The Problem with Hot-Swapping (On Exec Transitions)

A CEO attempting to hot-swap an exec.*

A theme in my practice is the CEO who's concluded that one of their executives is under-performing and must be managed out. Sometimes the CEO holds out hope that the transition will be perfectly seamless, with no disruption to operations, no awkwardness, no mess. A client once called this "hot-swapping," referring to technical components that can be replaced without powering down the system. What would this look like in practice?

• The CEO conclusively determines that the incumbent exec is under-performing and incapable of improvement. There's no question that they need to be replaced.
• In the absence of an obvious successor, the CEO runs a confidential search. News of the search never leaks to the incumbent, and prospective candidates aren't dissuaded by the secrecy.
• After a successor is identified and closed, the news is broken to the incumbent. They take it with grace and accept the severance package, with no threats of legal action or negative publicity.
• The successor is introduced to the team, who welcome their new colleague and eagerly assist in the onboarding process.
• The team wishes the departing exec well, who reciprocates. All loose ends are tied up, and the departing exec has left clear and thorough documentation for their successor.

It's not that things never turn out this way, but it's rare. There are multiple points where this neat and tidy plan can go awry. There's not just one problem with hot-swapping--there are many. So if you're a leader in this position, what challenges are you facing, and what might you do about them?

Making the Decision

You know the incumbent exec is under-performing, but you may not know the extent to which their performance is a function of situational factors that would hamper anyone in the role rather than personal shortcomings. If the incumbent hasn't been provided with sufficient critical feedback, you may not know whether they're capable of improvement. And if you leap to conclusions prematurely, you'll not only squander potential talent, you'll also miss opportunities to advance your own growth and development as a leader.

As CEO it's your obligation to replace under-performing execs when necessary, and yet you don't want to create a climate of fear on your team. You also don't want to cycle through multiple execs because you keep setting them up for failure in an untenable position. So consider...

• Are there structural or contextual factors beyond the incumbent's control that you might address?
• Have you provided them with sufficient critical feedback on the factors that are within their control?
• If so, how have they responded? Are they open to learning? Or are they defensive?

Run a Search? Or Break the News?

If you decide to proceed with a transition, unless you have a successor at the ready you face an important choice. One option is to run a confidential search and break the news to the incumbent later in the process. This poses several risks: If the incumbent learns about the search second-hand, they may feel betrayed, and the relationship will be damaged, making an amicable transition more difficult. To maintain confidentiality you'll need to limit exposure to the team, which will prevent them from providing input and may deter some prospective candidates. And you won't get the benefit of any insights from the incumbent, who may be in a position to tell you why they struggled.

In some circumstances you may feel obligated to identify a successor before breaking the news. You may lack faith in the incumbent's ability to handle the news. You may worry that they'll become a source of disruption once informed. Or you may have concluded that their poor judgment renders their insights less useful. But an alternative to the above is to inform the incumbent that you'll be replacing them and then reach agreement on a transition plan. This isn't always preferable before you have a successor lined up. But in my experience CEOs over-estimate the risks of this option and under-estimate the risks of a hot-swap. The key is recognizing that there's no risk-free path. So consider...

• You don't owe an under-performing exec a permanent role, special treatment, or a debate. But how might you treat them with honesty, fairness, and dignity?
• If you're concerned about a break in continuity, what's behind your fear of the empty chair?

Breaking the News...Again

However you proceed, at some point various stakeholders will need to be informed about the transition. This includes your other employees, such as the departing exec's direct reports, their colleagues on the executive team, and potentially the entire company. It may also include Board members, customers, and other external partners. The key element is the explanatory narrative, the rationale for the transition that helps these parties make sense of what's happening and why. Here hot-swapping poses a dilemma, because an exec who's been summarily terminated is unlikely to be a willing partner in this process. Even if they're induced to play along, the transparency of the charade is usually evident, which breeds cynicism and mistrust.

It isn't always preferable to hear from the departing exec. In cases of malfeasance, toxic behavior, or gross incompetence it may be preferable or even necessary to simply announce their departure. But barring such factors, it's likely that all parties will benefit from some form of joint participation. The departing exec is afforded an opportunity to say their goodbyes, minimize the loss of face, and leave with dignity. Other stakeholders gain clarity and reassurance, which increases their trust in your ability to manage difficult situations.

While the participation of the departing exec can be advantageous, I'm not suggesting that you obtain it by misleading people. Explanatory narratives rarely include "the whole truth," yet they must be truthful to be plausible. In an effort to help the departing exec save face you need not pretend that their tenure was an unqualified success or that anyone else is at fault for their shortcomings. So consider...

• What factors will influence your ability to create a plausible, truthful shared narrative?
• What information should be shared as a part of that narrative, and what should not?
• If you haven't yet chosen a successor, what role, if any, do you want other employees to play in the hiring process?

The Transition

Once you've identified a successor, you now have to implement the actual transition. Some parameters will have been fixed in the process of making the decision and breaking the news, while others remain open. Here, too, attempting a hot-swap can be counter-productive in multiple ways. You can leave the under-performing exec in the role for too long, or they may quit abruptly before you're prepared to make a change. If you've managed the process effectively, you still retain a great deal of flexibility at this point--and if you haven't, you may be locked into a suboptimal course of action.

The transition shouldn't be too lengthy. The departing exec will rapidly lose power and influence, and it will be difficult for them to remain motivated to give best effort. Organizations reliably solve for optionality, which often leads to excessive transition periods. This is one of the primary rationales for hot-swapping in the first place--CEOs often over-estimate the risk of a gap in continuity, and under-estimate the risk of leaving an under-performing exec in place.

In the circumstances noted above--malfeasance, toxic behavior, gross incompetence--the transition will be brief. Even if a severance package is contractually obligated (or advised by counsel), there's no need to retain the outgoing exec's services. But in most cases there are benefits to a longer, more orderly process. The departing exec has time to wrap things up, and the incoming exec is able to do the same as they conclude their previous role. The team can prepare to help onboard the incoming exec and will be better positioned to do so with sufficient notice and clarity on the narrative. So consider...

• How will this transition--the departure and the arrival--affect your executive team?
• What does the incoming exec need to know about the existing culture?
• How might you benefit from their fresh perspective?

This is Hard. What Helps?

If you're tempted to hot-swap an exec and you're anything like my clients, it's not because you're callous, but because you're human. The process I've outlined here necessarily entails having an ongoing series of difficult, awkward, even fraught conversations. In some cases you may be understandably obligated to prioritize other efforts. If your company's in the midst of a crisis, you simply may not have the time to invest in managing an under-performer, and you're justified in taking the most expedient route.

But even when that's not the case, you may still be reluctant to lean in because those conversations will be hard work, and you may feel that you lack the skills to conduct them effectively. While I obviously recommend working with a coach, here are some relevant resources to help you manage, offer feedback, communicate, and hire and fire more effectively:

Management

• Mind the Gap (On Leading Senior Executives)
• Why Executives Derail (and What You Can Do About It)
• How to Have Better One-on-Ones

Feedback

• How to Deliver Critical Feedback
• Building a Feedback-Rich Culture
• Why Some Feedback Hurts (and What to Do About It)

Communication

• Take a Walk (Making Tough Conversations Easier)
• Learning to Yield (Navigating Tough Conversations)
• Setting the Table (Difficult Conversations)

Hiring

• Fear of the Empty Chair, Part 2 (On Hiring)
• Surfacing Defensiveness (Three Questions for Candidates)
• Daniel Kahneman on Conducting Better Interviews

Firing

• Fear of the Empty Chair, Part 1 (On Terminations)
• Merciful Exits (On Under-Performing Executives)
• On Firing a Senior Team Member

 

* If you don't get the reference from the movie still above, see this clip from Steven Spielberg's classic 1981 film, Raiders of the Lost Ark.