How a CIO Can Survive a New CEO

Merrill Lynch CEO Stan O’Neal announced his retirement last week, six days after the financial services company reported a record $8.4 billion loss. Citigroup CEO Chuck Prince also stepped down as his company announced its own $8 billion hit. Time Warner, meanwhile, said that CEO Dick Parsons plans to retire next month.

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Time has promoted President and COO Jeff Bewkes to CEO. But no permanent replacement CEOs have been named at Merrill or Citigroup, leaving employees at each wondering what might happen to their jobs and their projects.

IT projects at big companies may be more insulated than those at smaller companies, says Paul Groce, head of the CIO practice at executive recruiter CTPartners in New York.

That’s because major technology efforts, like big trains, are hard to slow down once they’ve begun, he says. “Things will run along until the new chief dictates a new direction.”

As CEOs turn over, “there’s going to be concern about the future of the organization and there’s always the risk of losing key talent,” says Vincent Milich, director of the IT effectiveness practice at Hay Group, a management consulting firm in New York.

CIOs can use the uncertainty to their advantage, Milich says. “You represent continuity in leadership. The organization will value that and look to compensate you for that with a retention bonus.”

Some say CIO résumés should be going out when a new CEO comes in. “Any CIO worth his salt is in touch with executive recruiters at a time like this,” says Jim Noble, president of the Society for Information Management. Noble has been CIO at two of the high-profile companies announcing CEO changes this month: Merrill Lynch and Time Warner. He’s also been CIO at Altria and was global head of IT strategy at General Motors.

“Chances are, a new boss will want to appoint his team,” Noble says.

For example, Jim Keyes left as CEO of 7-Eleven to be CEO of Blockbuster in July. Two months later, Keith Morrow, who was CIO under Keyes at 7-Eleven, followed Keyes to Blockbuster. Keyes also lured David Podeschi from 7-Eleven to lead merchandising, distribution and logistics at Blockbuster.

“Jim knew technology can make all the difference in his success,” Noble says. “They are a wonderful team.”

New CEOs make personnel decisions within the first 60 days, so first impressions count, said Harvard Business School professor Kevin Coyne, writing in the Harvard Business Review.

When a new CEO comes on, Coyne wrote, “chances are high that [other] executives will find themselves out the door. They’re more likely than not to land in a lower position at a new company, to work in a much smaller firm or to retire altogether.”

Uh-oh, right? There’s more.

Coyne studied the turnover rate among proxy-level executives—those included in the annual proxy statements filed by their companies to the Securities and Exchange Commission—at the biggest 1,000 companies in the U.S. from 2002 to 2004. Where the CEO remained—that is, there was no change at the top—turnover among other C-level executives was 16 percent.

But when the CEO was replaced, major upheaval ensued. If the new CEO came from within, the turnover rate was 20 percent. If the new CEO came from outside the company, the rate doubled to 40 percent.

Now, CIOs aren’t typically included in proxy statements because they usually aren’t among the five highest-paid officers at their companies. Yet, there are some paid enough to be included in the proxies of the Fortune 1,000. Plus, Coyne noted, he found similarly alarming trends among C-level leaders just below proxy level.

The upshot is, when a new CEO enters, you ought to be prepared to prove your worth either to him or her or to an executive recruiter. Here’s some advice on how to survive:

• Ask how you can help. Coyne interviewed several CEOs who had taken over large companies. They said they were surprised at how few executives approached them to ask how they could contribute or to express support. “Demonstrate your willingness to go along with the program,” he said.

• Soothe the troops. “When there’s a lot of distraction and a lack of clarity about where IT should be focused, the CIO’s job becomes reassuring and refocusing the organization,” Milich says. Remind the IT group of what individuals need to do to support business units, he advises. “Get them away from water cooler talk.”

• Show common sense. Don’t go on vacation as a new CEO arrives. Don’t get caught gossiping. Get close, if you aren’t already, to key business leaders, Milich adds, to understand their angst and help them show good business results during this time of turmoil. “Be clear about what the mission is here,” he says.

• Embrace change. Heck, a new CEO might be a good thing, Groce says. “Executives may be happy to see changes occurring,” he says. “People know when things at a company aren’t going well.”