Organizational Culture & Values

I inherited a past CEO’s mess! Now, what do I do?

While inheriting past CEO problems is never easy, solving these problems is the first job of an incoming CEO.

Luckily, these problems aren’t hard to find. Over his years of turnaround and financial improvement work, Jeffrey Vogelsang has seen that most problems facing companies are caused by people.

“You can blame whatever you want, but it’s always the people,” said Vogelsang, a Vistage speaker and managing partner of Promontory Point Partners. “We find that to be true regardless of what the economy’s doing.”

The largest people-created mess a CEO inherits is typically a culture of complacency, Vogelsang said. He’s seen the same story repeatedly: A CEO and their company become successful, the CEO and executives get rich and enjoy life’s luxuries, and their attention to the company starts to lag. As the CEO’s attention wanes, so too does the company’s success.

“I would tell you that Sanibel Island and Aspen have been very good for my business,” Vogelsang said.

A new CEO facing any problem created by an outgoing CEO — cultural, financial, or otherwise — must avoid simply pointing fingers. Instead, they must take charge and own their role as the company’s chief problem-solver.

Not only does their job depend on it — analysis from Korn Ferry finds that the average CEO tenure is down to 6.9 years, on average — so too does the success of the company.

Here are five steps an incoming CEO can take to systematically clean up a messy situation at their company.


1. Ensure the company has cash

When Cynthia Romano, a Vistage member and global director of CohnReznick advisory’s restructuring and dispute resolution practice, is working to turnaround a company, she first looks at the company’s cashflow.

“You can be focused on the people, you can be focused on the processes, but if you run out of cash while you’re doing that, you don’t have a business,” Romano said. “If you’re bleeding cash, you’ve got to reverse the burn. If you don’t have enough cash, you’ve got to save some.”

Once a company is financially stabilized, Romano said it can move onto another big C: Communication.

2. Talk to everyone

In their first days as CEO, new executives should schedule individual meetings with members of the C-suite and employees across the company.

“We ask them open-ended questions,” Vogelsang said. “It’s not a job interview. In many cases, I don’t even really care what they do. I want to know what they think of the business. Where are we at? How do you think we’re doing? Where do you think we should be going?”

Vogelsang listens carefully, using this process to identify the company’s A-players — from entry level to leadership — as well as its weak links.

Romano agrees: “I ask people during the interviews: Who are the unsung heroes of this company? It’s amazing what you hear.”

By the end of this process, Romano said she’ll know what issues hold the company back. She’ll have also built trust with employees, an essential piece for any incoming CEO. “If you can’t gain trust quickly, you won’t succeed,” Romano said.

The process — which Vogelsang said a good CEO can complete in about a month — will reveal running themes of where the organization is falling short.

These themes can be useful to take back to the company’s A-players, a new CEO’s best friends, who can help whittle the themes down to a list of three or four priorities to help turn the company around.

These priorities become the rallying cry to help the company recover from its mess.

3. Create shared goals

After finding the company’s new priorities, Romano creates a matrix of impact to highlight the areas where the company will focus. She wants this to be a transparent process, one where people be honest and share thoughts about the direction of the company.

“Because everyone has an idea about where they fit,” she said. “I look at what we have in terms of people, departments, products, and services and how that matches up with the financial data.”

With a shortened list of priorities, Vogelsang said CEOs can start filling in granular details about the tactics and strategy of each goal. This allows them to put the right people in the right places.

“You have to get the team on board with these,” he said. “And then you have to have weekly accountability meetings where you go through that whole tactical list. Everybody’s got to be knocking their stuff out.”

Having these shared goals can be a powerful way to bring the company out of murky waters. Romano said that employees working at a company amid transition are often scared, and human brains simply don’t work when mired in fear.

By focusing on important shared goals, the company can improve while the employees relax into defined roles.

4. Look for signs of improvement

If a CEO can keep employees focused on the list of priorities, results will be obvious in the company’s key performance indicators. But there’s one sign of improvement that Romano said will come first: Laughter.

“You see people go from frightened and not talking to hearing some laughter in the hallways or you’ll see a smile,” Romano said. “I know that seems ridiculously small, but these moments happen before big changes to KPIs.

“I’ll never forget, I had one company that was just not turning,” Romano said. “Then one day, I heard a group of people laughing in the hallway and I smiled. I thought: This is the beginning.”

5. Find good talent, incentivize good work

While people are the problem with messy companies, they’re also essential for success.

But a problem often arises from the top. Vogelsang has noticed that many CEOs often push away talent and surround themselves with weak people. This means less talent in the ranks and no succession plan, which he considers a huge mistake.

“There’s no backup plan if somebody important leaves,” he said. “A succession plan isn’t just the CEO, it’s the career development path for all of this talent.”

A new CEO cleaning up an old mess should surround themselves with strong talent and create a good succession plan, Vogelsang said.

A good plan is transparent, outlining ways for talented people to move up through the company’s ranks. This includes creating individual goals and laying out a merit-based bonus package, one that rewards good work with a sizeable bonus.

This is another area where knowing your company’s A-players can be helpful. Talent knows talent, Vogelsang said, and can help point out those who are on board with a CEO’s plan, willing to work for it, and could be candidates to move up the company’s ranks over the years.

“One of the hardest things for a new CEO is to identify the talent that is willing to come with them,” Vogelsang said. “You may have some very talented people, but they might not want to come. And they’re not going to tell you they don’t want to come — they’re going to show you they don’t want to come by their lack of execution towards the goals.”

Meanwhile, good talent properly incentivized will carry a company into a new era of success.

“A new CEO has a short window of time of time to figure out who’s good, who’s not, who’s causing problems, and who’s creating value,” Romano said.


Related Resources

The First-Time CEO Survival Guide [available for download] 

How to stay focused as a new CEO

6 areas to focus on as a first-time CEO

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About the Author: Vistage Staff

Vistage facilitates confidential peer advisory groups for CEOs and other senior leaders, focusing on solving challenges, accelerating growth and improving business performance. Over 45,000 high-caliber execu

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