New CEO, old team: three steps to getting the most from the team you inherit.

You've just gotten the word. You are the new CEO--or maybe the word is that your offer to acquire another company has just been accepted. Whatever the source, you will now have a new bunch of executives reporting to you, and you know that your success will depend on them.

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Right away, you have two tasks--you have to choose who your team will be, and you have to help them be successful with you. Complicating the situation, you have little time to spend on these tasks (after all, you are busier than you have ever been--and it isn't going to let up). And the fact is, managing executives from the CEO position is just different. Among other factors, everyone you now meet with has an agenda. As one CEO put it, "You no longer even know if your jokes are funny. Everyone will laugh, just because you are CEO."

From our work with CEOs in transition, and from interviews with dozens of others, perhaps we can provide some facts and advice to help you with these twin tasks in the limited time you have available.

First, there is the issue of selecting your team. Much has been written on the generic qualities of a good team member, but surprisingly, CEOs have had little guidance on how to judge whether to keep most of their inherited team, or look for new blood.

There is much at stake. You do not want to be overly harsh and fire someone who could have succeeded. Headhunters are not cheap, searches take time and the dirty secret is that only half of new hires work out. So, a "false negative" is costly. However, at the same time, you do not want to keep people around who are going to fail anyway. When we interviewed 20 CEOs on what they wish they had done differently during their first days on the job, the most common answer was "I wished I had moved faster on the deadwood."

So how do you know whether you are being too hard or too soft? Every case is different, of course, but you may find it helpful to know what turnover is typical when a new CEO arrives--so you can judge whether your planned personnel actions are gentler or harsher than others in your situation.

On average, about 15 percent of executive level officers leave their companies in those years when the CEO does not change. Roughly half of the departures are voluntary (i.e., legitimate retirements, illness, etc.). Based on our analysis of all CEO turnover in the top 1,000 companies in 2002 and 2003, when a new CEO comes in, that 15 percent rises to an average of 21 percent. So do you want to be gentler, or harsher, than average?

Before you decide, note that the 21 percent is an average across a broad variety of companies and situations--so let's refine it to your needs. First, as shown in the table at right, the 21 percent is an average of a very broad distribution. More than 20 percent of new CEOs fired no one (nor did anyone leave voluntarily). And 10 percent saw turnover of 40 or more percent (suggesting they fired one-third of all executive officers in their first year). So you may want to see what percentile your plan corresponds to.

More important, there are patterns to the gentler or harsher treatments. For example, CEOs who were appointed from inside the company fire about 4 percent less than the average, while CEOs from outside the company fire about 4 percent more. If the company has performed well in the past year, take off 4 percent, but if it has performed poorly, add 5 percent.

Some of the most surprising differences are by industry. New service industry CEOs are tougher than average (by about 3 percent), and new manufacturing industry CEOs are gentler than average (by about 4 percent). Most other CEOs stay close to the average--except those of transportation and utilities, who fire an average of 6 percent more than the overall sample.

The effects are approximately additive. So, if you want to know how harshly you are judging your inherited team, simply determine the portion you expect to let go, and compare it to the distribution, adjusted by the sum of our three factors: internal/external appointment, company performance and industry.

Your second task is more subtle, but more important--improving the performance of those executives you intend to keep. We would not presume to present a comprehensive "executive development plan" here. That said, the biggest single boost you can give your team is not to try to improve their general effectiveness, but to ensure their effectiveness with you. In our CEO interviews, we have been surprised at the number of instances where (otherwise) effective executives failed through miscues with the new CEO. Based on these interviews, we suggest you take three simple steps to dramatically improve your team's effectiveness early in your tenure.

1. Provide basic guidelines on acceptable and unacceptable proposals. All of your senior executives have ideas for how to improve the company that were not approved under the previous CEO for one reason or another. Their natural inclination will be to discuss those ideas with you--informally, or as formal proposals. Perhaps the ideas in the heads of your new team members fit perfectly with your new direction, perhaps not. You want to hear the ones that fit. But you do not want to even hear the ones that don't. Those would waste your time, and gain you a reputation for being closed-minded when you turn them down.

Given this, it is surprising how few CEOs take the time to provide guidance as to the proposals they want to hear. Do you want growth ideas, or only efficiency ideas? Are there programs under way that you want reviewed before further major commitments are made? Are you ready for investment proposals early on, or do you want a few months to get the lay of the land first? Would you be open to acquisitions in your first six months? You do not have to provide a detailed strategy on day one--you simply must keep the team informed where your thoughts have progressed to the point of providing detailed direction, and where you are not ready to make big decisions. Believe us, you cannot count on your team to sense this intuitively. We have seen too many good executives get off to a bad start with the new CEO by either proposing actions too soon, or not proposing enough. So, tell your team explicitly where your thinking is, and update them every couple of months.

2. Teach them the essential three style preferences. Every human works differently, and executive teams have descended into tension quickly through avoidable stylistic differences. From the broken careers of many executives, we can tell you that three matter most.

* How do you like to interact? Some CEOs like formal reports, vertical memos and advance notice--others are the opposite. Do you have a preference? Do you get irritated when the interactions are not in your style comfort zone?

* How should they disagree with you? When they have a different point of view, can they express it in public meetings, executive meetings or only privately? What kind of facts convince you to change your mind--statistics or stories from the front line? If an exec has made his case and failed to convince you, can he try again without getting his head chewed off?

* What items should never come as surprises to you? Some CEOs want no surprises, others find an extensive download of every contingency to be both boring and unnecessary. Where do you fit into the spectrum? Perhaps you vary by type of information. We once worked with the new president of one of the largest financial services companies in the country to lay out the "threshold" where subordinates should inform him in advance across seven different categories, including operational problems, financial results and competitors' initiatives.

3. Give negative feedback quickly, but gently. But do give it. One of the most amazing results of our interviews was how often a CEO fired an exec for repeatedly taking (or failing to take) a particular action that the CEO disliked the first time--but never informed the executive of his view. This is simply poor management. Yes, you are busy--but not that busy.

So, give the negative feedback--but do so more gently than you think you should. As one CEO put it, "The day I became CEO, it was like my negative comments were amplified three times. I didn't think I had changed at all, but soon I was hearing how I had become an [extremely difficult boss]." Remember that you want to correct the action, but not crush the motivation and willingness to take risks. These are not your hourly workers. They are your senior leaders. You need them to be taking initiative.

What actions can a new CEO take to help his direct reports be successful? A one word summary would be to give them confidence--in their company, in themselves, in their new CEO. Confident people make decisions without looking over their shoulder. As the new CEO, you want your team to charge forward when you aren't looking, not just when you are. To do this, they have to know the types of initiative you want from them, how to work (and disagree) with you and that if they haven't heard from you, they should continue confidently charging ahead.

Kevin P. Coyne (Kevin@kevincoynepartners.com) and Shawn T. Coyne (shawn@thecoynepartnership.com) are co-founders of The Coyne Partnership, an executive counseling firm. Edward J. Coyne is an assistant professor at Samford University. Turnover Rates Among Executive Officers After New CEO Arrives % Turnover % New CEOs 0% 21% 1-10% 8% 10-20% 25% 20-30% 22% 30-40% 14% 40-50% 3% Over 50% 6%