Saving a sinking ship: leadership lessons for replacing a failed CEO

Taking over at a time of crisis can be the biggest test a leader can face. Here are the secrets to steering the ship to calmer waters

The Conservative leadership race is down to the final two but, whether it’s Rishi Sunak or Liz Truss, the new occupant of 10 Downing Street will be tasked with galvanising a divided party. 

Outgoing Prime Minister Boris Johnson had lost the confidence of many, both within the Tory party and the country, and saw 59 MPs resign in the final days of his premiership. 

CEOs can find themselves in a similar situation when installed at the top of a business with its back against the wall. For example, former Expedia CEO Dara Khosrowshahi was parachuted into Uber to root out the toxic culture that had developed under prior CEO and co-founder Travis Kalanick. 

Similarly, American luggage brand Away was tasked with finding new leadership at the end of 2019 after a Verge investigation uncovered the “cut-throat culture” that had been allowed to foment while under the leadership of Steph Korey, its former CEO and co-founder. 

Her replacement, Stuart Haselden, lasted just over a year in the position and only four months as the sole CEO. 

Dean Forbes – a specialist in transforming the fortunes of struggling businesses – claims that being an incoming leader is “a lonely, daunting and sleepless experience”. The current Forterro CEO has experience of turning around four businesses, which were each in varying states of distress when he came in. He believes the first task of any incoming leader should be to turn around the fortunes of the business first, before looking to change the culture. 

“In a transformation situation, the patient is on the table in trauma. You need to change things in the business quickly so that you preserve the company’s life.” 

As a result, decisiveness and good communication are important skills for leaders to exhibit, but so is patience. Forbes explains: “Everything might not work the way you said it would. What you mustn’t then do is unpick the changes you’ve already made, at the first sign of danger. 

“You have to be patient, let these things flow through and then communicate what went well, what didn’t and what needs to be done differently next time. This way you’ll always appear in control.” 

Why leaders need to be masters of perception 

In the case of the new Tory leader, Forbes believes their focus should be on “mastering internal and external-facing perception”. 

“Politics is such a difficult job. But if I were to be in their position, the first thing I would do would be to find a sequence of opportunities to demonstrate the united nature of the party and look for ways to let the public see we are all aligned,” Forbes says. 

But changing public opinion can be particularly challenging, according to London Business School Professor and leadership expert Randall Peterson. 

His studies into internal versus external perceptions of groups have shown that the external perception is far more critical. 

He says: “When you have two groups, insiders always think that the group is highly diverse and outsiders think that the group is much more homogeneous or similar. If you’ve got a few rogue elements within a group, the internal perception is that the few should not define the whole, whereas externally people tend to think that the entire organisation is like that.” 

This means that when there are rifts in an organisation, finding out what binds people and gives the group a shared purpose is crucial. Peterson advises business leaders to “figure out what works for everybody”. This can help to “rebuild the trust as well as refocus the culture”. 

Following a contested succession contest, the temptation may be for the victor to crush any remaining opposition. 

Peterson has seen similar mistakes made during mergers and acquisitions. He says: “Trying to crush the little partner will only focus its energy. Instead, the CEO should find the things that bind the two businesses together. You need to find ways to co-opt a little bit of what the opposition was talking about.” 

Why mature leaders have more success 

This can mean that leaders need to demonstrate a good level of maturity. In the eyes of executive coach Terez Rijkenberg, the worst thing an incoming CEO can do is to bad-mouth the previous leader. 

She says: “Your team may initially agree with your disparaging remarks but what often happens is that people start to look through the lens of negativity, causing them to focus on your shortcomings too.” 

Instead, Rijkenberg says that leaders should focus on the positives to help establish trust and draw attention away from the past and redirect it toward the future-focused outcomes that they want to achieve. 

Making assumptions about why people lost confidence in the previous leader is another mistake to avoid. Asking for feedback on the previous leadership gives people a chance to voice their concerns, making them feel heard and supported. 

This may not always yield the responses the incoming leader wants to hear, but it’s an important part of the transition process. 

From Forbes’s experience, incoming CEOs are often “the primary educator for where the business truly is at that moment”. 

He adds: “You have to be resilient. Because no matter how bad the situation you’re coming into, people will still think everything was great before you got there.” 

But despite its many challenges, finding success in this field can be its own reward. Forbes adds: “There’s nothing more rewarding than seeing the organisation revitalise itself under your stewardship and seeing your actions driving out that toxicity day by day.”