Startup Boards, 2nd Edition

Chapter 22CEO Transitions

As discussed earlier, the board only makes one operational decision––hiring and firing the CEO. While CEO and board conflict can often get resolved, there are points in the startup journey where the board decides it's time for a new CEO. Sometimes this is a surprise to the CEO; other times, it's a graceful transition. Either way, it's one of the most significant and intense things that a board takes on.

Situations That Lead to a CEO Change

Many specific situations lead a board to make a CEO change. Some are cut and dry, like fraud or other illegal behavior on the part of the CEO. But most are subjective and often result in long, difficult deliberations on the part of the board before making a final decision. These situations test the mettle of investors and independent board members and often shape the board's future culture and communication patterns. One of the most common situations is when the growth of the company stalls. From the outside, the business may look like it's doing fine. But the metrics tell a different story. Development milestones are missed, sales slow down significantly, and the company starts losing its leadership position in the market.

When growth slows, the best CEOs deal with it directly. They aren't bashful about addressing the slowdown and enlisting the board to help determine what to do. While the pressure for results may increase, the worst thing a CEO can do is be in denial or hide from the reality of the situation. ...