People running A/E firms are dealing with a lot of turnover and challenges today, and it's important they keep looking ahead. Former CEOs offer some direct tips for them.
CEOs are leaving the industry in record numbers. Some are leaving like a Swiss train—on plan, on schedule. More than a few are retiring early, spurred on by the pandemic to embrace a simpler, less-stressful sixth decade. Still others are being either “gently removed” or directly forced out by their boards or partners after having been found profoundly ill-equipped to lead over the past two years. A review of CEO ages and tenures among the ENR Top 500 points to even more turnover at the top of the industry over the next five years.
Most of these departing CEOs are passing the baton to an internal CEO-in-waiting. (Fewer than 5% of AE CEO transitions involve bringing someone in from the outside.) If you’re one of these CEOs-in-waiting, you’ve likely taken courses in leadership, read texts on the subject, watched TED Talks (or Ted Lasso) for inspiration, and listened to podcasts to help you prepare for your new role. This week’s column offers you some additional observations and advice—which may be a little difficult to hear (for both you and your firm)—as you consider this next part of your career.
1. You’re probably not the most qualified for the job: At least not from an experience perspective. The perfect candidate for the CEO position is someone who has previously led at least one AE firm that is more successful and larger than yours is today. You don’t have that track record. In fact, you’re going to be learning on the job. So, to accelerate up that learning curve as fast as possible and increase the probability of a successful transition, my advice to you is twofold. First, upgrade your board of directors to include a majority of external voices. Seek out former industry CEOs and executives who ran firms larger than yours, who have “been there, done that” and are eager to help. (Do NOT put industry consultants on your board as this presents both real and perceived conflicts of interest and you can always buy their services or advice by the hour). Second, join an industry CEO group in which your firm is the smallest—that way you can learn from those CEOs who have navigated the challenges that lie ahead of you. Then pass this knowledge along to other new CEOs of firms smaller than yours.
2. Protect yourself: Every year, on the anniversary of when he was fired from his firm, a former CEO friend of mine calls me. We catch up, and he thanks me again for the advice I gave him over a decade ago. The backstory—he had been offered the position of CEO and had asked me what he should do. I told him to get a severance agreement in place as one of the conditions of taking the role. When he was fired about three years into the job (not for cause, not for lack of performance, but for office politics), that severance package was a big factor in him successfully transitioning his career and moving on. A severance package is insurance for a risky endeavor. Research from the Corporate Executive Board (CEB) estimates that 50% to 70% of executives fail within 18 months of taking on a role, regardless of whether they were an external hire or promoted from within. So, it makes sense for you to have insurance should the transition fail, and you get fired.
3. “Are you my main man?” Not just the opening lyrics to the 1972 classic “Main Man” by T. Rex (with a terrific 2020 cover by Father John Misty), but the question that gets to the heart of the matter of why so many transitions in this industry fail. Are you cut out to be #1, lead dog, head honcho, grand poobah? Or are you at your best when you’re the wingman, second-in-command, or consigliere? More than a few CEO successions at ENR Top 500 firms have gone awry over the past decade for this very reason—resulting in damage to the firm and to the failed CEO. The pressure is enormous on CEOs-in-waiting to take the position. But that pressure is largely because there is no Plan B besides you. So, you feel almost obliged to take on the responsibility. My advice: Go deep, real deep, and figure out what you really want and what you’re really good at (not what the firm-retained psychologist tells you that you should do based on your “managerial profile”). If you don’t believe you’re right for the job, if you doubt your abilities, don’t take it on. You’ll feel like you’re letting everyone down, but in reality, you’re not. Instead, you’re making everyone get real about the options for the future of the firm. You’ll thank yourself 20 years down the road.
4. A decade to make your mark: This job will be the most meaningful and rewarding of your career. But if the events of the past few years have taught us anything, this job will age you. It will also consume all of your time if you let it. It will also tempt you to stay on longer than you should—either because you love it so much or because, like at most firms, your successor is not in place. So, the odds are you’d defer your departure and stick around longer than is good for you or the firm. Average tenure of CEOs in this industry is about 20 years. This is comprised of 15 years of “productive” leadership and 5 years of unproductive, messy transition. This industry has a problem with CEOs (especially founders) staying in the position way too long. Look, you’re no spring chicken. You’re 40- or 50-something. Make sure you are not CEO when you are 60- or 70-something. Plan on 10 years of productive, all-in leadership and 5 years of transition. If you do it right, you can migrate to a different role after those 10 years if you like—just not CEO.
This article originally appeared on Morrissey Goodale’s website. Morrissey Goodale is a CFE Media content partner.
