When a firm is in a tight financial corner, the board-level instinct tends to lean towards caution, to shell up and shut off outgoings. Given that their responsibility in these circumstances is to protect the interests of shareholders and creditors by minimising potential losses, this is unsurprising. But at what point does this priority kick in, and move away from supporting the CEO and c-suite to turn things around?
I have found that in leadership there is never just one way to go about things. There is no clearcut right and wrong, but when times are hard it’s a firm’s leaders that need to steady the ship and reassure stakeholders and employees.
This is why, when an organisation finds itself facing a significant challenge, upfront investment into your c-suite can be the wise move that pays off down the line. In this article I explore why.
When things have gone wrong – and right
Leadership hires are expensive both from a hiring perspective and managing out incumbents. But from my experience of matching high-end talent for top jobs, they are more than worth the investment, particularly when a firm is facing existential risks.
There are many past examples showing that when cracks start to form, bringing in top c-suite professionals or replacing the CEO altogether as early as possible can drastically influence a firm’s future.
A recent incident is the fall of retail’s Arcadia Group, which entered administration in 2020, putting around 13,000 jobs at risk. Whilst Covid was the final straw, the group’s troubles had built up over many years and yet, throughout this time, the leadership stayed largely thesame. CEO Ian Grabiner, described as Arcadia chair Sir Philip Green’s ‘right-hand man’, had been in place for 11 years, since 2009.
Over in the travel sector, another example of leadership failing, and even being rewarded to stay, is the collapse of Thomas Cook in 2019. CEO Peter Frankhauser had been with the firm since 2001 and in the top job for five years when it collapsed. Rising debts and a slow response to the changing travel market were not new issues at the point of liquidation. It can only be speculative, but perhaps investment to bring in a new leader with the right skills to manage a turnaround could have saved the operator.
On the other hand, a new leader can drive a revival. Starbucks has just enjoyed its best quarter in two years since appointing its new CEO Brian Niccol in the autumn of 2024. In fact, even the news of his appointment caused the coffee giant’s stocks to spike by 20%. Niccol set about making changes straightaway to start turning around the coffee giant’s fortunes, including simplifying menus, setting time targets for baristas, cutting corporate roles, and closing underperforming stores.
Another strong example is in the tech sector. In the early 2010s, Microsoft was recording weakening performance having missed opportunities for innovation and losing out to competitors such as Apple, Amazon and Google, with a long-term stagnant share price.Steve Ballmer, who had been CEO since 2000 and with the firm since the 1980s, was accused of being ‘stuck in the past’, when he was replaced by Satya Nadella in 2014.
Since this time, Nadella has implemented a major strategic shift including prioritising subscription models and turning Microsoft’s Intelligent Cloud business into a powerhouse, rocketing the tech behemoth’s market value during his tenure so far.
Long-standing leadership can become blinkered and not see the opportunities to pivot, such as was the case at Microsoft and Thomas Cook, or even recognise the scale of a problem. An experienced senior appointment, either in the top job or within the c-suite, can bring a fresh perspective and is also likely to reassure investors.
Crucial employee confidence
A real danger in challenging times is flight risk of your top talent, and once they start to leave it can be only a matter of time before the dam bursts. The legal sector is particularly vulnerable to this.
Take the example of global law firm Dewey & LeBoeuf LLP. By the time the firm went bankrupt in May 2012, it had lost hundreds of partners to other firms, hammering the nail into its coffin. This pattern is particularly pronounced in the legal sector because of how they are owned, making them prone to mass partner losses at the sniff of financial troubles, even while the firm may still be viable.
Having a leader that employees trust and believe in is a key ingredient to retaining the best talent and getting the most out of your teams. If your people feel motivated, they will drive your business to the moon. I do not claim to know everything about business leadership, noone does. But in my experience of leading a scale up I have found that attracting and retaining the best people is the lynchpin to growth, because they create your firm’s culture and drive its success.
Match leadership skills
A business leader facing financial hardship will need to draw on different skills to those used when the sun is shining and the mission is growth. For the former, keeping your head when under pressure and being able to step back and make strategic, big picture decisions in times of uncertainty is vital. Not every leader has both sets of skills.
A CEO that answers to a board must feel like they have its backing, or they will be constrained. This may negatively impact how they carry out their role. Nonetheless, I would suggest that if a board is not keeping a close eye on the horizon and what leadership skills will be needed in the near future and setting these against the strengths of their current CEO, then they are not doing enough to future proof their enterprise’s future, or safeguard stakeholders’ interests.
About the author: Jack Hayes is the CEO of H&P Executive Search, which he founded in 2019, aged 25. With a strong entrepreneurial spirit, Jack is passionate about transforming businesses through people by sourcing exceptional talent for top global firms. Leading from the front, Jack is a specialist in the US legal market working with the most senior hires for renowned law firms. Jack is putting his ambitious vision for H&P into practice to disrupt the high-end executive search market, strengthened by continuous growth. He keenly supports the continual development of teams and individuals at all levels, offering life-changing careers.