The Vital Role of the Outgoing CEO

All boards aspire to a drama-free CEO succession — to one that not only is proactive and strategic but also positions the organization for future success. The best practices for handling this process are well understood: start early, identify and develop multiple internal candidates, assess their fit with organizational needs, choose the right person, and then thoughtfully onboard the chosen successor.

The clinical emphasis on those steps is useful, which is probably why the majority of the research on succession focuses on the “how.” What that research typically neglects, however, are the actions and emotions (particularly late in the process) of one central protagonist: the outgoing CEO.

Most CEOs spent years striving to get to the top. During their time in office, they work long hours nurturing the firm’s culture, setting the strategic vision, and improving operations. For many CEOs the role is less a job and more an all-encompassing identity. So leaving it can be emotional, and that’s something directors need to pay attention to. What outgoing CEOs feel influences how they think and act during successions, which can have significant consequences. Our research shows that when CEOs begin the succession process with a strong relationship with the board, are actively engaged in helping choose a successor, and have positive views of the process, the transition to a new CEO is more successful, as measured by such variables as the tenure of their replacement and turnover among the top team. However, when outgoing CEOs experience ambivalence or regret or feel excluded from the succession process, transitions can become tumultuous. Incumbents and boards often underestimate how delicate these transitions can be.

Even impeccably orchestrated CEO successions give rise to strong emotions. In July 2009, Xerox CEO Anne Mulcahy passed the baton to Ursula Burns, a handpicked successor whom Mulcahy had spent years grooming for the role. Mulcahy later described the transition in HBR. (See “Xerox’s Former CEO on Why Succession Shouldn’t Be a Horse Race,” October 2010.) “People don’t realize how hard succession is on the incumbent CEO,” she wrote. “It’s designed to make you able to go away without causing a big impact, and that doesn’t come naturally.”

To better understand what CEOs experience when they step down, we conducted extended interviews with 30 former chief executives. Our analysis and synthesis of the information gathered revealed five psychological crossroads that outgoing CEOs confront: (1) initiating a succession, (2) relinquishing control, (3) managing emotions, (4) planning for what’s next, and (5) detaching from the role and the organization. Boards and incoming CEOs that understand the challenges facing the departing leader at each of these turning points will be better equipped to avoid problems.

In this article we elaborate on each crossroad and share the stories of the CEOs with whom we spoke. We also provide advice for boards and outgoing CEOs that are navigating CEO transitions.

[ Crossroad #1 ]

Initiating a Succession

At this stage, two factors can contribute to psychological tensions: CEOs’ reasons for stepping down and boards’ reactions to their decision. In our research most successions (83%) were initiated by the CEO, with the three most-often cited reasons being age and tenure, or temporal factors; the future needs of the organization; and personal reasons.

The CEOs who left for temporal reasons referred to their tenure or age range as “feeling right,” though the specific tenure or age was not consistent across them. “Five years was kind of the right time frame,” said the former managing partner of a premier law firm, while the former CEO of an executive advisory company said, “It was time after 16 years.” CEOs who cited personal reasons said that they felt they’d accomplished their goals, that they lacked the focus or energy to continue in the role, or that they had ambitions outside business.

Some observers who’ve studied CEO successions suggest that CEOs have a hard time letting go because they believe that the organization needs their skills or that nobody can replace them. But as we just noted, we found that the opposite is true: Consideration of the organization’s future often leads a CEO to initiate succession. Leaders we spoke with acknowledged the need for fresh eyes or a different style. Others cited the pipeline of candidates. “If I were to stay another five years, that would eliminate opportunities for others to continue progressing,” said the former head of a global transportation company.

Underpinning CEOs’ willingness to initiate succession was their relationship with the board. When it was strong, CEOs were more likely to instigate the process. But even in those cases, when they told their boards they were planning to leave, the directors tended to act surprised. This suggests that although boards spend time discussing succession, they aren’t focusing enough on when it might happen. “It took the board a year to find a successor,” said the former CEO of a European asset management firm. “What was the quality of the existing succession plan?”

Advice for boards. The fact that the majority of CEOs are initiating the succession process and in many circumstances surprising the board is troubling. Understanding more about what drives the desire to step down should help directors. Given that a CEO’s age and tenure are apparent, boards ought to be able to anticipate when they should start having conversations about succession. While directors should be having regular dialogues with CEOs — at the very least, annually — the temporal factors will help the board anchor a conversation about ideal timing. And knowing that many leaders are thinking about the talent pipeline when planning their exits should enable directors to have more-open and honest discussions with CEOs about long-term succession strategies. Boards can use the three main reasons for exits (timing, organizational needs, personal needs) to frame conversations with sitting CEOs about how their timeline and expectations are evolving.

Advice for CEOs. Cultivating deep relationships with board members is crucial. CEOs who’ve neglected to do so find it harder to have candid conversations about their plans for succession and often avoid discussing them until they realize they’re ready to move on. “I probably should have shifted some of the time I spent running the business to relationship building with the board,” said the former CEO of a global packaging company. “If there was an opportunity to go have lunch or dinner with a board member or spend time with my team, the team always won.” In fact, many reasons CEOs have for wanting to leave, while unexpected, are legitimate and may inspire pleasant conversations with the board that augment the overall succession process.

[ Crossroad #2 ]

Relinquishing Control

The CEOs we spoke with participated in five kinds of succession activities: canvassing for potential candidates, creating their successor’s ideal profile, interviewing potential candidates, preparing candidates for the vetting process, and onboarding the chosen successor. However, their involvement often dwindled as things moved along. What’s more, leaving aside onboarding, which takes place after a successor is chosen, nearly one in four CEOs (23%) reported being excluded entirely from the process. That can be jarring to someone who is used to being in the driver’s seat. When the former CEO of a utility company raised the topic of succession at a board meeting, the board even told him, “Succession is our role, not yours. You don’t need to be bringing that up to us.”

That kind of view is shortsighted. Despite what corporate governance experts might say, “the CEO is really instrumental in a successful succession, even though in theory it’s a board decision,” said the former CEO of a global financial services company. Our research showed that when CEOs were more involved in the succession process, they were more confident in the new CEOs’ ability to lead the organization. Looking at the 10 successors whose tenures ended after we completed data collection, we found that the previous CEO’s involvement in the process was positively correlated with the length of a replacement’s tenure. But when CEOs were excluded or participated only minimally, transitions tended to be rockier. There were six transitions in which CEOs had left without a successor in place, and in five of them the CEO had partaken in either just one succession activity or none at all. The outgoing CEO’s involvement also affected how much of a company’s top management remained intact after the transition. The greater the participation of outgoing CEOs, the less likely there were to be defections among the senior executive ranks.

Advice for boards. Boards should recognize that CEOs are uncomfortable with the way their control wanes during succession. This is about more than just losing power; it’s about how much CEOs matter. Psychologically, we all need to feel that we’re significant, and that’s especially true for people who are used to being in positions of authority. Additionally, boards should recognize that the more a CEO is involved, the better the outcome for the organization will be. Boards should be up front about who will participate in the succession process and how, and should have ongoing dialogues to clearly articulate when, how, and why they want the CEO to contribute. At the very least, outgoing CEOs should play a role in canvassing candidates, formulating a successor’s profile, preparing candidates for interviews, and onboarding the successor. Establishing a transition plan with succession metrics and gates is another best board practice.

Advice for CEOs. CEOs must be prepared for their responsibilities to decrease during the succession process. Those who don’t fully anticipate this may try to wrest control back from the board, and such power struggles impede successful transitions. Knowing that their wavering control may be impinging on their psychological need to matter should help CEOs understand why this period is particularly challenging for them. And outgoing CEOs can find comfort by focusing on areas where they’re still having an impact — on themselves, their team, and the broader organization.

[ Crossroad #3 ]

Managing Emotions

Over the course of succession, CEOs had to address both the reactions of others and their own complex emotions.

At the companies in our research, half the boards were unreceptive (from the outgoing leaders’ perspective) when CEOs told them they wanted to step down, with directors expressing surprise, concern about the timeline, or unhappiness with the news. Such responses created a lot of angst and worry among the CEOs. In some instances the board pushed back on the CEO’s decision to go. After one CEO of a distribution company shared his desire to leave, his board held nine meetings to try to get him to stay. The CEO recalled: “Finally, one board member came to their senses and said, ‘You know, I don’t think it’s a good idea. He doesn’t want to do it.’” In other cases boards spent weeks processing the news without taking action.

Outgoing CEOs also had to manage the doubts of their top team members. They often had to justify why they were stepping down. They had to alleviate concerns about what new leadership would mean for the future of the team and the organization. Once successors were chosen, in addition to onboarding them, outgoing CEOs had to deal with the frustrations of unsuccessful candidates. “The daggers got pointed back at me,” said the former CEO of an institutional investment firm. “I was close to them, had worked with them for 20 years, had really strong relationships — trust, everything. And for some reason they were angry.”

Then there were the CEOs’ own complicated emotions. The period between having made the decision to step down and the announcement was fraught, marked by feelings of loneliness and dishonesty for having to keep the news secret. “I was specifically told that I couldn’t make an announcement, even though in my mind there was an end date for my job in this company,” said one former health care CEO. “I absolutely had to disguise my true intentions.”

CEOs experienced both positive and negative emotions when announcing that they’d be leaving. On one hand, they felt relieved that they no longer had to hide their decision. Some were excited about the prospect of having the right successor take over. “I felt joy, like I handed the baton over to the right person,” said the former CEO of a real estate services company. On the other hand, CEOs experienced grief and distress over giving up the job and often frustration over their lack of involvement with and insight into the succession process. They worried about how the organization and their successor would fare. Some felt an anticipatory guilt that they’d be responsible if things went poorly.

Primarily, however, CEOs were disappointed and shocked at how quickly they were pushed to the periphery as allegiances shifted toward the successor. Some CEOs also felt slighted when their contributions to the organization seemed to be overlooked or overshadowed by the attention showered on the incoming CEO. In one succession the board even announced the outgoing CEO’s departure and introduced and highlighted the track record of the new CEO during the same call.

As with the other crossroads, we found that the quality of the CEO-board relationship had a major effect: When it was strong, outgoing leaders seemed to cope with their negative emotions better. But even when CEOs initiated the succession process and felt involved in it, they struggled.

Advice for boards. Boards need to be aware of the unexpected mix of emotions CEOs may experience. They should know that certain periods (such as the preannouncement phase) tend to be particularly stressful. Directors should check on how the CEO is doing and try to counter the negative feelings the process might evoke (for instance, by minimizing the period during which the outgoing CEO must keep the departure news a secret). Directors should also moderate their own reactions to the CEO’s decision to step down.

Advice for CEOs. CEOs will need to manage their own emotional journey — but instead of suppressing their feelings, they should lean into them and try to understand their meaning. Discussing them with trusted outsiders — a professional coach, a peer CEO, the CHRO, or a spouse — may be useful. “It’s important to be honest about what your emotional vulnerabilities are going to be and what your safety net will be,” the former CEO of a transportation solutions company advised. “And you need to be candidly raw, be able to say, ‘I need help today.’” The executives we interviewed also recommended that outgoing CEOs communicate more with stakeholders (like their own teams, customers, and partners) to alleviate uncertainty about the succession and bring greater clarity to the process. Though some may believe emotions have no place in the boardroom, they are inevitably present. Anticipating them, staying attuned to them, and knowing how and where to find support is critical to ensuring a positive succession experience.

[ Crossroad #4 ]

Planning for What’s Next

Although CEOs are hired for their long-term strategic capabilities, many of them do not apply those skills to their personal life. More than half (53%) of the CEOs we interviewed made no plan for what they’d do after leaving office. While outgoing CEOs were aware of the importance of considering their next act, urgent day-to-day responsibilities frequently sucked up all their bandwidth. Perhaps not surprisingly, we found that CEOs who did not plan ahead experienced more negative emotions during the transition.

In the last empirical study of CEO departures, published in the 1980s, Jeffrey Sonnenfeld of Yale found that “in contemplating their own retirement, [CEOs] see only losses.” Sonnenfeld heard little mention of hobbies or recreational plans. In his 2019 HBR article “The CEO’s Guide to Retirement,” Bill George of Harvard Business School (himself a former chief executive) argued that today’s CEOs have more opportunities for active and meaningful retirements; the options could include corporate or nonprofit board service, writing books, joining a private equity firm, creating a foundation, serving in government, and mentoring emerging leaders. “Many former CEOs find that this period of generativity is very fulfilling,” George wrote. Indeed, at the time of our interviews, all the former CEOs in our study were working full-time or part-time or were actively involved with their business community or personal projects.

Sometimes the transition out of the CEO role doesn’t mean a complete exit from the organization. Nearly half (47%) of CEOs stayed on in some capacity with their companies after the handover, including by coaching their successor or remaining as a board member (which again was more likely to occur when their relationship with the board was strong). Although a predecessor’s continued presence can be tricky for a new CEO, outgoing CEOs experienced more positive emotions and fewer top team members left when the departing CEO stayed on in some sort of role with the organization.

Advice for boards. One of a board’s biggest decisions is whether or how the outgoing CEO should remain involved after officially stepping down. In general, when the successor plans to continue the current strategy and make incremental changes, it’s more practical for the outgoing CEO to stay on as a director or an adviser. Incoming CEOs with more-dramatic change initiatives may well see the outgoing CEO as an impediment. It’s imperative that the board and the new CEO be in agreement on this decision.

Directors, especially those who are former CEOs, should share their personal experiences with leaving high-level jobs as a way to support a departing CEO. They can help outgoing CEOs navigate this challenging time by offering networking help and mentoring or serving as a sounding board. Human connection across a shared journey and at meaningful stops along the exit route can ease the transition.

Advice for CEOs. The CEOs in our study noted the importance of having varied interests, both while in office and after stepping down. As they approached their post-CEO life, some needed a plan and structure, and others were comfortable experimenting with a blank canvas. Most leaders emphasized the need to focus on intrinsic purpose in the next act. “Ideally you’re self-reflective with your family and spouse,” shared the former CEO of a telecommunications company. “Your spouse might say, ‘You said you’re retired. We were going to travel, but you can’t go because you have a meeting.’ Understanding that real state of play is important.” Finally, many CEOs suggested that it was important to avoid jumping quickly into keeping themselves busy without truly evaluating their own desire for what was next. “I’ve had some of my peers say to me that their biggest mistake was overcommitting, and that comment was really quite impactful,” the former CEO of a pension fund told us. “From my perspective, I would only undertake anything based on two criteria: It had to be something I was genuinely interested in, and I had to know and like the people.”

[ Crossroad #5 ]

Detaching from the Role and the Organization

It’s not uncommon for outgoing CEOs to have a hard time disengaging from the role and relinquishing the CEO title. In our data there was a relatively even split between CEOs who viewed the role as their job (43%) and those who saw it as their identity (47%), with the remainder feeling it was a little of both. Although some were aware of the dangers of entangling their identity with the CEO role, it often was hard to avoid, given the way other people responded to them. Even well after chief executives had stepped down, other people continued to treat them as if they were in charge. “People come up to me and talk to me as if I’m still the CEO,” said the former head of a multinational financial institution. “I still get calls from other CEOs saying there’s an issue. And I say, ‘You know I retired eight years ago, right?’”

We found that viewing the CEO role as part of your identity was a double-edged sword. On one hand, CEOs who saw it that way were more likely to have a strong relationship with the board, which positively affects succession. At the same time, those CEOs also experienced more negative emotions during their succession because moving out of the role involved a greater loss than just giving up a job title.

Advice for boards. Boards should consider holding an event or creating other mechanisms to celebrate the success of outgoing CEOs and demarcate the end of their tenures. Such events can generate positive emotions, satisfy ego needs, and promote closure. Anthropologists argue that throughout human existence, rituals have helped people manage uncertainty during life transitions. If this takes the form of an event, it need not be large or lavish; it’s more important that it be meaningful. “I got two inches’ worth of letters from employees saying what they were thankful for, and they did a surprise send-off,” the former CEO of a technology company told us. “That was overwhelming to me in a positive way. You don’t necessarily expect it, it’s kind of grassroots, and it does make you feel good.”

Advice for CEOs. The CEOs we spoke with said it’s important not to let your personal identity become too closely tied to the company or the job. “Start thinking about that early because the connection to that element of identity is going to change,” said the former CEO of an insolvency services firm. “That goes to the question not only of how are you going to transition yourself out of that identity but also of what are you going to do to create a different identity?”

We found that CEOs who had a humble servant leadership style often referred to their position as being at the bottom of the organizational chart and saw their personal identity as who they were outside their job, not in it. Those leaders had smoother transitions, but even so, some expressed surprise at the abruptness of their disconnection. “Be prepared for some disappointment at how quickly you’re forgotten,” said the former leader of a professional sports company. To cope with this new reality, the people we spoke with recommended that CEOs look for support from professional coaches, peer groups, and others who have lived through similar experiences.

In theory and in practice, many people underestimate how vital the emotions and actions of the outgoing CEO are to successions. That tendency is detrimental to boards, to incoming CEOs trying to take the reins, and to outgoing CEOs themselves, who are forced to navigate a challenging process without much advice or support. It’s in an organization’s best interest that the outgoing CEO make this transition smoothly, and there are specific actions boards can take to increase the odds that this will happen.

The most effective advice for everyone involved is this: When the relationships between the outgoing CEO and individual board members are deep and authentic, all succession crossroads are much easier to manage. And the time to build such relationships is far in advance of the transition. When CEOs and directors have been close for a long time, “you can have more-awkward conversations because there is trust,” said the former CEO of a household appliances manufacturer. Developing those relationships should be a daily priority during every phase of a CEO’s journey.

Copyright 2024 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

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