The New CEO’s Guide to Transformation

The New CEO’s Guide to Transformation

          
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The New CEO’s Guide to Transformation

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    One Hundred Days Before Starting: Define the Ambition

    New CEOs often have time—as much as 100 days—after unwinding themselves from most of the responsibilities of their former job and before they must assume those of the new position. This period offers a critical opportunity for leaders to take charge and define the organization’s collective transformation ambition. (See Exhibit 3.)

    exhibit

    When defining this ambition, it is critically important for CEOs—whether hired from the inside or brought in from the outside—to adopt an investigative and analytical mind-set: “I need to learn more.” (For an example of an incoming leader who defined a bold transformation ambition, see “A New Retail CEO Hits the Ground Running.”) Incoming leaders should talk with as many critical stakeholders as possible, both inside and outside the organization, in order to educate themselves about the company:

    • Employees, to determine if there is a consensus regarding the changes that are needed; ideally, leaders should speak with 30 to 50 employees from across all units and at all levels
    • Customers, to get unvarnished opinions of the company’s performance in addressing their needs
    • Industry and functional experts, to understand the company and the complexities or disruptions in the market

    A NEW RETAIL CEO HITS THE GROUND RUNNING

    A new CEO was hired to run a retail organization that had been losing market share for several years and that was starting to see profitability decline. During the 100 days before taking over, the CEO visited stores, talked with customers, studied international best practices to build on his own experience abroad, and talked with experts in the retail sector. Through that process, he realized that the immediate priority was to identify rapid, no-regret moves that could increase top-line sales and reenergize the organization.

    While conducting this due diligence, the new CEO also developed a strong presentation to introduce his plan to the organization. As soon as he took over, he gave the presentation during the first executive-committee meeting, supporting the plan with the customer feedback he’d generated firsthand, along with his international experience with retail peers. In this presentation, he used very direct language and simple terminology, which made the messages powerful, credible, and resonant.

    During his first month, the CEO gave similar presentations to larger groups of employees and managers, which provided clarity and reduced anxiety in the organization. He also traveled to meet the extended management team, visited crucial countries, and granted interviews to select media outlets—always with the same clear and consistent messages.

    Within the first quarter, the company had begun to roll out several no-regret moves on the basis of his international retail experience and firsthand research, including a loyalty campaign, extended operating hours for a particular store format, and new promotions. The results jump-started top-line growth for the first time in years, leading to subsequent gains in market share. With those gains behind them, employees were more willing to accept the cost cuts and other measures required for the company to become leaner and more agile.

    During these conversations, a new CEO should primarily listen, encourage open and honest discussion, and make sure that all possible dynamic factors and all possible solutions are being brought to the forefront. Through this process, the CEO must start to diagnose problems and create hypotheses regarding which aspects of the company require improvement. This means assessing the urgency of the various situations—in terms of both scope and timing—and determining whether the company should seek to transform a specific function, market, or division or instead undergo a more comprehensive effort that affects multiple areas of the company.

    In both broad and narrow transformation efforts, new CEOs need to start identifying rapid, no-regret moves during this time—initiatives that are relatively easy to implement in the first 100 days and that can generate results in 3 to12 months. These no-regret initiatives should close performance gaps in a few critical areas, reduce costs, improve top- and bottom-line performance, and free up cash in order to fuel longer-term initiatives. (For an example of a leader who launched multiple measures to build momentum for a transformation, see “A Technology Leader Creates Momentum Through Rapid Moves.”) As new CEOs establish momentum with these initiatives, they should also clearly define the company’s goals for improving long-term performance—and how the company will sustain those improvements over time.

    A TECHNOLOGY LEADER CREATES MOMENTUM THROUGH RAPID MOVES

    At a global technology company, the head of a business unit realized that the organization was not winning the highly competitive war for talent. The company had dropped in the ratings at websites such as Glassdoor.com and in Fortune magazine’s annual “Best Companies to Work For” review. The results of employee engagement surveys had been falling for years. And the unit head knew from personal interactions with employees that they were not happy or motivated to go above and beyond. He wanted a transformation that would increase employee engagement, restore internal pride, and persuade employees to go the extra mile.

    But his challenges did not stop there. Customer feedback was very troubling. For example, one customer commented: “When we look at your products, we can see how your organization is structured. Your products are siloed, with incompatible components and broken interfaces—which is just like your siloed organization. We need integrated solutions with components that work together to solve our problems, and we need them now.” Such feedback gave the unit head a second impetus for a transformation.

    In response, he defined a bold ambition to transform the unit in order to win the war for talent, energize his engineers, deliver the integrated solutions that customers were demanding, and free up resources to deploy on opportunities for growth.

    His first step was to conduct a thorough analysis of the root causes of the performance issues. On the basis of this analysis, the unit head defined the ambition for a step-change transformation across multiple dimensions, including growth, innovation, leadership capabilities, workforce quality, organizational efficiency, employee productivity, and culture.

    Within the first few weeks, he selected the leadership team to drive the transformation program and communicated the case for change, initially among the top 150 leaders, and then across the business unit.

    In the first 100 days, the unit head launched the full transformation program with multiple teams, a program management office, change-management processes, and an employee communications plan. Over the next year, the transformation delivered significant improvements across multiple performance dimensions—the result of a business unit leader conducting a thorough diagnostic and defining a bold transformation ambition.