A new CEO will often enter a business with a 100-day plan. But where on their list of priorities does changing the leadership team come? The consensus seems to be right at the top, but the speed and extent is dependent on the circumstances.
"Once you have a clear vision and strategy of where you are going to take a business, it's absolutely number one,” says Steve Richards, CEO of private equity-backed Casual Dining Group. “You have to get the management team right; you've got to have like-minded people who share that vision."
So, how long should new CEOs give themselves to make those crucial changes? Lynne Embleton, CEO at IAG Cargo, cautions against immediate, poorly-informed action. “The first 90 days are for learning, thinking, observing; they're not for acting,” she says. “Don't act in haste. Be sure that you're making the right changes, but then execute quickly."
Shaun Chilton, CEO at Clinigen Group, has found that planning, with an eye to the future, is time well spent. “I was always very clear about what I wanted in terms of mix of skills and a structure. One of the things I've learned is the value of the time I put in to work out the structure needed to future-proof it, so not necessarily the structure I need there and then, but to try and balance that with what we'd need in two or three years' time. There's nothing worse than making changes and then making them all over again."
During this planning period, methods of assessing the incumbent leadership team include formal ones, like psychometric testing and bringing in external experts to review team dynamics, as well as more informal approaches, such as seeking feedback from colleagues and the CEO observing behaviours and ways of working first-hand.
Rob Walker, CEO of BIE Executive, emphasises the need to make your own assessment, and cautions against "knee-jerk" reactions: "You may have been given observations on the top team, by say the chairman, but you've got to make your own assessment – you're working with those people day-to-day," he says.
Matching roles to the business strategy
So, what should you be looking for in the existing leadership team, or in potential new hires? Their ability to deliver the business strategy is key, and Rob believes that the input of a good HRD can be invaluable here. “You can take the business plan, and what you're meant to be delivering, and assess the roles and responsibilities of the management team against them. That's where the HRD can give a lot of guidance," he says.
As a CEO, you also need to be aware of your own strengths and weaknesses. Amy Francis, Relationship Manager at Criticaleye, says: “Be honest about any skills gaps you have, and make sure there are other members of the leadership team who can cover those bases.” She also advocates being clear about your focus: “Set out what areas you want to concentrate on – such as growth or an upcoming IPO – and then assign responsibility for the remaining areas to members of your senior team. Give yourself the time and space to deliver on your priorities.”
For Steve, the ability of the top team to thrive in the current situation, rather than what might have been appropriate in the past, is crucial, as is being able to deal with change. On stepping into the CEO role at the troubled restaurant business Tragus Group in 2014, he replaced all but one of the existing senior team: "I took the view that it was the time to implement the big changes. They were really fundamental to the business. If you exit 40 percent of the assets, sell off brands and exit 30 percent of the people, that is surgery, that is business transformation.
"I needed a team who knew how to handle that, and who had done business transformation before. After we had completed that stage one journey, and built what we called ‘Good Co,’ we then set about a growth strategy: acquiring and integrating new businesses, investing heavily into our brands and people. I didn't want steady-state managers; I wanted people who were going to be business change agents," he explains.
For Shaun, traits like loyalty, trust and enthusiasm are non-negotiable. He is prepared to give people time to grow into a role if they have the right approach: "Excellent performance is never purely about the numbers. I'm prepared to give people a degree of patience for quite a long time, to develop into a role, if they have the right attitude. It really is about attitudes and behaviours: I'd trade technical expertise for someone who isn't quite as good technically but has the passion and enthusiasm for what we are trying to do. The numbers will come if those parts are right,” he says.
Losing knowledge and experience
While changes to the leadership team can help move the business forward and engender positive behaviours, can it ever be damaging? Yes, if it’s done to such an extent that knowledge and corporate know-how are lost. Lynne recognises this risk: “50 percent of my direct reports are new in their roles, but I think that if that went any further we'd start to lose too much experience to enable us to make the right decisions and run the business effectively,” she says.
And while Steve changed most of the leadership team at Tragus Group, he took the opposite approach following the purchase of the Las Iguanas restaurant chain: "One has to be flexible and different situations require different solutions and approaches. When we acquired Las Iguanas for a 10x multiple we acquired a fantastic growth vehicle for the UK and our international franchising division. The last thing I wanted was to change any of the management – they are best in class.
“We appraised them through the due diligence process and decided that they were crucial to the business and the culture of that brand. We went so far as to let them keep their own head office and their own identity, because we didn't want the umbrella company to damage that."
He questions the speed and extent of changes that can take place, especially during acquisitions, when it’s not unusual for a buyer to clear out the top team in a company that performs well: "Management drive a culture and that shouldn't be underestimated. If you do a review of M&A, you'll find that teams get changed too quickly and then things fall apart."
By Emma Riddell, Senior Editor, Criticaleye
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