blackstroke

11/12/2015

A CEO’s death profoundly affects virtually every stakeholder connected to the company and can trigger strong emotional reactions and a loss of mental focus. The scope of such an impact is routinely underestimated or ignored - especially by the board of directors. The notion that people can or will separate themselves is false. Employees and executives are human beings who cannot park their emotions at the door. They may try to put on a strong façade, but behind the mask can be powerful emotions and distracted thoughts. The successor CEO must therefore be aware of the implications of these emotions and act to mitigate their negative impact or they will significantly diminish the company’s performance.

The death of a business leader is the ultimate behavior change that affects every part of the company from the boardroom to the stockroom. In most cases, the impact of grief and its threat to a company is not well understood or properly addressed. Unfortunately, even well prepared successor executives are usually ill-equipped to lead grief-burdened companies through the crucial 90-180 day period immediately following the death of its owner or CEO.

The president of American Express Co., Mr. Edward Gilligan, who was viewed as a likely successor to Chief Executive Kenneth Chenault, collapsed and died just a few ago on the way home from a business trip. His death sent shock waves through the company. Mr. Gilligan’s death leaves American Express Co. without a clear successor at a time when the company is facing a number of difficulties and shows that the topic of this article is quite relevant although it is based on a deeply sad story.

THE REACTIONS IN THE WORKPLACE

The death of the CEO creates an uncertain future. Employees, family members, board members, customers and suppliers will all ask themselves the question: What is going to happen to the company and how will this affect me? Such a reaction is normal and triggers heightened feelings of fear and vulnerability unavoidable. There is nothing wrong with these feelings. They are automatic and natural human reactions to a highly unusual situation.

The other nearly universal reaction is a loss of focus. When a person’s emotional energy is consumed by grief it becomes difficult to concentrate. Following the passing of the CEO, people will find themselves lost in their thoughts and mentally preoccupied with feelings of insecurity, sadness, shock, concern, uncertainty and more. The lack of concentration can affect everyone and often results in an increase in mistakes, poor decisions and diminished energy.

THE IMPACT

A common misconception is the belief that only those closest to the late owner/CEO (family, senior executives, lifelong business associates, etc.) are affected. Even those who were not particularly close with the CEO may relive the pain experienced from past deaths of loved ones and bring these emotions to the surface. For example, they may think about their parents or other authority figures they have lost in their lives. The resurfacing of past emotions amplifies reactions to the current death.

The executive running a company after a CEO or owner has died should expect many employees to have heightened emotional reactions and possibly display unusual behavior. Reactions could range from numbness to outward aggression or agitation. It is also common for employees to withdraw or internalize their emotions thus diverting their focus from the business at hand.

The death of a CEO also is a significant change for other stakeholders in the business. It is natural for the company’s suppliers, customers, lenders, shareholders and others to ask themselves the same question as the employees: How does this death affect the company, our investment, or our business relationship? All too often the outside stakeholders’ need for assurance or request for information on how the death affects them is seen as calloused or insensitive. However, these reactions are perfectly natural and their uncertainty must be immediately addressed.

THE SUCCESSOR CEO CAN'T AVOID THE EMOTIONS THAT ARE PRESENT

Thus far the wide-ranging and powerful emotions resulting from the passing of the CEO have been discussed; the most prevalent being grief, fear about the future, insecurity and lost mental concentration. All of the stakeholders–employees, the board, the family, customers, suppliers and others–will look for and need immediate reassurance that the company is being led properly. This requires an assured and effective CEO at the helm.

In western cultures, death is most often not discussed openly and people actively avoid it for fear of making others feel bad. This is particularly true in the business world. Acknowledging and addressing the fears, insecurities and mental preoccupation is essential to decreasing the emotionally-charged atmosphere in the company. This task cannot be delegated and must be addressed head-on by the successor CEO.

Far too often business leaders give an acknowledgement and then immediately try to get the employees focused on the business at hand. In other words, “ignore or hide your feelings and get to work.” This is counterproductive in the short and long run. It will interfere with the processing of these powerful emotions thus extending their impact. It could also lead to people redirecting their emotions in unhealthy and counterproductive ways. Mild disagreements could escalate; anxiety, indecisiveness, reduced energy, and general loss of concentration can be prolonged. The lesson here is that when CEOs attempt to diminish the impact of a death by getting people to focus on their work, the impact of unaddressed emotions will continue and can manifest itself in unhealthy ways.

To lead a company through this period, the CEO must give permission to the employees to express their feelings, admit they are affected and not try to hide behind a “strong front”. Early on the successor CEO must lead by example and acknowledge and articulate that he or she too is affected by grief. The CEO must also meet individually with the senior executives, family members and others to empathetically listen to their concerns and offer reassurances. The new CEO must provide this assured leadership.

Being a confident and empathetic leadership takes time and tremendous emotional energy. The successor CEO may be burdened with his own grief and his energy may be limited; or he may be unable to be the assured leader that is required. If this is the case, consideration must to be given to bringing in an interim CEO until the successor CEO is mentally and emotionally capable of leading the company.

LEADING THE COMPANY

Immediately following the death of the CEO or business owner, the successor CEO, more than ever, needs to support and focus the company. Senior executives, perhaps more than any other group other than the family, will be grieving and distracted. Their judgment and concentration will be compromised and the CEO will have to give additional attention to the key decisions they are making. Matters that normally are delegated will have to be reviewed, and patience will be needed to address poor decisions and mistakes. If indecisive behavior is observed, then the CEO will need to step in and encourage decision making. This is a time for the CEO to be a hands-on leader.

Likewise, key customers, suppliers and stakeholders view the death as a significant risk issue. Their concerns cannot be dismissed or diminished, but rather addressed in a level-headed and consistent manner. They, like the employees, need to feel that there is steady, confident leadership running the company. The successor CEO needs to take the time to meet with these groups bringing focused attention and energy to the relationship.

Unfortunately the business world can be a cruel unforgiving environment and competitors should be expected to try to take advantage of any missteps following the death. The most effective competitors will not be so up-front as to address the death directly. Rather they will step up customer service and attentiveness so that, if the company disrupted by the death falters, they are there for the customer. The successor CEO must focus and refocus the organization to ensure it delivers and serves its customers to prevent any erosion of its customer’s confidence. This is like pushing a cart up a hill and without continuous effort, attention and focus, service and customer satisfaction will slip backwards.

UNUSUAL AND ONE-TIME ISSUES NEED TO BE ADDRESSED

The death of a CEO, who is also the business owner, initiates many one-time and unique items that require attention. Many lawyers and business people understand that the ownership of the company may change and this will trigger almost as many legal and financial issues as an outright sale of the company. Since the employees and family are already suffering from lost concentration and focus, the need to address these specific items can further distract and disrupt executive leadership.

A broad range of issues needing to be addressed could include the following:

  • Financials issues including estate tax valuations and tax filings.
  • Contract changes, such as insurance policies, loans, leases and other legal documents. (Those involving personal guarantees will need to be changed.)
  • Meetings with lawyers to address estate and inheritance issues, allocate assets, change ownership, transfer title on assets and establish new trusts.
  • Meetings with key customers, suppliers and other stakeholders such as banks, landlords and others.
  • Sale of the company in accordance with the will, which will include working with the investments bankers and M&A attorneys.
  • Many of these matters involve issues that may be foreign to the successor CEO and will test his or her business judgment and stamina.

To address these items and prevent them from becoming a major disruption, the successor CEO will need to meet with professional advisors and staff to put action plans in place. The goal is to mitigate problems and not let these issues misdirect the focus of the management team or the company.

In summary, there are many powerful emotions and unique challenges resulting from the death of a CEO or business owner. The successor CEO must immediately provide calm, confident, empathetic, reassuring and professional direction to everyone involved with the company. Effective transition leadership is essential to navigate the powerful emotions present, mitigate the inevitable loss of focus, and ensure the business continues to execute so that its market position and profitability do not deteriorate.