The Psychological Impact of Succession on the Outgoing CEO

A version of this article originally appeared in the July-August 2024 magazine issue of Harvard Business Review.

Few single, predictable events are a greater stress test of organizational viability than selecting and transitioning a new CEO. The rewards of getting it right are high—but so are the risks of getting it wrong.

The best practices for handling this process are nearly undisputed: start early so you have time to establish a leadership blueprint, look internally, and develop earmarked candidates, assess their fit with the blueprint, and thoughtfully onboard the chosen successor.

Yet, there is one area that many boards overlook.

For most, the succession process is focused firmly on the incoming CEO—running in such a way that ensures they hit the ground running. But, it's important that boards do not lose sight of another central protagonist in the succession process: the outgoing CEO.

CEOs commit countless hours and personal sacrifice to the top job. So, when an organization takes a procedural approach to succession that solely focused on the incoming CEO, they fail to take into consideration the psychological tensions that outgoing CEOs face during the process. 

To better understand what CEOs experience when they hand over the keys, we conducted extended interviews with 30 departing CEOs. Our analysis and synthesis revealed five common psychological crossroads they faced during the succession process—and how to best face them.

Psychological crossroad #1: initiating a succession

Our research found that 83% of successions were CEO-initiated, with the three most-cited reasons for stepping down being: time-bound, thinking of the organization’s future needs, and personal.

The CEOs who initiated succession for time-bound reasons referred to their age or tenure as “feeling right,” though the specific number varied between CEOs. Similarly, for personal reasons, CEOs mentioned they felt accomplished or lacked the focus or energy to continue.

Prior writing typically suggests that CEOs have a hard time letting go because they believe nobody can replace them. In contrast, what precipitated CEOs’ decision to step down was often because they felt their skills did not meet the organization’s future needs or that staying in the role would impede the succession pipeline.

Underpinning CEOs’ willingness to initiate succession was their relationship with the board. When it was strong, more CEOs initiated their succession. Yet, even then, boards were still surprised at the decision, suggesting that although boards spend time discussing succession, there’s little strategic planning about when a CEO might leave.

Psychological crossroad #2: relinquishing control

CEOs began with a great deal of agency when they self-initiated succession. However, this control ebbed and flowed throughout their succession journey. Onboarding aside, which takes place after the successor is chosen, CEOs’ involvement in their succession dwindled significantly, with 23% excluded entirely. Yet once the successor was chosen, their involvement rebounded, as many led their successor’s onboarding.

Although corporate governance experts typically suggest that boards are responsible for succession, CEOs’ involvement in the process is instrumental to its success. When CEOs were heavily involved, they were more confident in their successor’s ability to lead the organization. Among the 10 successors we interviewed whose tenures ended after data collection, the predecessor’s involvement was positively correlated with the successor’s tenure. Out of the six transitions where CEOs left without a successor, five had minimal participation from the outgoing CEO. The greater the participation of the outgoing CEO, the less likely there were defections among the senior executive ranks post-transition.

Psychological crossroad #3: managing emotions

During succession, CEOs had to manage others’ reactions as well as their own complex emotions.

When CEOs indicated they wanted to step down, half of the boards were unreceptive (from CEOs’ perspectives). Sometimes, boards pushed back on CEOs and other times, they did not fully respond for long periods of time. Such responses created a sense of angst among CEOs. They also had to manage the doubts of their top team, justify why they were stepping down, and alleviate concerns about what new leadership meant for the team and their organization. Once successors were chosen, outgoing CEOs had to address the frustrations of unsuccessful candidates.

Then there were the CEOs’ own complicated emotions. The period between deciding to step down and when the announcement was made was punctuated by feelings of loneliness and dishonesty for having to keep the news secret. Upon announcing, CEOs experienced a spectrum of emotions. Positively, CEOs felt relieved they no longer had to hide their decision, and some were excited about having the right successor take over.

Negatively, CEOs experienced grief and distress over losing their job, and frustration over their limited involvement with and insight into the succession process. They worried about the successor and the organization’s future. Some felt anticipatory guilt if things went poorly. Primarily, however, CEOs were disappointed and shocked at how quickly they were pushed to the sidelines as allegiances shifted toward the successor. Some CEOs also felt slighted, as their contributions to the organization seemed to be overlooked or overshadowed by the attention showered on the incoming CEO.

Similar to the other crossroads we’ve discussed, the CEO-board relationship had a major effect. When it was strong, boards were more receptive to a CEO’s decision to step down and leaders seemed to cope with their negative emotions better. But even when CEOs self-initiated succession and felt involved in it, they still struggled.

Psychological crossroad #4: planning for what’s next

Although CEOs are hired for their long-term, strategic capabilities, many do not apply these skills to their personal life. In our research, we found that 53% of CEOs did not plan ahead. While they knew they should consider their next act—not always retirement—the urgency of planning ahead paled in comparison to their day-to-day responsibilities. Perhaps unsurprisingly, the CEOs who did not plan ahead experienced more negative emotions during the transition.

Sometimes, a CEO’s transition does not mean a complete exit. We found that 47% of CEOs were involved with their organization post-handover, including coaching their successor or remaining as a board member (again, more likely to occur when the CEO-board relationship was strong). Although the predecessor’s presence post-exit can be tricky for the new CEO, outgoing CEOs experienced more positive emotions and fewer top team members left when the departing CEO remained in some capacity.

Psychological crossroad #5: detaching from the role and the organization

The psychological relationship CEOs have with the title can impact how they disengage from the role. There was a comparable split between those who viewed CEO as their job (43%) versus their identity (47%); the remainder felt it was both. Although many CEOs knew it was dangerous to entangle their identity with the role, this melting pot process often occurs naturally—as they do their job and as others reinforce their identity as CEO.

Thus, the CEO identity is a double-edged sword. When CEOs viewed the role as part of their identity, they were more likely to have a strong relationship with the board, which positively impacted succession. At the same time, those CEOs also experienced more negative emotions, because transitioning meant losing their professional identity.

The bottom line

When the CEO-board relationship is strong, all psychological crossroads are easier to manage. Developing these relationships should be a daily priority for the incumbent and board during every phase of a CEO’s journey.

Author

Rebecca Slan Jerusalim is a senior member of Russell Reynolds Associates’ Leadership Advisory group. She is based in Toronto.
Navio Kwok is a member of Russell Reynolds Associates’ Center for Leadership Insight. He is based in Toronto.