besides Jerry Yang. This unnecessarily compounds the uncertainty that already surrounds Yahoo. If the board knows who will go, it should make that clear now. If it doesnâ€™t know, it had better decide fast.
So how can boards avoid these issues when managing through tough transitions?
Take responsibility for the future
Avoiding the repetition of past mistakes is a responsibility that rests with individuals. For those who step down, it means resisting the temptation to manage from the grave â€” taking some last decision that will bind the company beyond their tenure. For continuing board members it means having the courage to make a decisive break with the past. They need to learn and apply the lessons of the companyâ€™s past and not fall victim to them or carry them forward.
The board appoints the board, as it were, but this represents a significant opportunity if those doing the appointing ask themselves who will be the best people to help move the company into the future. It is a tough task, because in times of extreme upheaval it means admitting that perhaps their own actions have been detrimental. The boardâ€™s holdovers must ask themselves who can bring the skills and experience needed to provide the stewardship their organization requires in a difficult period of transition.
For incoming board members it means avoiding the danger of being â€œsoldâ€ accounts of the past and establishing for themselves a full picture of the companyâ€™s strengths and weaknesses. They should hear from every constituency â€” board directors, members of the executive team, employees, customers, and investors â€” and ask probing questions of all those they speak with. Armed with this knowledge and their own skills, they can weigh competing narratives of the past and learn from history rather than become its perpetual victim.
Start the sequence of renewal with the board
When whole swaths of a company need to be renewed, sequence is important. Since the board appoints the CEO, it first needs to look to itself for renewal, including securing trust if it has lost it. Only then will the CEO have a running start.
The process of board renewal prior to appointing a new CEO and executive team may take slightly longer when properly sequenced. However, if done right, it will send a clear message to investors and stakeholders that the board has gotten the message, that it is prepared for and capable of taking decisive action in the best interests of the company, and that its number one concern is the companyâ€™s legacy â€” not its own.
The board must be able to tell when it has put all the right pieces in place. It can then take a step back from the front line and let the newly appointed executive team get on with the job. Here, too, the balance comes in the knowledge that stepping back from the front line of crisis management does not mean disengaging from the responsibility of stewardship.
Managing transitions successfully
RIM and Yahoo are just two examples of companies going through difficult transitions. But many companies, both in and out of the news, are experiencing the same sort of upheaval. Managing transition is an essential skill that boards and their directors must possess individually and collectively. Only boards with the ability to grasp the opportunity presented by periods of transition will be able to lead from the front and avoid being managed from the grave.