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Interim CEO Successions: Implications for CEO Successor Selection and Subsequent Firm Performance

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Can interim CEO appointments truly benefit a firm’s search for the right leader or does the disruption outweigh the advantages? This study examines how interim and direct CEO successions impact firm performance, delving into the complexities of CEO selection during challenging scenarios.

Image courtesy of interviewee. December 11, 2024

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This video discusses a study on the increasing trend of companies appointing interim CEOs, which has grown to over 20% of annual CEO successions since 2000. Despite their popularity, academic literature indicates that interim appointments are generally detrimental to company performance, creating leadership vacuums and operational disruptions. Researchers aimed to explore potential long-term consequences of these interim appointments compared to direct CEO successions.

Key findings reveal that CEOs appointed after an interim period tend to perform worse than those appointed through direct succession, with negative impacts lasting up to three years post-succession. Various factors, including industry complexity and the managerial demands of the company, influenced the decision to use interim CEOs. The study identified some contexts where interim appointments might mitigate negative effects, particularly in volatile environments or when a strong pool of candidates is available.

The research suggests that interim CEOs can create strategic stasis—where critical decisions are delayed—due to their temporary status. This video results in poor performance outcomes, affecting not just the interim period but also the tenure of subsequent CEOs.

The authors call for boards to critically evaluate the decisions surrounding interim appointments and consider alternative strategies, as the current trend appears to have consistently negative implications for long-term performance. Future research could explore the circumstances that might justify interim appointments or identify other viable transitional strategies.

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Here are five key points from the video:

1. **Increase in Interim CEO Appointments**: The video highlights a growing trend of companies appointing interim CEOs, with over 20% of annual CEO successions being interim since 2000. Despite this increase, the literature indicates that interim appointments are generally detrimental to company performance.

2. **Negative Short and Long-Term Effects**: The academic research suggests that interim CEO appointments lead to significant disruptions, impacting decision-making and operational performance. The study aims to explore both short-term and long-term consequences of these appointments, revealing that companies with interim CEOs tend to perform worse than those with direct succession arrangements.

3. **Potential Benefits of Interim CEOs**: While interim appointments are often seen as negative, the study acknowledges that under certain conditions, they can allow companies to take a step back, assess their needs, and potentially refine their decision-making processes regarding the selection of a permanent CEO.

4. **Research Methodology and Findings**: The study analyzes data from companies in the S&P 1500 between 2002 and 2016, comparing the performance of CEOs appointed after an interim period versus those appointed through direct succession. The results indicate that interim CEOs perform significantly worse in the long term, affecting not just their tenure but also the performance of their successors.

5. **Convideoual Factors Influencing Interim CEO Impact**: The video discusses that the negative impact of interim CEOs may vary based on specific conditions, such as industry complexity and the availability of candidates. Future research is suggested to focus on understanding the nuances of interim appointments and improving decision-making processes for boards facing unexpected leadership changes.

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Here are some key quotes from the video you regarding interim CEO appointments and their impact on company performance:

1. **Growth in Interim Appointments**:
- "A lot of companies are engaging in these interim CEO appointments. And in fact, it's been growing, consistently since the year 2000. It's now over 20% of companies per year of successions are an interim succession."

2. **Negative Effects on Companies**:
- "All the academic literature shows that essentially it's not good for the company. It hurts. It's very disruptive because you don't have a leader, and there's all sorts of performance consequences."

3. **Investor Sentiment**:
- "Investors don't really like it when there's an interim appointment. Analysts don't like it."

4. **Study Objectives**:
- "We thought, well, we're gonna look at the longer term consequences and see actually, is it just a short-term problem for companies?"

5. **Initial Assumptions on Interim CEOs**:
- "I had the view of interim CEO appointments are always bad... Interim appointments are bad."

6. **Potential Benefits**:
- "...there were some studies that showed under some conditions, maybe it's better to have an interim CEO because it gives this, let's say, breathing room, this stop gap."
- "It can be sometimes more like a change tool... a strategic reset where we can reevaluate what type of CEO do we actually want."

7. **Findings on Performance**:
- "Following CEOs appointed following an interim period, they performed quite a bit more poorly than CEOs appointed in a direct succession."
- "The ROA... was just a little bit over half as good when you had a CEO who was appointed following an interim period."

8. **Lingering Effects**:
- "...it's not that it's just bad one year after; it's bad several years after."

9. **Mechanisms of Poor Performance**:
- "...creates lots of disruptions internally, while at the same time you have this weird thing that it creates disruption. But the interim CEO probably also doesn't have that much power."

10. **Convideo-Dependent Outcomes**:
- "Interims can be bad... that's not the truth. Interims sometimes can be good... It's probably somewhere convideo dependent."

11. **Future Research Directions**:
- "Future research is really gonna move more towards opening this box, what's actually happening. How can they make better decisions?"

12. **Advice for Boards**:
- "...boards should consider whether or not this is a good idea."

These quotes highlight the central theme of the video, which revolves around the complexities and implications of interim CEO appointments, including their growing prevalence, perceived negative impacts, and the need for further analysis and understanding of their effects on organizational performance.

X-TIMESTAMP-MAP=LOCAL:00:00:00.000,MPEGTS:90000

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Context of the work really is that,

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we've been looking at interim CEOs,

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and different types of organizational changes at the top.

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And one of the things we noticed is that a lot

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of companies are engaging in these interim CEO appointments.

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And in fact, it's been growing,

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consistently since the year 2000.

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It's now over 20% of companies per year of,

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successions per year are an interim succession.

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Um, but what's interesting for us is

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that actually all the academic literature shows

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that essentially it's not good for the company.

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It hurts. It's very disruptive

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because you don't have a leader.

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So you're kind of in this vacuum leadership vacuum.

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Um, and there's also sorts of performance consequences.

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The research is pretty clear that,

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investors don't really like it when there's an

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interim appointment.

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Analysts don't like it.

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The operational performance of the company is poor

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because of course you don't have,

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a leader making decisions.

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The top management team is fighting.

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So we were curious to think, well, okay, we know

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that there's short term consequences that, that are poor.

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Um, but companies seem to be doing this.

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So either the academics don't,

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haven't really discovered the longer term effects or,

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or some other reason why this might be happening.

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Or maybe, you know, the boards just don't realize and,

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and companies don't realize how bad it is

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because they don't read the academic literature and so on.

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So we thought, well, we're gonna look at the longer term

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consequences and see actually,

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is it just a short-term problem for companies?

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And it's kind of like short-term pain for long-term gain,

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or is maybe it's poor or maybe it's better in the long-term.

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We don't know. So that was the, the context of the study.

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So that, that's really what drove us to,

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to investigate whether or not, it turns out

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to be a good thing or a bad thing.

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And Rob asked me to join.

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I had the view of interim seal appointments are always bad.

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So I thought, okay, it's probably,

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the literature is very clear on it.

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Interim appointments are bad.

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Of all the reasons that Rob mentioned.

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And actually, when I went a bit bit deeper into the

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literature, I was quite surprised

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that there were some studies that showed under some

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conditions, maybe it's better to have an interim CEO

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because it gives this, let's say,

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breathing room, this stop gap.

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So the benefits actually of sim

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of those interim CO appointments are sometimes it's better.

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Instead of very fastly

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or hastily getting a new CEO, it's better maybe

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to take a step back and check with an interim CEO.

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Is that actually the type of CO we want to have?

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The second is actually also it can be sometimes

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more like a change tool.

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'cause sometimes a, a company might be in extreme crisis

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and the CEO might have stepped away,

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and then the board might decide we need to make a big cut.

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And before we then have the second big cut

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with a completely new CEO,

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let's first have a interim CEO maybe to, to please

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or, make our investors less scared

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so we can have this strategic reset where we can reevaluate

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what type of CEO do we actually want in the first place.

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So it helps maybe boards also to refine what type

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of CEO what skills are needed.

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And then finally, I think it's also a bit, I mean,

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boards themself are, and I saw it when I, when I worked

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before in a very big company,

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boards themself are just human people

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that are also somehow bound by, by biases,

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information asymmetry, so

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that they don't have all the information available.

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And honestly, frankly, they don't meet that often.

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They meet maybe four to six times.

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So sometimes they might need just the time to

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actually understand the, the markets

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or get more information,

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but also maybe to learn from the interim CEO.

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'cause you, it could be like a probation period in a sense.

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Okay, we get real time insight.

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We see how the market is, moving.

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We see how the CEO, the interim CEO is

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reacting to certain conditions.

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Maybe we can learn something for this for the next CEO

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or maybe just appoint them as permanent CEO.

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We use, us, companies to test this.

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So, part of the reason for

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that is the data is very accessible.

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You know, there's,

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because of the, disclosure requirements,

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for us companies, it, you get all sorts

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of great data about company performance, all sorts of stuff,

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but also about the directors on the board,

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characteristics about the executives,

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the CEOs, everything like that.

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So we use a large sample, it's a sample of any company

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that appeared in the s

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and p 1500 between the years, 2002 and 2016.

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And so that gave us a company.

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And then from there, we narrowed it down

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to just when there was a CEO succession, so a change in CEO.

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And from there, we, we had around 1200 or so,

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and then we looked with manually code whether

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or not, the CEO that

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'cause we're, what we're really looking at in this,

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in this study is what is the performance following the c

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CEO appointment and whether

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or not there's any cha difference in performance

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for A CEO who is appointed following an interim period and

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or A CEO, compared to A CEO, during a,

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in a regular succession, a direct succession.

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So we narrowed it down to those CEOs,

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and then we compared them and we, you know,

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ran different types of analysis mainly, what we call,

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multiple regression OLS, regression analysis,

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looking at performance for one year,

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post succession two year,

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and then three year post succession.

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We controlled for things like, you know, you know,

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what was the performance of the company prior

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to the succession, you know, other board characteristics.

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The reason for the departure that led to the succession,

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either be it an interim succession or,

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or a direct succession.

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We ended up with about 155 interim, c CEOs

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who had been appointed following an interim period.

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And the rest would be CEOs,

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appointed in a direct succession.

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We also, so that was kind of the main test.

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We also did a, another test, which was, matching CEOs.

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So, you know, we wanted to make sure

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that we were comparing apples

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to apples and not apples to oranges.

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And so one way to do that is to match the CEOs.

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So on a second set of tests, we ran a,

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propensity score matching, which allowed us

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to then match the CEO's, A CEO,

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who was appointed following an interim period where the CEO,

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who was appointed in direct succession

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over things that we thought would matter.

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So post succession or pre-session firm performance,

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the reason for the departure, which would be a key reason

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that could drive subsequent performance

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and a few other characteristics.

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What we found actually was really, I mean,

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we didn't really know what we were gonna find going in.

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So what we found was that, following,

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of CEOs appointed following, an, an interim period,

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they performed quite a bit more poorly than

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CEOs appointed in a direct succession.

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And that's over one year, two year,

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and three year post succession.

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So three years later, they're still performing worse.

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And to give you an idea, the ROA, the return on assets,

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which is a typical measure we use in academia for measuring,

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say, operational performance.

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How, so, how well is the company running itself,

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was just a little bit over,

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half is good when you had an A CEO,

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who was appointed following interim period.

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Uh, so that was kind of the, the key one, key finding.

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But we also found that, which I think Nick will talk

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to you in a moment, depending on the context of the,

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of the succession and whether

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or not, that maybe it was more difficult to find a CEO,

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we found that that also played a role in

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mitigating this poor performance.

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I think first the mechanisms,

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which I thought was ex really interesting,

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what Rob mentioned was this lingering effect.

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So it's not that it's just bad one year

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after it's bad, several years

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after, it goes basically into the performance

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of the next CEO and the mechanisms

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we think is really this big disruption.

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So you have an interim CEO then

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before it means probably he didn't have the ability

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to find a real or permanent CEO.

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So it just creates lots of disruptions internally,

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while at the same time you have this weird thing

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that it creates disruption.

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But the interim CEO probably

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also doesn't have that much power.

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So you have something we call strategic stasis

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where there's a backlog probably under most interim CEOs

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that don, who don't really make strategic decisions.

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They don't wanna make the big decisions

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because it might,

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they might be fully aware the next CEO might need

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to do those decisions, or it could be simply

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to calm the market or calm the investors.

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So it's somehow this mix

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between this disruption more on the internal side,

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while at the same time we have this disruption,

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but the captain's not really steering the ship into the

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right or into a very strong direction.

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And then I think the other mechanism that

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can come is simply the market or the market

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and employees might react negatively.

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So let's say you see a company that doesn't manage

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to get a new CO or has to fire maybe a CO abruptly,

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and now as an interim CEO, you might start

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to think there's something happening there.

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It has really reputational risks for investors, the market

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and stakeholders, and this also can, then translate

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for employees because you don't know who's basically going

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to be your boss, your top boss

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in the, in the next few years.

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So all of this really is kind of, is disruptive

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to interim CEOs.

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And this then goes further into, yeah, into the period

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of the next C which I think is the most interesting.

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And I, I think Rob, will mention how

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that we still found though, let's say three, three times

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or three conditions when it's not that bad.

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So it's not that it's getting better,

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but at least the, it's not that bad.

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Interim might be an option that is not terrible.

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One of the reasons why boards appoint an interim CO is

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because they don't know who typically, I mean, it could be

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for some kind of change reason, but often it's just

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that they're caught on their heels without a successor ready

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to go and their CEO leaves unexpectedly.

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So now they're, they have this decision,

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either we put in someone temporary while we search

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for a solu, you know, a longer term solution,

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or we just hastily, point someone.

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So the idea of putting someone in is really then,

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so you've got this interim CEO in place

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and now you're trying to figure out, well,

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what do we need from the next CEO?

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This is an, you know, the typical CEO last seven years

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or so on average.

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So it's a long-term choice.

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And so now the company's asking itself, okay, so

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what challenges are we facing

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and what kind of person do we need running the company?

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And so what we thought is, well, there are three main things

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that boards are gonna cons consider when they

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appoint a new CEO.

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Um, and so we thought we're gonna test these, for

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as moderators to see if they have an effect on our overall

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relationship between, us,

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you know, with for performance.

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And so the first one we thought of, well, for one thing

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that the boards do is they're gonna look at the industry

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and look at competitors and what's the landscape

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and what's going on

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and, you know, what do we need to consider?

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Because what we, we need to know what's happening in our,

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in our environment in order to know what kind

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of person might be able to lead.

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And this is gonna be more difficult if the environment is

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maybe very complex or volatile or et cetera.

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And when I say environment, I mean, you know,

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industry and everything like that.

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And so we tested that.

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So we thought, okay, let's see if,

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if industry complexity is greater than maybe,

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maybe than interim, using an interim period

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to find your next CEO isn't as bad as if in a very simple,

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straightforward industry context.

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So that was one. The second one was thinking, well,

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the managerial demands.

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So if you have a small company, you know,

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that's maybe not diversified at all,

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doesn't engage in any acquisitions, this type of thing,

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maybe it's not so hard to find a CEO

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and you know, maybe you should just go forward right away.

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Whereas if you've got a very large diversified company

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that's global, et cetera, in all sorts of industries, well

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that's gonna be harder to find someone

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who can actually manage that

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because it's managing complexities isn't for everyone,

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and you need someone with the right experience.

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So we tested that. The last one was thinking about

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who could be potential candidates

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and different companies have a different sort of pool

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of candidates to choose from,

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and this is gonna, depend on their industry

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and how technologically, specific things are

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that they're facing and so on.

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So we also ran a test to see, you know,

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if a company has more can, a larger number of candidates

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to consider from outside the company,

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not internal, but external.

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But that can also be a challenge

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because all these things, when you have greater,

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environmental complexity, greater demands for the CEO role

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and greater number of, external candidates to consider,

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these are gonna be things that, make it more challenging

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to find the CO and then

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therefore maybe using an interim

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period to find 'em is better.

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And what we found was for each of those,

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when you've got an interim, when, when, when any

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of these are higher, when there's greater complexity,

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managerial roles or greater number of candidates

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to consider having an interim in place,

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interim CEO in place

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and using the interim period to find your next CEO

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actually allayed the negative effect, of from,

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of negative from performance.

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I think it's two things. One is really this,

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view we started with, okay, interims can be bad.

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Okay, that's not the truth.

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Interims sometimes can be good also not the truth.

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It's probably somewhere context

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dependent, which Rob talked about.

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So I think the future research is somehow moving away from

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this simple main effect, interim good

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or interim bad to under what conditions

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or how does it happen?

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Is it maybe certain,

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is there maybe a certain process interim might select

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different executives which then actually drive firm

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performance or select the wrong ones,

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which then drive firm performance.

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I think future research is really gonna move more towards

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opening this box, what's actually happening.

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And I, I think the second one,

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and that's maybe, more on the psychology side is really

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re-engaging into maybe the biases

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or let's say the in info information asymetry

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among the decision makers.

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'cause what Rob mentioned is actually that when the context,

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so when the company's in a environment

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or has a co which has lots of complex tasks

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or, needs to find a CEO, with lots

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of different types of backgrounds

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and different type of career steps,

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then the board probably needs to make more sense

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of different types of information.

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They just don't have all the information available.

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So I guess research will focus more on

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what's actually going on.

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How can they make better decisions?

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Or there may be terrible decisions that,

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that are part dependent that go through years and years

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and years and years because they once decided on some

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candidate and for personal reasons,

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continue believing in that candidate.

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So I think it's gonna be opening that box here.

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So that, that's my view on this.

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You know, if you put our paper into the,

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the greater context of literature on interim successions,

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it's yet another example that these are bad choices.

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I mean, overall we find that it's a bad idea

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even three years after you, the interim CEO has left

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and you've got a new CEO

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that these companies are still performing

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significantly worse.

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So I, I hope,

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and I think that, you know, boards should consider,

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whether or not this is a good idea.

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I now the question is what's the solution?

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What do you do when you're stuck, you know, with a mm-hmm.

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You know, in the situation where your co

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left and you don't know what to do.

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I mean, that, I think that's also an implication is,

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is someone maybe could find out, you know, who is,

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what's the right thing to do, maybe a shorter interim

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period, maybe some other hybrid thing

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that we don't know about yet.

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I don't know. But definitely it looks like these interim,

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interim co appointments really just don't seem

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to be a good idea.

Exploring the Impact of Interim CEO Appointments

00:00:00 - Context of the work really is that, we've been looking at interim CEOs, and different types of organizational changes at the top. And one of the things we noticed is that a lot of companies are engaging in these interim CEO appointments. And in fact, it's been growing, consistently since the year 2000. It's now over 20% of companies per year of, successions per year are an interim succession. but what's interesting for us is that actually all the academic literature shows that essentially it's not good for the company. It hurts. It's very disruptive because you don't have a leader.

00:00:38 - and there's also sorts of performance consequences. The research is pretty clear that, investors don't really like it when there's an interim appointment. Analysts don't like it. The operational performance of the company is poor because of course you don't have, a leader making decisions. The top management team is fighting. So we were curious to think, well, okay, we know that there's short term consequences that, that are poor. but companies seem to be doing this.

00:01:07 - haven't really discovered the longer term effects or, or some other reason why this might be happening. Or maybe, you know, the boards just don't realize and, and companies don't realize how bad it is because they don't read the academic literature and so on. So we thought, well, we're gonna look at the longer term consequences and see actually, is it just a short-term problem for companies? And it's kind of like short-term pain for long-term gain, or is maybe it's poor or maybe it's better in the long-term. We don't know. So that was the, the context of the study. So that, that's really what drove us to,

The Complexities of Interim CEO Appointments

00:01:38 - to be a good thing or a bad thing. And Rob asked me to join. I had the view of interim seal appointments are always bad. So I thought, okay, it's probably, the literature is very clear on it. Interim appointments are bad. Of all the reasons that Rob mentioned. And actually, when I went a bit bit deeper into the literature, I was quite surprised that there were some studies that showed under some conditions, maybe it's better to have an interim CEO because it gives this, let's say, breathing room, this stop gap.

00:02:09 - of those interim CO appointments are sometimes it's better. Instead of very fastly or hastily getting a new CEO, it's better maybe to take a step back and check with an interim CEO. Is that actually the type of CO we want to have? The second is actually also it can be sometimes more like a change tool. 'cause sometimes a, a company might be in extreme crisis and the CEO might have stepped away,

00:02:40 - And before we then have the second big cut with a completely new CEO, let's first have a interim CEO maybe to, to please or, make our investors less scared so we can have this strategic reset where we can reevaluate what type of CEO do we actually want in the first place. So it helps maybe boards also to refine what type of CEO what skills are needed. And then finally, I think it's also a bit, I mean, boards themself are, and I saw it when I, when I worked

Board Biases and Learning Opportunities During Interim CEO Periods

00:03:11 - boards themself are just human people that are also somehow bound by, by biases, information asymmetry, so that they don't have all the information available. And honestly, frankly, they don't meet that often. They meet maybe four to six times. So sometimes they might need just the time to actually understand the, the markets or get more information, but also maybe to learn from the interim CEO. 'cause you, it could be like a probation period in a sense.

00:03:41 - We see how the market is, moving. We see how the CEO, the interim CEO is reacting to certain conditions. Maybe we can learn something for this for the next CEO or maybe just appoint them as permanent CEO. We use, us, companies to test this. So, part of the reason for that is the data is very accessible. You know, there's, because of the, disclosure requirements, for us companies, it, you get all sorts of great data about company performance, all sorts of stuff,

00:04:14 - characteristics about the executives, the CEOs, everything like that. So we use a large sample, it's a sample of any company that appeared in the s and p 1500 between the years, 2002 and 2016. And so that gave us a company. And then from there, we narrowed it down to just when there was a CEO succession, so a change in CEO. And from there, we, we had around 1200 or so,

Comparative Analysis of CEO Appointment Performance: Interim vs. Direct Succession

00:04:44 - or not, the CEO that 'cause we're, what we're really looking at in this, in this study is what is the performance following the c CEO appointment and whether or not there's any cha difference in performance for A CEO who is appointed following an interim period and or A CEO, compared to A CEO, during a, in a regular succession, a direct succession. So we narrowed it down to those CEOs, and then we compared them and we, you know,

00:05:16 - multiple regression OLS, regression analysis, looking at performance for one year, post succession two year, and then three year post succession. We controlled for things like, you know, you know, what was the performance of the company prior to the succession, you know, other board characteristics. The reason for the departure that led to the succession, either be it an interim succession or, or a direct succession. We ended up with about 155 interim, c CEOs who had been appointed following an interim period.

00:05:46 - appointed in a direct succession. We also, so that was kind of the main test. We also did a, another test, which was, matching CEOs. So, you know, we wanted to make sure that we were comparing apples to apples and not apples to oranges. And so one way to do that is to match the CEOs. So on a second set of tests, we ran a, propensity score matching, which allowed us to then match the CEO's, A CEO, who was appointed following an interim period where the CEO, who was appointed in direct succession

Impact of Interim CEO Appointments on Long-Term Company Performance

00:06:18 - So post succession or pre-session firm performance, the reason for the departure, which would be a key reason that could drive subsequent performance and a few other characteristics. What we found actually was really, I mean, we didn't really know what we were gonna find going in. So what we found was that, following, of CEOs appointed following, an, an interim period, they performed quite a bit more poorly than CEOs appointed in a direct succession.

00:06:49 - and three year post succession. So three years later, they're still performing worse. And to give you an idea, the ROA, the return on assets, which is a typical measure we use in academia for measuring, say, operational performance. How, so, how well is the company running itself, was just a little bit over, half is good when you had an A CEO, who was appointed following interim period. so that was kind of the, the key one, key finding. But we also found that, which I think Nick will talk

00:07:23 - of the succession and whether or not, that maybe it was more difficult to find a CEO, we found that that also played a role in mitigating this poor performance. I think first the mechanisms, which I thought was ex really interesting, what Rob mentioned was this lingering effect. So it's not that it's just bad one year after it's bad, several years after, it goes basically into the performance of the next CEO and the mechanisms

Challenges of Interim CEO Leadership

00:07:52 - So you have an interim CEO then before it means probably he didn't have the ability to find a real or permanent CEO. So it just creates lots of disruptions internally, while at the same time you have this weird thing that it creates disruption. But the interim CEO probably also doesn't have that much power. So you have something we call strategic stasis where there's a backlog probably under most interim CEOs

00:08:24 - They don't wanna make the big decisions because it might, they might be fully aware the next CEO might need to do those decisions, or it could be simply to calm the market or calm the investors. So it's somehow this mix between this disruption more on the internal side, while at the same time we have this disruption, but the captain's not really steering the ship into the right or into a very strong direction. And then I think the other mechanism that can come is simply the market or the market

00:08:55 - So let's say you see a company that doesn't manage to get a new CO or has to fire maybe a CO abruptly, and now as an interim CEO, you might start to think there's something happening there. It has really reputational risks for investors, the market and stakeholders, and this also can, then translate for employees because you don't know who's basically going to be your boss, your top boss in the, in the next few years. So all of this really is kind of, is disruptive

Exploring Conditions Favoring Interim CEO Appointments

00:09:27 - And this then goes further into, yeah, into the period of the next C which I think is the most interesting. And I, I think Rob, will mention how that we still found though, let's say three, three times or three conditions when it's not that bad. So it's not that it's getting better, but at least the, it's not that bad. Interim might be an option that is not terrible. One of the reasons why boards appoint an interim CO is because they don't know who typically, I mean, it could be

00:10:00 - that they're caught on their heels without a successor ready to go and their CEO leaves unexpectedly. So now they're, they have this decision, either we put in someone temporary while we search for a solu, you know, a longer term solution, or we just hastily, point someone. So the idea of putting someone in is really then, so you've got this interim CEO in place and now you're trying to figure out, well, what do we need from the next CEO? This is an, you know, the typical CEO last seven years or so on average. So it's a long-term choice. And so now the company's asking itself, okay, so

00:10:32 - and what kind of person do we need running the company? And so what we thought is, well, there are three main things that boards are gonna cons consider when they appoint a new CEO. and so we thought we're gonna test these, for as moderators to see if they have an effect on our overall relationship between, us, you know, with for performance. And so the first one we thought of, well, for one thing that the boards do is they're gonna look at the industry and look at competitors and what's the landscape

Navigating Leadership Selection in Complex Environments

00:11:03 - and, you know, what do we need to consider? Because what we, we need to know what's happening in our, in our environment in order to know what kind of person might be able to lead. And this is gonna be more difficult if the environment is maybe very complex or volatile or et cetera. And when I say environment, I mean, you know, industry and everything like that. And so we tested that. So we thought, okay, let's see if, if industry complexity is greater than maybe, maybe than interim, using an interim period to find your next CEO isn't as bad as if in a very simple,

00:11:36 - So that was one. The second one was thinking, well, the managerial demands. So if you have a small company, you know, that's maybe not diversified at all, doesn't engage in any acquisitions, this type of thing, maybe it's not so hard to find a CEO and you know, maybe you should just go forward right away. Whereas if you've got a very large diversified company that's global, et cetera, in all sorts of industries, well that's gonna be harder to find someone who can actually manage that because it's managing complexities isn't for everyone, and you need someone with the right experience.

00:12:08 - who could be potential candidates and different companies have a different sort of pool of candidates to choose from, and this is gonna, depend on their industry and how technologically, specific things are that they're facing and so on. So we also ran a test to see, you know, if a company has more can, a larger number of candidates to consider from outside the company, not internal, but external. But that can also be a challenge because all these things, when you have greater,

Interim CEO Performance: Contextual Factors and Future Research Directions

00:12:42 - and greater number of, external candidates to consider, these are gonna be things that, make it more challenging to find the CO and then therefore maybe using an interim period to find 'em is better. And what we found was for each of those, when you've got an interim, when, when, when any of these are higher, when there's greater complexity, managerial roles or greater number of candidates to consider having an interim in place, interim CEO in place and using the interim period to find your next CEO

00:13:13 - of negative from performance. I think it's two things. One is really this, view we started with, okay, interims can be bad. Okay, that's not the truth. Interims sometimes can be good also not the truth. It's probably somewhere context dependent, which Rob talked about. So I think the future research is somehow moving away from this simple main effect, interim good or interim bad to under what conditions or how does it happen? Is it maybe certain, is there maybe a certain process interim might select

00:13:46 - performance or select the wrong ones, which then drive firm performance. I think future research is really gonna move more towards opening this box, what's actually happening. And I, I think the second one, and that's maybe, more on the psychology side is really re-engaging into maybe the biases or let's say the in info information asymetry among the decision makers. 'cause what Rob mentioned is actually that when the context, so when the company's in a environment

Challenges in CEO Succession Decisions

00:14:20 - or, needs to find a CEO, with lots of different types of backgrounds and different type of career steps, then the board probably needs to make more sense of different types of information. They just don't have all the information available. So I guess research will focus more on what's actually going on. How can they make better decisions? Or there may be terrible decisions that, that are part dependent that go through years and years

00:14:49 - candidate and for personal reasons, continue believing in that candidate. So I think it's gonna be opening that box here. So that, that's my view on this. You know, if you put our paper into the, the greater context of literature on interim successions, it's yet another example that these are bad choices. I mean, overall we find that it's a bad idea even three years after you, the interim CEO has left and you've got a new CEO that these companies are still performing

00:15:20 - So I, I hope, and I think that, you know, boards should consider, whether or not this is a good idea. I now the question is what's the solution? What do you do when you're stuck, you know, with a mm-hmm. You know, in the situation where your co left and you don't know what to do. I mean, that, I think that's also an implication is, is someone maybe could find out, you know, who is, what's the right thing to do, maybe a shorter interim period, maybe some other hybrid thing that we don't know about yet. I don't know. But definitely it looks like these interim,