In my first executive role, I was the executive director of a struggling non-profit. I had little guidance from the board in terms of where to take the organization or how to get there.

I made big decisions—early on— that were painful. Ultimately, they were beneficial in terms of improving accountability, decreasing risk and improving management systems.

I didn’t realize it until later – but what I was really doing was getting my “arms around” the organization. Making sure I understood it, could control it, increase transparency and accountability and could operate it.

Which is fine. In fact, I made major moves toward best practices. Except for one major problem:

I was slow when it came to making decisions that would produce growth. Growth often requires an investment of some kind. It often requires risk.

In my case, I was afraid of making mistakes. So, I did a great job of getting everything very neat and tidy. We were incredibly hard-working, thrifty and productive in relation to our size.

But for years, we were limited in growth. Growth only started when I started making big decisions, all of which carried risk. Most of which worked. Some didn’t.

In the final analysis, though, not making big moves was costlier than making big moves. You can recover and learn from a mistake. You might even convert it into something valuable.

You can’t do anything with inertia.

Secrets of Success for New CEO’s

The global consulting firm, McKinsey, conducted a study[i] of CEO’s to identify if there was a connection between early big decisions and overall success (as defined by total return to shareholders.) What they found is enlightening:

What Decisions Have the Most Impact?

According to the study, incoming CEO’s tend to make similar strategic choices, or moves, in their first two years, at roughly the same rates. This is regardless of whether the company was successful or struggling. These choices, in the percentage of frequency, follow:

Although the decisions had similar frequencies, their efficacy changed depending on whether the company was already successful or struggling.

Top Three Decisions That Created Situational Success

1. Organizational redesign was the decision that had the greatest impact on already successful Despite this, this choice was only made 26% percent of the time. Surprisingly, it had little impact on low performers.
2. Strategic reviews had the greatest impact on struggling However, it was only chosen by 31% of CEOs at struggling companies. This appears to be an underutilized decision. The impact of a strategic review was limited for already successful companies.
3. Reshuffling management teams often produced a significant benefit for struggling businesses However, this choice destroyed value in already successful companies. Caution: This was the most common choice made by incoming CEO’s. If taking the helm at an already successful company, don’t be so quick to make management changes.

An Observation

Frequently made choices made by CEO’s are sometimes negative ones (reshuffling management in successful companies.)

Rarer choices are some of the most valuable (strategic reviews in struggling companies.)

Not making a big move, or several big moves is the worst choice.

Decision Making Principles for New CEO’s

The study went on to make several other observations:

• Think like an outsider: Whether the company is performing well or poorly, most CEO’s will make a strategic change. A big move.

However, CEO’s hired from the outside (which are the minority) tend to make more of these big moves.

In most cases, big moves are associated with success. In fact, when looking at companies that were poorly performing, the most successful turnarounds occurred when a new CEO made at least four or more big moves.

Successful companies didn’t seem to benefit from as many changes, but some change was still beneficial.

In my experience, inside hires are often hampered by fear of rocking the boat relationally, internal politics and the same blind spots that created the problems, to begin with.

Outsiders don’t tend to come in with those relationships or baggage. They see things differently and so feel free to act differently.

This doesn’t mean you should necessarily hire from the outside. They do lack institutional knowledge and understanding of your culture.

But, it does mean that if you choose to hire from within, you should seek and be open to outside perspectives.

• Make decisions aligned with company values, vision and desired outcomes. Some new CEO’s try to follow a manual or pattern they’ve seen as successful. Sometimes this is attempting to replicate a successful mentor they look up to or a successful peer in their field.

It can feel safe or expedient to copy what others are doing, hoping to mimic their success.

It is helpful to look at what others are doing. That’s getting the outside perspective.

However, your decisions should be made based on what makes the most sense given your starting point, environment, and desired outcomes.

The best answers are usually innovations – learning lessons from others but adapting those lessons to best fit your context and goals. Be discerning when mimicking tactics and cautious about mimicking strategy. When doing so – focus on principles rather than exact replication.

• For struggling organizations – think comprehensively. The most successful turnarounds, in struggling organizations, came from CEO’s who made many (4+) big changes in a 2-year period.

In other words, they realized “It’s a big boat, we’d better turn fast and turn hard before we’re far off course.”

Successful changes were made strategically and carefully, presumably in response to the strategic review. They were made with a “whole organization” context. While fast and large – they weren’t reactive.

Change Is Hard. Not Changing Might Be Harder.

Not making the big changes is why:

• Blockbuster isn’t Netflix
• Sears isn’t Amazon
• RadioShack isn’t Best Buy

Timely and strategically-led big changes allow for continued growth. Don’t be shy about doing what needs to be done.

Take good care,

Christian

[i] https://www.mckinsey.com/featured-insights/leadership/how-new-ceos-can-boost-their-odds-of-success accessed 8/8/2018