It was big news in tech circles last month when we learned about the appointment of Carol Bartz as the new CEO of Yahoo!. With 13,000 employees and a languishing stock, she’s got her work cut out for her. Her appointment got me thinking about what happens to companies of all shapes and sizes when a new (outside) CEO shows up.
Exodus
The first thing senior people (those that worked directly for the former CEO) do is brush up their resumes. Whether they leave by choice or not, you can expect to see the management team change. At Yahoo! the same day that Bartz was announced, former CFO and now President Susan Decker resigned. Now, its true Decker was hoping for the top job. But I believe she would have left anyway for two reasons: trust and change.
Change
When a new CEO is appointed to any company, this is a signal that change is needed. Often these changes are defensive - the company is underperforming and needs help. Even where the company is doing well there often comes a time when new leadership is needed to take the company to the next level. In both cases, the message is change.
You cannot effect real change with the same team you had in place before. This is like bridging a struggling company without asking them to do anything differently. So, often a new CEO will bring in fresh leaders in the various departments to clear the decks, remove legacy thinking and get started on implementing the new agenda.
Trust
Very often, these new generals have worked with the CEO before. To people who have been with the company for a long time, seeing these “friends” of the new CEO join in very senior roles can be frustrating. But it is crucial for the new CEO. Being a CEO is arguably the toughest job going. You have a target on your back at all times and everyone wants a piece of you. You need to surround yourself with trusted generals. Now, these trusted people had better be very good at what they do - but that’s another matter
So, the need for change and for trusted generals to carry out that change often drives a complete reshaping of company management teams. I have lived this personally, having left two companies where the CEO was changed. I also saw this when we sold Terrascale to Rackable. Rackable had performance issues and when the new CEO came in he changed almost every member of the team. Only the VPs of HR and IT remain from the old guard.
Limbo
What happens for the mere mortals who actually do the work while these theatrics take place in the exec chambers? Well, titles and org charts aside, we live in a pretty flat and open World. They know exactly what’s going on and they spend a lot of time speculating on changes to come, thinking about their own job safety and generally not getting things done. This can put companies in limbo. So, it’s important for new CEOs to quickly assemble their team and stabilize things. Think of it as ripping the band aid off quickly vs slowly.
So, you can expect to see all of this play out at Yahoo! in the coming weeks. Wall Street didn’t seem to pleased with her appointment, but I know her track record at Autodesk and think she has what it takes.
At your company, no matter the size, if you see a new CEO coming in, expect the same things to happen.