Failure to Launch
CEOs who never get started
Becoming a CEO is heady stuff, sometimes the culmination of a lifelong goal. Imagine how disappointing it must be to reach that goal only to be sidelined at the last moment or a few brief weeks into the job. It’s rare but it happens, and there are important lessons to learn from those heartbreaking experiences.
You may remember Liz Truss, the UK Prime Minister who left office after only 45 days as the markets rejected her policies. You may not remember Bill Johnson, who was poised to lead the Duke Energy-Progress Energy merger but was surprisingly removed by the board after 20 minutes as CEO. Laxman Narasimhan spent 6 months learning Starbuck’s business, including training as a barista, before running into a couple of quarters of bad performance and being ousted by the board. Shipping company Ferguson’s CEO, John Petticrew, left after only a year on the job citing personal reasons.
What are the typical causes of failure to launch when taking up the role of CEO? They fall into four categories which I will address here starting with the least likely and ending with the more common causes for early departures.
1. Personal issues
Although uncommon, personal issues can prevent an incoming CEO from taking up the reins. None of us can foresee health challenges that arise and occasionally, we hear about a new CEO who is diagnosed with heart problems or cancer or some other condition that demands immediate attention. Just bad luck. Personal issues can also arise on the home front, since the acceptance of the role sometimes involves a move that disrupts family dynamics. A spouse who realizes they don’t want to be a part of the new setup or a child who suddenly needs special attention can short-circuit the acceptance process before it is completed.
Even after taking office, personal issues can crop up that shorten one’s intended stay. Several CEOs have taken the job with the promise to relocate only to never do so, using the company jet or public transportation to commute on weekends.
There’s not much that can be done about personal issues by either the organization or the candidate. In today’s world, information about candidates is widely available from a variety of online sources, so it isn’t difficult for the fact-checkers to do a thorough job of vetting candidates. Personal issues that emerge during the course of a person’s hiring and early days on the job are harder to anticipate. Hence, the need for backup candidates. While most organizations are satisfied with one person on the wait list, I’m aware of at least one large company that went through three candidates within a month who all flamed out for personal reasons. Talk about slim odds. All you can do is over-prepare.
2. Cultural issues
Sometimes, a person just isn’t a good fit with the culture of the company they join. This can be the result of “The Founder’s Shadow” phenomenon, in which an outsider is brought in to streamline operations only to be rejected by both the founder and those who worked for the founder, given the founder’s charismatic and relationship-based style. Bob Chapek ran into this problem at Disney, alienating Bob Iger, the Disney creatives, and famously Scarlet Johannson in his short tenure. Stephanie Linnartz tried to bring Marriott’s efficiency to Under Armour but the company and founder Kevin Plank weren’t having it. During his time at Procter & Gamble, Ed Artz earned the nickname “Prince of Darkness” for his gruff and demanding style, despite his success in making P&G more of a global player. On the flip side, Andrew Mason had so much fun being the founder/CEO at Groupon, including posting videos of himself doing yoga in his underwear that 60 Minutes called attention to, he was removed by the board shortly after the company’s IPO.
3. Ethics violations
Although often cited as “performance issues” to avoid making matters worse, human foibles have been the cause of a number of prominent downfalls. A new insurance company CEO found himself so infatuated with his head of HR that he managed to get fired in less than a year. A not-for-profit CEO failed to disclose a mental health challenge that caused him to become intensely angry at his people. A bit of “resume bolstering” reminiscent of the George Santos fiasco cut short the tenure of a tech company CEO after it was discovered just a few months into the job. An internal candidate at a defense contractor failed to disclose a personal relationship with a subordinate that cost him the top job within a few weeks of being appointed. “Power corrupts” is a statement that we have to question because while the direction of causality may be true in some cases, it appears that already corrupt individuals seem to find their way into powerful positions.
4. Buyer’s remorse
Boards remove candidates or new appointees because something has changed that makes the choice less attractive. A proposed merger has fallen through, the market protests the choice, a key customer objects, the stock takes a dive, the new person offends the board or the senior team revolts. Despite kicking the tires, it can be hard to know what driving a car will be like until you actually drive it. Having to remove a late-stage candidate or renew a search months after concluding one is a point of embarrassment for the board. That makes it likely that there are many instances out there of boards tolerating a poor choice but not taking action. Things have to be pretty bad for a board to admit it has made a terrible and very public mistake. Nevertheless, it is the board’s duty to act if they collectively surmise that standing pat would be worse for the company that its reputation taking a hit.
Performance
The number one reason CEOs are removed is for performance issues. Usually, this doesn’t occur for some time after taking up the role, so it probably shouldn’t be considered a reason for “failure to launch.” Still, signs that a person isn’t up for the task can become clear in the first few months as they struggle with guiding the organization’s response to a crisis or sudden downturn in sales. In such situations, either a decisive action that is wrong or taking no action at all can sow the seeds of doubt that lead to the person’s eventual removal.
Perfect foresight isn’t attainable, even with the most careful vetting procedures. Candidates conceal things they don’t want the board to know or change after they accept the job. How others will react to the candidate is not something the board can predict. It’s wonderful when the board wins the selection lottery and the candidate turns into a beloved superstar. But boards should remember that the odds of hitting the jackpot are slim and do the necessary work to be prepared to start the process all over again.