Square Pegs, Round Holes

Hiring a new CEO can seem like the answer to an organization's problems, especially if the CEO comes from an admired outside company. But history shows that the results can be disastrous when a newcomer's style clashes with company culture.

In today's hyper-competitive corporate landscape, C-suite mobility is greater than ever before. Executive recruiters promise "transformation" by importing top-tier talent from outside the organization. Boards, keen to avoid insular thinking, are seduced by resumes that tout successes at other industry giants. However, too often, these leaders prove to be square pegs in round holes - a misfit between their personal style and the organization's DNA.

What seems to be poorly understood, however, is how difficult it can be for an individual to successfully transition from one organization to another, as the newcomer's culture may be a poor fit with the new company.

Take, for instance, one of the most debated CEO tenures in recent memory: Bob Chapek at Disney (2020 - 2022). When Bob Iger, the driving force behind Disney's creative and employee-focused culture, stepped down, Chapek, a respected operations executive, was tapped to take the reins in 2020. Despite a strong performance record, Chapek's transactional, efficiency-driven approach quickly clashed with Disney's tradition of creativity, openness, and risk-taking. Employee morale suffered, public controversies mounted, and after just two years, he was replaced by the board in 2022; an unusually abrupt reversal for a Fortune 50 CEO.

The Disney example is not unique. In 2021, Walgreens Boots Alliance announced the appointment of Rosalind Brewer as CEO, hailing her sterling record at Starbucks and Sam's Club. However, the transition was challenging. Brewer's focus on cost-cutting and operational discipline ran into friction with Walgreens' historically collaborative, patient-driven health culture. Brewer and the company parted ways in just under two years, illustrating the perils of undervaluing cultural fit.

Why does this keep happening? Organizational culture - those shared values, beliefs, and behaviours - is typically rooted in a company's founding story and reinforced over generations of employees. Employees rewarded for exemplifying these values see them as the bedrock of how things are done. Resistance and turnover often ensue when a new CEO arrives with a dramatically different playbook.

Consider this: a 2023 survey by Spencer Stuart found that 46% of CEOs hired from outside failed to meet performance expectations within 18 months. Conversely, 70% of internally promoted CEOs were still with their organizations. Notably, at the two-year point, internally promoted leadership outperforms its external peers. Having alignment with the company's values trumps the brightest resumes.

The issue is the Board of Directors' perception that an individual's success at one company will translate to success in their company. Add a list of accolades from business journals and organizations to the perceived success; the shine is almost blinding.

Whether you're hiring or transitioning yourself, these numbers should give pause. Here are some key cultural measures to keep in mind for an organization bringing in outside talent.

Lessons for Today's Boards and Leaders

To avoid costly misfires, boards should focus on these culture-aligned strategies:

• Don't assume new blood will fix everything. Transformational change works only with, not against, the organizational grain.

• Celebrate your existing culture. Reinforce it through recognition, hiring, and leadership development tailored to your unique history and values, not just "best practices" imported from elsewhere.

• Test for cultural fit before hiring or promoting. Cultural alignment now ranks among the strongest predictors of executive success, and it should be prioritized even above industry experience.

• Introduce outsiders at mid-levels first. Let new perspectives prove themselves and adapt before vaulting them into the C-suite.

• In succession planning, prioritize both values and results. The best leaders drive performance and model your company's most cherished behavioural norms and traditions.

• When designing a leadership curriculum, avoid basing it on best practices benchmarked from other companies, universities, or consulting firms. Base it on best practices that have evolved during your company's history.

Conclusion:

The lesson from Home Depot, Disney, Walgreens, JCPenney, CXA Group, and countless others is clear: there's no universal leadership formula. The most accomplished resume in the world can fail spectacularly if its new CEO can't embrace their company's values and norms of behaviour. When it comes to leadership transitions, culture isn't just one factor; it's the soil in which all strategies take root.

David's new book, Selecting the Best: Fostering a Workforce Driven by Values for Lasting Success, is a playbook that ensures you will understand how to identify the current authentic values that drive the company and apply that knowledge to conduct powerful and insightful (revealing) interviews.