From CEO to Chairman – The Transition – Part 1

From CEO to Chairman – The Transition – Part 1

In any company, leadership plays a critical role in determining the success or failure of the organisation. Great leadership can enable a company to grow and meet and exceed goals, even in trying circumstances. Poor leadership often does the opposite, driving a company to struggle. Perhaps no positions in a company are as critical as the CEO and the Chairman. These two positions hold the lion’s share of the responsibility for the direction of a company. Their actions, specific skills and abilities often determine the overall success of a company. While the two roles are both incredibly important – and as major leadership roles, they share some similarities – there are some important differences. These differences in responsibility and required skill are particularly important for those individuals making the transition from CEO to Chairman. This transition is an important one, and, because of the challenges and importance of both positions, must be done carefully and thoughtfully to ensure a smooth and successful transition. Both CEO and Chairman require a similar set of skills, which is good news for those making the transition. Both require excellent leadership skills, the ability to create unity and motivate people. Each requires the ability to think strategically about business and the company goals. Because of this overlap, many CEOs can transition smoothly into Chairman, and visa-versa. Chairman talking to his team Team construction However, there are also key differences that require different skills and approaches. One of the most prominent differences, and hence one of the biggest challenges in the transition from CEO to Chairman, is the inability of the Chairman to create his own team. As CEO, one can create their own team, hiring or firing as needed to create the team that will work best around them. However, the Chairman does not have that same power. Instead they must work with the board of directors; this can create challenges because of internal struggles and political motivations within the board. This means that in addition to the leadership skills required to be a CEO, a chairman must develop the ability to lead people from a variety of backgrounds and perspectives to good decisions and, hopefully, consensus. This can be difficult, and takes a significant amount of people and communication skills. Strong lines of communication with board members is essential. While transitioning it is essential that strong and open communication be established with members of the board of directors.

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The Chief Executive Officer role can be characterised as more of a 24/7 role. In contrast, the role of Chairman is more of a part-time role. The board, led by the Chairman, is responsible for protecting investors’ interests. These include the company’s profitability and stability. The board usually meets several times a year, during which it sets long-term goals, reviews financial results, evaluates the performance of high-level managers, and votes on important strategic moves proposed by the Chief Executive Officer. Consequently, the CEO needs to be more abreast of the details within the business, as his or her “24/7” role is more hands-on. The CEO also has a much greater role in human resource development, in areas such as succession planning and general management development. Clarity and expectations Business meeting with chairman Another important step that must be taken when making the transition from CEO to Chairman is determining and clarifying authority and expectations. There are a multitude of models for sharing and dividing responsibility between the CEO and Chairman. Determining which one is best depends on the specific skills of the individuals involved and on the specifics of the company’s circumstance. There is no right

or wrong way to divide roles. However, it is essential as the new CEO enters and the former CEO transitions to Chairman that both individuals have a clear vision and expectation of how responsibilities will be divided, and where and how collaboration can occur. If the leaders of a company are not clear on responsibilities, the company will suffer as the rest of the company seeks to follow poor, undefined leadership. Good leadership will begin with knowing and understanding the specifics of roles, responsibilities and expectations on both the CEO and Chairman.

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Support mechanisms There is one significant difference in the roles to highlight: the structure and control of support mechanisms. As a Chief Executive Officer, you generally have the experience of building a team of people over time. You have the ability to work with them on a day-to-day basis and develop a support system that suit your preferences and requirements. With proper time and execution, you can create a very comfortable system, where you have complete trust in your team and their abilities to present you with all the business intelligence required to make business decisions. As a Chairman, you don’t have that same day-to-day involvement with your team. Further, a Chairman may not have the same control over board makeup- their “support team”. Many chairmen acknowledge that they miss the satisfaction that they had as a CEO working closely with their handpicked team on a day-to-day basis. As Chairman, however, you still have to make sure your team is working effectively together, listen to the views of individual team members, and take those views into account when you make your ultimate decisions. Many chairmen acknowledge that they miss the satisfaction that they had as a CEO working closely with their handpicked team on a day-to-day basis. Beyond the ability to construct your team support, there are also variations in how these roles are structured. When you are a CEO, each member of the senior management team is there in a particular role and each has a particular expertise. There will be a finance specialist, a marketing specialist, etc. On a board a Chairman will typically have people from a wide range of backgrounds who are expected to have a view on a wide range of issues. Due to this, the discussions can range a bit more broadly in a board context with more people getting involved in them. Keep in mind The balance of power between the CEO and the Chairman varies widely from company to company. Every organisation has its own quirks and tendencies, which will alter the roles and attitudes of particular roles within the collective whole. So keep your organisation’s culture and past history in mind, so to know how to best prepare for new roles. The success of a public company requires more than a strong CEO. It requires a competent board, and in particular a strong Chairman. Understanding the difference between what a CEO does and that of a Chairman is essential to bridge this divide and transition smoothly from one role into the next. With proper preparation and anticipation of what to expect, you too can successfully accomplish this.

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