When to Dump Your CEO

“When a nonperforming CEO finally leaves an organisation, stakeholders often wonder why the board took so long to act.” Author Ram Charan tackles the issue of how to stop a faltering CEO from damaging your organisation in a fascinating recent article (read it here). Charan is a prominent business advisor and author (including the acclaimed book Execution) who speaks with enormous experience.

The key focus of the article is to emphasise that hesitation is counterproductive, as evidenced by his following statement “One of the most serious mistakes a board can make is to underestimate how quickly the company can decline under the wrong leadership. A faltering CEO simply cannot be allowed to stay in the job for long.”

 Helpfully, the article lists a number of early warning signs that board members should be on the lookout for that the CEO may be heading into troubled water, some of these include:

• CEOs who close themselves off to other views,
• Deflection when the numbers don’t come through,
• Limiting the flow of information and perspectives the board is exposed to, and
• The CEO may be spending too much time on outside activities, unrelated to performance.

The board needs to begin discussions as soon as issues are first raised, and Charan makes the point that this needs to be done “however perilous that may seem.” He makes the astute observation that “in the rest of their working lives, most board directors are strong, con􀁆dent leaders, but in the context of a board, they often hold back.”

Creating a positive context for this is important, which includes making clear that raising such issues is to test the feelings of the entire board, rather than rush into action. Also, meetings that run to a too tight schedule can drive “out candour, so board leaders should reserve time for directors to air concerns.”

Importantly the key is not to delay and to continue the discussion over time until the facts are clear and “then consensus should be reached rapidly about what course of action to take: support, coach, or dismiss.”

A challenging proposition, but some very good advice from Charan for all boards, to ensure they are fulfilling their responsibility to the organisation’s shareholder.