Leadership lessons on: When to move on
Having the right leadership can be the difference between leading and following the market. But how can organisations – and individuals - manage a change in leadership when the time comes?
Transition management is a critical undertaking for any executive board and putting a new CEO in place will arguably be one of the most important matters they oversee.
Unhelpfully, there is no hard and fast rule for how to implement this change. However, according to Tim Payne, financial services consulting partner at KPMG, it is likely to be cyclical in nature.
“Change in senior leadership, particularly at CEO level, will often come about as one transformational cycle ends and another is about to begin,” explains Payne. “Change will be influenced by leaders making an honest appraisal of whether they feel they’ve achieved what they can thus far, and whether they believe they are best placed to take the organisation through the next cycle.
“Almost every player in the insurance sector is in or about to enter a new transformational cycle, with most driving towards new goals involving digital and ESG,” he adds.
As such, it is important for the board to properly plan around this process and ensure their incoming leaders are fully prepared for the task that awaits them.
Paul McCreadie, partner at private equity firm ECI Partners, has overseen many transitions within the insurance space and advises that these projects should not be undertaken lightly.
“There is no right or wrong time to manage a transition, instead it’s more about ensuring that the message is communicated both internally and externally over a period of time,” says McCreadie.
A business should always have multiple senior level people involved in each relationship so one person leaving should not adversely impact the business, he says.
“Where possible, there should be a continuous cycle of change at the top, with people moving in and out of roles over a set period to ensure that there isn’t concentration, and the business continues to evolve.”
The challenges of change
However, these people are not just leaders and CEOs. They are human beings and changing your job role can be a complex and confusing period for anyone. It is hardly surprising that, given the corporate environment, many executives struggle in such transitions.
Research from McKinsey & Co found that only 27% of newly installed senior executives believed their organisations had the right resources in place to support their move to a C-level role.
These challenges can be even more difficult for the person being replaced and incumbents can naturally want to hold onto their roles. Charlie Thompson, partner in the financial services practice at recruiters Odgers Berndston, sees various reasons for this.
“Attractive compensation, long-term incentive plans and stock performance are the most common reasons why people will stay in roles for the long term,” says Thompson.
“But there’s always a level of uncertainty attached to moving on. Bringing your skills and experiences to a new company is often highly rewarding. As we start to return to some sense of normality, we expect people to be looking around externally as people look for new challenges and impetus post pandemic.”
The next step
A natural route for outgoing leaders is the non-executive world, where individuals can benefit from their vast experience in a different employment structure. Many executives may already have non-executive roles before they retire, and this can allow them to strengthen their credibility and get ready for the next (and potentially final) stage of their career. However, this is still not without challenges.
“You have to be ready mentally,” says Thompson. “You need to be more consultative, more consensual in your support and challenge around the board table.
“It should also come as no surprise that the non-exec world, especially in financial services, is not filled with the fancy lunches it might once have been. The duties of a non-executive director are substantial and the time commitment and regulatory oversight have increased significantly. It is the next stage in a career and should be treated as such.”
Another path is emerging however, and many executives are now aware they can take their knowledge and skills and create their own start-ups.
This was the experience of Tim Hardcastle, CEO and founder of insurtech firm INSTANDA, who was a CIO at Hiscox before taking the plunge to branch out on this own. While there were individual drivers for the move, the start-up’s founder points to the nature of the insurance industry itself as having a role in his decision.
“The insurance industry could be absolutely amazing, but the fundamental issues holding it back are legacy issues and embedded ways of working which are very difficult to shift,” says Hardcastle, who admits he was not impressed by the way technology was being used at Hiscox.
“I’ve worked in large organisations and it is difficult to push through change,” he says.
Nevertheless, Hardcastle’s decision was not easy. He acknowledges he could have continued to work as a senior executive in the insurance industry with an attractive compensation package, but he decided to re-mortgage his house and start a business.
Aside from the opportunity he saw to enhance the way technology was being used by insurers, Hardcastle also says the desire to make a difference is a key motivation for people in his position.
“When I left, I was weighing up staying in another corporate role and had been on an attractive executive package, but sometimes people are at certain points in their life where they have itches to scratch,” he explains.
“Ultimately, when we think about motivation and what makes people feel valued it can be something as inherent as making a difference and being in an organisation where you can do that.”
For executives looking to take their next step there are plenty of avenues with varying degrees of risk, according to Hardcastle.
“People have to really take an honest assessment of themselves about where they feel they will be comfortable in the balance,” he concludes.