Saving a sinking ship: leadership lessons for replacing a failed CEO

The Con­ser­v­a­tive lead­er­ship race is down to the final two but, whether it’s Rishi Sunak or Liz Truss, the new occu­pant of 10 Down­ing Street will be tasked with gal­vanis­ing a divid­ed par­ty. 

Out­go­ing Prime Min­is­ter Boris John­son had lost the con­fi­dence of many, both with­in the Tory par­ty and the coun­try, and saw 59 MPs resign in the final days of his pre­mier­ship. 

CEOs can find them­selves in a sim­i­lar sit­u­a­tion when installed at the top of a busi­ness with its back against the wall. For exam­ple, for­mer Expe­dia CEO Dara Khos­row­shahi was para­chut­ed into Uber to root out the tox­ic cul­ture that had devel­oped under pri­or CEO and co-founder Travis Kalan­ick.  

Sim­i­lar­ly, Amer­i­can lug­gage brand Away was tasked with find­ing new lead­er­ship at the end of 2019 after a Verge inves­ti­ga­tion uncov­ered the “cut-throat cul­ture” that had been allowed to foment while under the lead­er­ship of Steph Korey, its for­mer CEO and co-founder. 

Her replace­ment, Stu­art Haselden, last­ed just over a year in the posi­tion and only four months as the sole CEO.  

Dean Forbes – a spe­cial­ist in trans­form­ing the for­tunes of strug­gling busi­ness­es – claims that being an incom­ing leader is “a lone­ly, daunt­ing and sleep­less expe­ri­ence”. The cur­rent Forter­ro CEO has expe­ri­ence of turn­ing around four busi­ness­es, which were each in vary­ing states of dis­tress when he came in. He believes the first task of any incom­ing leader should be to turn around the for­tunes of the busi­ness first, before look­ing to change the cul­ture.  

“In a trans­for­ma­tion sit­u­a­tion, the patient is on the table in trau­ma. You need to change things in the busi­ness quick­ly so that you pre­serve the company’s life.” 

As a result, deci­sive­ness and good com­mu­ni­ca­tion are impor­tant skills for lead­ers to exhib­it, but so is patience. Forbes explains: “Every­thing might not work the way you said it would. What you mustn’t then do is unpick the changes you’ve already made, at the first sign of dan­ger.  

“You have to be patient, let these things flow through and then com­mu­ni­cate what went well, what didn’t and what needs to be done dif­fer­ent­ly next time. This way you’ll always appear in con­trol.” 

Why leaders need to be masters of perception 

In the case of the new Tory leader, Forbes believes their focus should be on “mas­ter­ing inter­nal and exter­nal-fac­ing per­cep­tion”. 

“Pol­i­tics is such a dif­fi­cult job. But if I were to be in their posi­tion, the first thing I would do would be to find a sequence of oppor­tu­ni­ties to demon­strate the unit­ed nature of the par­ty and look for ways to let the pub­lic see we are all aligned,” Forbes says. 

But chang­ing pub­lic opin­ion can be par­tic­u­lar­ly chal­leng­ing, accord­ing to Lon­don Busi­ness School Pro­fes­sor and lead­er­ship expert Ran­dall Peter­son. 

His stud­ies into inter­nal ver­sus exter­nal per­cep­tions of groups have shown that the exter­nal per­cep­tion is far more crit­i­cal. 

He says: “When you have two groups, insid­ers always think that the group is high­ly diverse and out­siders think that the group is much more homo­ge­neous or sim­i­lar. If you’ve got a few rogue ele­ments with­in a group, the inter­nal per­cep­tion is that the few should not define the whole, where­as exter­nal­ly peo­ple tend to think that the entire organ­i­sa­tion is like that.” 

This means that when there are rifts in an organ­i­sa­tion, find­ing out what binds peo­ple and gives the group a shared pur­pose is cru­cial. Peter­son advis­es busi­ness lead­ers to “fig­ure out what works for every­body”. This can help to “rebuild the trust as well as refo­cus the cul­ture”. 

Fol­low­ing a con­test­ed suc­ces­sion con­test, the temp­ta­tion may be for the vic­tor to crush any remain­ing oppo­si­tion.  

Peter­son has seen sim­i­lar mis­takes made dur­ing merg­ers and acqui­si­tions. He says: “Try­ing to crush the lit­tle part­ner will only focus its ener­gy. Instead, the CEO should find the things that bind the two busi­ness­es togeth­er. You need to find ways to co-opt a lit­tle bit of what the oppo­si­tion was talk­ing about.” 

Why mature leaders have more success 

This can mean that lead­ers need to demon­strate a good lev­el of matu­ri­ty. In the eyes of exec­u­tive coach Terez Rijken­berg, the worst thing an incom­ing CEO can do is to bad-mouth the pre­vi­ous leader. 

She says: “Your team may ini­tial­ly agree with your dis­parag­ing remarks but what often hap­pens is that peo­ple start to look through the lens of neg­a­tiv­i­ty, caus­ing them to focus on your short­com­ings too.” 

Instead, Rijken­berg says that lead­ers should focus on the pos­i­tives to help estab­lish trust and draw atten­tion away from the past and redi­rect it toward the future-focused out­comes that they want to achieve. 

Mak­ing assump­tions about why peo­ple lost con­fi­dence in the pre­vi­ous leader is anoth­er mis­take to avoid. Ask­ing for feed­back on the pre­vi­ous lead­er­ship gives peo­ple a chance to voice their con­cerns, mak­ing them feel heard and sup­port­ed. 

This may not always yield the respons­es the incom­ing leader wants to hear, but it’s an impor­tant part of the tran­si­tion process. 

From Forbes’s expe­ri­ence, incom­ing CEOs are often “the pri­ma­ry edu­ca­tor for where the busi­ness tru­ly is at that moment”.  

He adds: “You have to be resilient. Because no mat­ter how bad the sit­u­a­tion you’re com­ing into, peo­ple will still think every­thing was great before you got there.” 

But despite its many chal­lenges, find­ing suc­cess in this field can be its own reward. Forbes adds: “There’s noth­ing more reward­ing than see­ing the organ­i­sa­tion revi­talise itself under your stew­ard­ship and see­ing your actions dri­ving out that tox­i­c­i­ty day by day.”