Most first-time CEOs are not short on vision. What they lack is a number they built themselves and are willing to be judged by, and the first year tends to go to whoever can say what will happen, by when, and then make it happen. That is where a new CEO gets exposed, and it is where the owner or board that hired them can help the most.
It matters because first-time CEOs are now the norm. Of the new S&P 1500 CEOs that Spencer Stuart counted, more than four in five had never run a company before, as HR Executive reported in its piece on record CEO turnover. Those are large public companies, but the mid-market version happens every time a founder hands the keys to a first outside president, a second generation takes over, or a private equity owner promotes the head of sales.
Why does a new CEO's first year go wrong?
The plan they inherit was usually built backward. Someone picked the answer first, often the number the deal or the board wanted, and then found assumptions that would get there. A new CEO tends to accept that plan, because questioning it in the first month feels like picking a fight with the people who just hired you.
Early in my career my job was taking business cases apart. I built parallel models on my own assumptions and set them next to the one on the table, and what I was looking for was whether the number had been built forward from the facts or backward from an answer somebody had already picked. You could usually tell inside twenty minutes. A first-time CEO who never runs that test ends up owning someone else's guess, and gets judged on it.
The time a new CEO has to prove a number is getting shorter. HR Executive reports that the share of CEOs leaving within 30 to 36 months of taking the job rose 79% in a single year. A new CEO who spends the first year defending an inherited plan has used up a large part of that window before doing anything of their own.
Rebuild the plan from the facts forward
My advice to a new CEO, and to the owner who hired one, is to rebuild the operating plan before the first full board meeting. Start with what customers are doing, which is not always what they say. Listen to their actions as much as their voice. Then put a forecast on it that you are willing to be held to, with an owner and a date beside every line that matters.
That forecast will often come out smaller than the one you inherited. Say so early and show the work. A board can plan around a lower number that holds, while a higher one that slips in the third quarter costs a new CEO far more trust than it would cost a veteran.
A new CEO needs an operator in a working seat, not a coach
This is the gap a fractional executive is suited to fill. A coach helps the new CEO think. An operator who has carried a forecast at the size the company is heading toward sits in a working seat, as COO, CFO or CMO, and builds the plan with them line by line.
The org chart does not matter much. The operator can sit above, below or next to the new CEO, as long as they share the same vision of where the company is going. The CEO keeps the direction and the final calls. The operator's job is to turn that direction into an action plan with dates and owners, hold the team to it, and leave the company able to run it without them.
When an outside operator is the wrong move for a new CEO
It is the wrong move when the owner and the new CEO have not agreed on where the company is going. Adding an operator to an unsettled direction gives you a third opinion and no plan, so settle the direction first, then bring in help to execute it. And if your new CEO has already run a full P&L at this size under a different title, they may only need the board to back their numbers.
Ask your new CEO which number they would sign
If you have just promoted or hired a first-time CEO, ask them one thing in the next few weeks: which number in this year's plan would you put your name on, and how did you build it? If the answer starts with the target and works back to the assumptions, you know where to start.
If you are deciding what kind of help to put beside them, here is how I think about what a fractional CFO or COO does, and why judgment earned at your next size is the thing to pay for. If you are in the middle of that transition now, I am glad to talk it through.
John Wyatt · John Wyatt's page · All posts · RSS