Game On: Leadership Changes May Be on the Horizon. IROs Should Be Ready to Perform Like MVPs.

Written By Joni Konstantelos, Managing Director

June 2, 2021

With the dust settling from the extraordinary ride we have been on for the past 15 months, the unofficial embargo on CEO transitions is starting to lift. Major management changes are typically put on pause during times of heightened uncertainty – CEO transitions fell by about 1/3 from their pre-crisis high during the past three global recessions, according to a Spencer Stuart study. But now, boards that favored stability during all the volatility are more than ready to make necessary moves. Underperforming CEOs, aging or exhausted CEOs who are ready to retire, and those leaders who are not the right fit for an impending shift in company strategy may soon be replaced. Spencer Stuart projects that CEO transitions will pick up mid 2021. And we agree: change is coming for many organizations sooner than later.

The IRO’s role in management transition is two-fold.

As an IRO, it’s critical not to be blindsided if and when this happens in your organization. It is likely you will not get the news until the last minute. But that does not mean you should not be prepared. When you do get the word, you will need to act quickly to accomplish two critical objectives:

  • First, it is your job to reassure investors that this transition is part of a well-thought-out succession plan and to make sure that initial institutional interactions are handled the right way. You do not want stock prices to get pressured when the announcement hits simply because investors feel unsure or left out of the loop.  You will be front and center when it comes to managing immediate and ongoing communications.
  • Second, you will want to quickly establish yourself as a key advisor and close confidant to the new CEO. Your knowledge of and relationships with important investors will be integral to fostering a smooth transition and bolstering the new leader’s success – as well as to solidifying your own.

6 Keys to Ensuring Successful Leadership Transitions

Now is the time to put your game plan in place and be ready with your strategy if a major change comes your way. These tips will guide you through the before, during, and after phases of a CEO transition and help you create a communications plan that takes all stakeholders into account.

  1. Dust off your company’s succession plan.
    • Because IROs typically do not get much advanced warning on major issues, it is best practice for the company to always have a succession plan in place and ready to go. Especially now, as companies are just beginning to find their footing again as they emerge from the COVID-19 crisis, it is critical to have this plan at the ready to help navigate the additional uncertainty and mitigate the risk that leadership changes always create. Review your company’s plan so it is fresh in your mind and so that you’re ready to implement a thoughtful, well-aligned investor communications plan should the need arise.
  2. Log some face time with the new CEO.
    • If a transition happens, lobby to be one of the first to spend some time with the CEO. This will let you hear her new ideas firsthand and get a handle on her style. It is also a good time for you to learn the CEO’s top three to five high-level objectives, so you can share them with investors. And you will need to know where the CEO stands on the guidance issued by her predecessor. Will she confirm it, change it, or does she need more time to decide? If the latter is the case, find out if she can commit to a timeframe when she will comment one way or the other, such as by the next earnings call.
    • At the same time you are gathering information, you will want to share all the relevant information you can as well. You can help quickly and thoroughly onboard the new CEO, arming her with the tools she will need to seamlessly transition into her role. Be sure to share historical knowledge of the company’s IR program, including IR strategy, shareholder base analysis for the past four to five quarters, peer group analysis, and ESG initiatives and performance.
    • Also share the most recent investor perception study, summarizing the highlights and calling out the major pain points for your investors. If it has been a while since your company has done a perception study, there is no time like the present. The insights you will uncover will give your CEO (and the entire leadership team), an updated view of investor perception about the company, its strategy, and messaging, which may have changed significantly given recent events. It is also a great idea to plan a follow up study in a year to analyze progress on key topics.
  3. Carefully craft the day-of announcement.
    • Be fastidious when drafting the press release announcing the new CEO. Take the time to build out a key messaging document that organizes your thoughts and addresses the key points you will need to make, including:
      • Proper recognition to the outgoing executive.
      • Why the new CEO is the right person for the job and what unique or specific talents she brings to the table.
      • An overview of the CEO’s vision for the company including direct quotes from the new executive.
      • Evidence that the board weighed the decision carefully and fully supports the new CEO.
      • A quote from the board chair elaborating on the incoming CEO’s accomplishments and what makes her the right fit for the company’s future.
    • Thoughtfully consider the wording for the release and make sure the tone is spot on as well. Tone will be dictated by the circumstances surrounding the transition. For example, if the company is in turmoil, the CEO’s quotes should have a commanding, steady resonance to help convey that she is ready to take control and turn things around. On the other hand, if a beloved CEO is retiring, the incoming CEO should give proper accolades to the footsteps she is about to follow.
    • Ultimately, you want a piece that – through words and tone – paints a clear picture of why the new CEO is the best possible person for the job and that leaves the investment community feeling confident that the company’s future is in the right hands.
  4. Immediately follow up with phone calls.
    • It is important to give your top shareholders and sell-side analysts some TLC as soon as possible following the public announcement. Set aside time to contact your A-list so you can personally inform them about the leadership change.
    • And, be prepared to answer a lot of questions. It will help if you have a handy copy of the key messaging points that you used to draft the announcement when you make these calls. You may also want to anticipate and draft responses to questions you know your investors and analysts will ask, such as:
      • If and when the new CEO will confirm past guidance?
      • What the new CEO hopes to accomplish in the first 100 days?
      • Whether or not the strategy is changing significantly?
      • If there are any additional leadership changes forthcoming?
    • If you can, practice delivering your responses to these types of questions in advance. And remember that the name of the game here is to reassure stakeholders that the new executive is more than capable, has the necessary experience, and is the right person to lead the company’s future. With any transition – planned or not – the number one fear among stakeholders is that the company is in chaos. Use this initial call to quell that concern as best you can.
  5. Schedule a follow up call with the CEO.
    • During your initial conversations, try to schedule a longer 30-minute call between the new CEO and your top holders and covering sell-side analysts, and try to get this on the books as soon as feasible. In-person meetings are always best. But if this is not possible due to ongoing travel restrictions, a video conference will work. Face-to-face (or screen-to-screen) time will give the participants the opportunity to connect and start the relationship on the right note. This dedicated time helps put investor engagement into high gear and allows shareholders and analysts the time they need to dive more deeply into their questions directly with the new CEO.
  6. Plan an investor or analyst day.
    • Within six to nine months of the new executive taking the helm, plan to hold an investor day, in person if possible. This event may be the first chance for both the buy and the sell-side to meet the new CEO face to face if your previous calls are all done over the screen. However, a virtual investor day is also an option if an in-person event isn’t possible, and we’ve seen many companies have great success with these types of meetings during the pandemic.
    • However and wherever you choose to host, the focus should be on the CEO’s initial observations and accomplishments over the first six months as well as where she plans to take the company in the future. Attendees will want to know what changes have been made and if there will be any forthcoming significant changes to strategy and execution, including the executives’ perception on why (or why not) any changes need to happen.
    • Keep in mind that this event is a golden opportunity for you to shine as the IRO. By bringing together company leadership, investors, and analysts for a half-day of critical and strategic conversations, you can create significant value for all the involved parties. Do not forget to get all the mileage you can out of the hard work that goes into this event by planning on timely follow up with attendees and by leveraging event presentations and video footage on your IR site and in your ongoing communications.

Be well prepared to play your part.

For many IROs that have helped successfully navigate the pandemic, there may be yet another critical opportunity just around the corner. If a leadership change does take place in your organization, you need to be ready to help both your investors and your new executive through the transition. To learn more about how we can help with everything from perfecting an evolving investor narrative to putting together a highly effective investor day, give us a call.

Back To Blog