Sunday, February 11, 2018

How to plan and announce resignation of your CEO

Mr Mugo Kibati, the outgoing Sanlam Kenya CEO. FILE PHOTO | NMG Mr Mugo Kibati, the outgoing Sanlam Kenya CEO. FILE PHOTO | NMG 
Financial services group Sanlam Kenya last week announced the resignation of its chief executive officer Mugo Kibati, as it addressed the challenge of reassuring all of its stakeholders on continuity, with research showing that 15 per cent of top executive departures trigger the flight of other top management.
“The Sanlam Kenya Board of Directors wishes to inform all shareholders and stakeholders that the Board has accepted the resignation of our Group Chief Executive Officer (GCEO), Mr Mugo Kibati with effect from 1st March 2018, to pursue personal and professional business interests,” said Sanlam Kenya.
The resignation of a top executive can cause unease in the company as it can be an indicator of hard times ahead for an organisation and may cause other departures in the company.
According to research conducted by Stanford University on the implication of CEO resignation, the probability of top managers leaving an organisation when the CEO departs is nearly 15 per cent but it increases to 30 per cent when new CEO appointed is not from the organisation.
Thus, it is important to inform the employees first, keeping them in the loop of the company’s ongoings and preventing speculation in the office that may hinder productivity and morale.
In Sanlam Kenya’s case, the resignation was first communicated during a staff baraza/town hall meeting, well before sending out the press release.
It was followed by a formal note going out to all staff through their email addresses among other internal communication channels.
“It is very important for staff to hear the message first before it gets to the public domain. In this instance, the staff baraza worked very well,” said Lilian Onyach, the Sanlam regional head of Marketing and corporate communications.
Maggie Ireri, the chief executive officer of TIFA Research, a company offering market, social and sports research, says “it is best for the CEO to communicate the resignation to the staff first before addressing the media as it plays a critical role in minimising panic in the office. Serving notice and ensuring a proper handover to the next CEO, also helps in the easy transition for employees from one CEO to the other.”
Handling media content effectively has become more demanding in the era of social platfoms like Facebook, Twitter, and WhatsApp that lack professional pollicing and are podiums for “venting”.
For a top executive that is well known in the public, it is best to issue a press release stating the reasons for resignation immediately after addressing the staff as the information can leak, leading to speculation in the media that may consequently ruin any deals that the company may be pursuing and even its share price.
This curbs the rumour mill surrounding the CEO departure and it will be regarded as a transition to something better rather than the decline of a company.
When Andrew Mason, the ex-CEO of Groupon, a US e-commerce platform that offers consumers discounted products and services by buying as a group, he took some steps that are laden with weighty lessons.
In 2013, he resigned from the position he held since the company’s founding in 2008, writing an honest letter to the employees that he also addressed to the public, explaining that he was taking responsibility for the company’s poor performance and was resigning to allow the company and them (employees) to progress under a new CEO leadership.
The company’s share price had declined 77 per cent and it had reported a loss of $81 million in Q4 of 2012, sending its stock price down 24 per cent in one day.
“……..from the scandalous accounting techniques to our material weakness to missing our own expectation in two quarters, a stock price that is declining, the events of the last year and a half speak for themselves. As CEO, I am accountable,” said Mason.
“As employees of Groupon, you are doing a wonderful job, and you deserve the outside world to give you a second chance. I’m getting in the way of that. A fresh CEO earns you that chance. The board will give full support to the strategy that we have shared over the last few months, and I’ve never seen you working together more effectively as a global company — it’s time to give Groupon a relief valve from the public noise……..”
Mason’s resignation letter drew praise from industry experts, who described it as brave, courageous, unusually honest, and authentic as well as one of the best resignation letters of all time from a top executive.
Therefore, it is important for companies to handle the resignation of their top executive with utmost diligence as it may have a ripple effect within the company and outside of it.
Companies are created as going concerns, and, should, therefore not crumble just because one leader is leaving the helm.
- African Laughter

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