Every leadership transition creates uncertainty. Will the new leader uncover and seize opportunities and assemble the right team? Will the changes be sustainable? Will a worthy successor be developed? These questions boil down to one: Will the leader be successful?
Why are leadership transitions important?
Hardly anything that happens at a company is more important than a high-level executive transition. By the nature of the role, a new senior leader’s action or inaction will significantly influence the course of the business, for better or for worse. Yet in spite of these high stakes, leaders are typically underprepared for—and undersupported during—the transition to new roles.
The consequences are huge
Executive transitions are typically high-stakes, high-tension events: when asked to rank life’s challenges in order of difficulty, the top one is “making a transition at work”—ahead of bereavement, divorce, and health issues. If the transition succeeds, the leader’s company will probably be successful; nine out of ten teams whose leader had a successful transition go on to meet their three-year performance goals. Moreover, the attrition risk for such teams is 13 percent lower, their level of discretionary effort is 2 percent higher, and they generate 5 percent more revenue and profit than average. But when leaders struggle through a transition, the performance of their direct reports is 15 percent lower than it would be with high-performing leaders. The direct reports are also 20 percent more likely to be disengaged or to leave the organization.
Successful or not, transitions have direct expenses—typically, for advertising, searches, relocation, sign-on bonuses, referral awards, and the overhead of HR professionals and other leaders involved in the process. For senior-executive roles, these outlays have been estimated at 213 percent of the annual salary. Yet perhaps the most significant cost is losing six, 12, or 18 months while the competition races ahead.
Nearly half of leadership transitions fail
Studies show that two years after executive transitions, anywhere between 27 and 46 percent of them are regarded as failures or disappointments. Leaders rank organizational politics as the main challenge: 68 percent of transitions founder on issues related to politics, culture, and people, and 67 percent of leaders wish they had moved faster to change the culture. These matters aren’t problems only for leaders who come in from the outside: 79 percent of external and 69 percent of internal hires report that implementing culture change is difficult.
Leadership transitions are more frequent, yet new leaders get little help
The pace and magnitude of change are constantly rising in the business world, so it is no surprise that senior-executive transitions are increasingly common: CEO turnover rates have shot up from 11.6 percent in 2010 to 16.6 percent in 2015. Since 69 percent of new CEOs reshuffle their management teams within the first two years, transitions then cascade through the senior ranks. Sixty-seven percent of leaders report that their organizations now experience “some or many more” transitions than they did in the previous year.
Leaders in transition reflexively rely on the skills and strategies that worked for them in the past. That’s a mistake, says Watkins, whose research shows that executives moving into new roles must gain a deep understanding of the situation at hand and adapt to it. To help them accurately assess their organizations and tailor their strategies and styles accordingly, he developed the STARS framework.
Executives can accelerate their immersion in new roles by following certain fundamental principles: Organize to learn about the business, establish A-item priorities, define strategic intent, quickly build the leadership team, secure early wins, and create supportive alliances across the company. But the way those principles should be applied depends very much on the business situation, which the STARS framework can help leaders analyze. Turnarounds and realignments present especially distinct leadership challenges that call for particular transition strategies.
Regardless of the business situation, leaders must figure out which things need to happen—perhaps a jump in market share or an expansion into different markets—for their business to achieve its goals. And they must determine which leadership style best fits the new culture they’re joining. Armed with such clarity, executives can design effective plans to manage their organizations and themselves.
“STARS” is an acronym for the five common situations leaders may find themselves moving into: start-up, turnaround, accelerated growth, realignment, and sustaining success . The model outlines the characteristics and challenges of, respectively, launching a venture or project; saving a business or initiative that’s in serious trouble; dealing with rapid expansion; reenergizing a once-leading company that’s now facing problems; and following in the footsteps of a highly regarded leader with a strong legacy of success.
The STARS Framework
Assessing the Business Situation
To see how the situation shapes the transition strategy, consider how Stefan Eisenberg (not his real name) adapted his approach when he moved from one role to another. A hard-driving, German-born executive, Stefan had successfully led the turnaround of the European manufacturing operations of an international consumer products firm based in the United States. As vice president of manufacturing, he had moved decisively to restructure an organization that was broken because of the company’s overemphasis on growth through acquisition and its focus on country-level operations to the exclusion of other opportunities. Within a year, Stefan had centralized the most important manufacturing support functions, closed four of the least efficient plants, and shifted a big chunk of production to Eastern Europe. These changes, painful though they were, began to bear fruit by the end of 18 months, and operational efficiency continued to improve: Three years after the changes were rolled out, the company’s plants were in the top 20% of benchmarked plants in Europe.
But no good deed goes unpunished. Stefan’s success in Europe led to his appointment as the executive vice president of supply chain for the company’s core North American operations, headquartered in New Jersey. The job was much bigger, combining manufacturing with strategic sourcing, outbound logistics, and customer service. With his appointment, the previously separate organizations were united in a single end-to-end supply chain.
In contrast to the situation in Europe, North American operations were not in immediate crisis—which was the essence of the problem. The organization’s long-term success had only recently shown signs of slipping. The previous year, industry benchmarks had placed the company’s manufacturing performance slightly below average in terms of overall efficiency and in the lower third in the crucial area of customer satisfaction with on-time delivery. Mediocre scores, to be sure, but nothing that screamed “turnaround.”
Meanwhile, Stefan’s own assessment of the organization indicated that serious problems were brewing. The business was addicted to firefighting; managers reveled in their ability to react well in crises rather than tearing out problems at the root. Stefan believed it was only a matter of time before major failures occurred. Furthermore, executives relied too much on “gut feel” to make critical decisions, and information systems provided too little of the right kind of objective data. These shortcomings contributed, in Stefan’s view, to widespread, unfounded optimism about the organization’s future.
Using the STARS model, Stefan was able to recognize the clear differences between the realignment situation he was heading into (where clouds were gathering but the storm hadn’t hit yet) and the dramatic turnaround he so successfully managed in Europe (where urgent needs demanded urgent actions). In a turnaround, there is a burning platform; the problem teaches the people, if you will. In a realignment, there is a lot of denial; the leader needs to open people’s eyes to the fact that a problem even exists. If Stefan had treated his new situation as a turnaround and tried to conduct radical surgery, he would probably have incurred both active and passive resistance, undermining his ability to realize needed change, especially because he was an outsider coming in and therefore vulnerable to being isolated and undercut. Recognizing what was required in North American operations, Stefan adopted a more measured approach.
The right strategies for creating organizational change flow directly from the STARS situation you’ve inherited. Once you’ve clearly outlined your new challenges, you, like Stefan, can more effectively apply a set of fundamental principles that will ease your transition and increase your odds of long-term leadership success. Specifically, you must organize to learn about the business, establish A-item priorities, define strategic intent, get the leadership team in place fast, identify where you can secure early wins, and create supporting alliances.
The state your organization is in also has implications for the adjustments you’ll need to make to manage yourself. This is particularly true when it comes to determining leadership styles and figuring out whether you are reflexively a “hero” or a “steward.”
It’s critical for leaders to understand their reflexive responses to management challenges: How do you prefer to learn in new situations? Is your personal bent more about heroism, as it was for Stefan, or stewardship? Psychometric testing can help you get a baseline reading of your leadership style, as can 360-degree and other observational feedback. If you are 100% “hero,” then it may be best for you to stick to turnaround opportunities, eschewing other leadership assignments. For most leaders, though, reflexive responses can be adapted when necessary—so long as people clearly understand their tendencies and are willing to make changes.
Exercising personal discipline.
Wise leaders in transition ask themselves, “What am I good at—or what do I like doing—that I need to do less of?” They also ask, “What am I mediocre at—or what do I dislike doing—that I need to do more of?” And then they consciously, deliberately fight to make those things happen every day.
Building complementary teams.
You simply can’t do it all, regardless of the business context, and you can’t completely turn into something or someone you’re not—which makes the precise mix of heroes and stewards (every organization needs both) on your leadership team all the more critical.
As Stefan’s transition suggests, the STARS framework is helpful for individuals moving into new business situations and seeking to develop organizational and personal strategies that are effective in context. It can also play a central role, no matter what the business situation, in a new leader’s attempts to get bosses, peers, and direct reports to agree on the core challenges all are facing.
Indeed, the leader can fall into dangerous traps if everyone’s perceptions don’t line up: How can you negotiate achievable expectations if your boss thinks the organization’s problems are significantly more or less severe than you believe them to be? How can you get the necessary support to dramatically turn around your organization if your peers think you are there simply to realign operations, or vice versa? Executives can make change easier on their companies as well as themselves by using the STARS model to develop a common language that will accelerate everyone’s transition into new roles and opportunities.
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