Firing the CEO
How a Public Relations Strategy can Limit the Damage
By David Weiner, MBA and Aaron E.
Boles, LL.B.
We’re in the era of permanent change, and CEOs are fair game for
the chopping block, as organizations everywhere constantly overhaul
their operations to become more competitive.
Where corporate leaders once were afforded a degree of
latitude when company performance lagged for a quarter or two, they
now are increasingly being held responsible for underperformance by
boards of directors. A bad six months of financials is often enough
to see off the CEO. And there are a host of other reasons that company
leaders get sacked, ranging from disputes with the board to personality
clashes with the management team. The post-Enron era has also created
a hair trigger response if a corporate boss is suspected of cooking
the books; the best way to diffuse a cloud of suspicion looming over
questionable financial reporting is to eject the person in charge.
The legal position of a dismissed corporate leader isn’t always
clear, which makes the communications aspect even murkier. One thing
that is unambiguous, however, is that bungling the firing process can
turn a challenging situation into a corporate crisis.
Twenty years ago, public displays of disaffection by a terminated executive
were rare, since most were afraid that a lawsuit or excessively negative
commentary to the media could damage their reputation. Badmouthing your
former employer raised the prospect of having difficulty landing new
work – a lawsuit was considered even worse. There was also an
understanding by executives that they were members of the corporate
club and as such, they had to accept the hard realities of life at the
top, including being unceremoniously dumped at least once in their careers.
This is no longer the case. Two trends are emerging: terminated CEOs
are filing wrongful dismissal lawsuits, and the media are scrutinizing
all aspects of the departure. These trends are likely to continue and
involve an expanding cross-section of the C-suite, including COOs and
CFOs.
All of this spells potential trouble for companies: the
last thing any organization needs is a nasty fight with a former executive.
And in the absence of sound communications planning, stakeholders can
be left wondering about the stability of the company. The impact of
a dismissed CEO on the organization can be measured in productivity,
investor confidence, and strategic integrity, as well as dollars. Share
price can take a beating and when stock performance falls, the remaining
executives often get the blame – and the cycle of dismissal continues.
Whether or not an executive termination proceeds smoothly
often depends on the degree of communications planning the company undertakes
before the CEO is let go. A good public relations strategy can also
mitigate the effect of a wrongful dismissal lawsuit or other negative
public commentary by the outgoing leader. What follows is a seven-step
guide to help make the transition easier on everyone.
1. Plan Ahead – Be Prepared
Before a CEO is fired, the axe-wielder should take
time to develop a communications strategy for every stakeholder: employees,
including the executive team, key customers, business partners, suppliers
and the media. Aligning the information delivered to each audience
improves the chances that the transition will run well. A good communications
strategy should present a CEO departure as a business process. Poorly
planned communications efforts are nothing more than attempts at damage
control, usually implemented long after things have become messy.
If the situation is not an urgent crisis, a good strategy
to ensure an easy transition is to fire the CEO with plenty of notice
before the new head honcho steps in. Giving stakeholders early warning
that a transition is to take place over a period of several weeks
dispels any impression that the company is a rudderless ship.
2. Know Your Audience
For a publicly traded company, the first priority must
be to maintain the confidence of shareholders and the financial community.
A private company’s priority, on the other hand, should be its
customers and employees.
In every case, however, a major error occurs when other
stakeholders are informed before the management team knows that a
CEO is on the way out. Although it might be argued that senior employees
don't necessarily have a right to know about CEO transitions ahead
of time, they do hold considerable power in a tight community like
Bay Street or Howe Street. In fact, senior employees do have rights:
the right to leave the company; the right to speak less than fondly
of the company; and they have a right to not to be unfailingly loyal
to the new leadership. The best policy is to keep key leaders informed,
albeit on a strictly confidential basis, when a CEO transition is
afoot.
3. Communicate Internally
CEOs who replace outgoing chiefs have their work cut
out for them and have to persuade other senior executives and staff
to buy into their vision of how to lead the company.
In this situation, the big danger occurs when another
senior manager becomes better at communicating an alternative vision.
This is a recipe for a kind of corporate tribal warfare in which one
or other of the protagonists will suffer. Devising a comprehensive
internal communications plan that articulates the new CEO’s
vision and business plan will significantly increase the chances of
buy-in from internal stakeholders. It will also help with early identification
of any managers that are unwilling to work within the new regime.
Offering those people a way out before they become a problem is obviously
preferable to facing internecine strife down the road.
4. Use Clear Language
Communications need to be tailored to the needs of
different stakeholders, both internal and external, and focus on protecting
corporate reputation. Organizations need to communicate in language
that will be understood. Lawyers can counsel clients that stating
the company’s legal position with respect to the ousted executive
isn’t enough; in fact, legal terms may cause the impression
that the company is hiding behind a legal smokescreen.
5. Engage the Media
Business journalists are frequently the primary conduit
to your audiences. Being prepared with trained spokespersons, defined
key messages and a well-tested media plan will go a long way to ensuring
balance, fairness and accuracy in the press. By adhering to principles
of openness, honesty and prompt disclosure to the media, the company
will be seen as well-poised to move forward after the executive transition.
6. Identify your support
CEOs are high profile executives. The media will seek
comment not only from the former executive and the company, but from
other sources as well, particularly if the transition was involuntary.
Being familiar with knowledgeable partners, industry experts and analysts
that can speak about a company’s leadership is important for
building credibility through third parties.
7. Keep your Ear to the Ground
Regular monitoring of the media, canvassing employees
and seeking feedback from external stakeholders will alert the company
to any lingering issues concerning the new CEO. The weeks following
a transition will set the tone for the new leader, and the more positive
the reception from all audiences, the better that person’s chances
for success.
A fired executive can disrupt a company's operations
and create significant financial exposure if the transition is allowed
to get messy. The most reliable insurance against these risks is a well
thought out communications plan. A company that fails to carefully map
a communications strategy for the transition will eventually be haunted
by that mistake. But at its best, a CEO transition should be seen and
treated as a chance for an organization to create a positive impression
in the minds of its internal and external publics.
David Weiner, MBA, is a senior partner with NATIONAL
Public Relations in Toronto, Canada’s largest corporate communications
firm. Aaron E. Boles, LL.B., is a consultant at the firm.
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