You’ve decided you need to replace one of your executives. Hopefully, the executive already knows things aren’t going great and that you’ve already had several conversations about performance. Hopefully, you’ve also already had several conversations with the board and they either are pushing for, or at least generally agree with, your decision.
So the question is how to do you execute? You have two primary options:
- Terminate and start search. Arguably, the normal order of operations.
- Start search and then terminate. This is commonly known as a backdoor search, I guess because you’re sneaking out the back door to interview candidates. More formally, it’s known as a confidential search.
Yes, there are a lot of sub-cases. “Search” can mean anything from networking with replacement CXOs referred by your network up to writing a $100K+ check to Daversa, True, and the like. “Terminate” can mean anything from walking the CXO out the door with a security escort to quietly making an agreement to separate in 60 days.
As someone who’s recruited candiates, been recruited as a candidate, and even once hired via a backdoor search, let me say that I don’t like them. Why?
- They make a bad impression on candidates. Think: so, this company is shooting their CMO and that person doesn’t even know it yet? (Sure, I’d love to work for them.)
- They tie the recruiter’s hands behind their back. Think: I have this great opportunity with a high-growth data workbench company — but I can’t tell you who it is. (Call me when you can.)
- They erode trust in the company culture. The first rule of confidential search is there are no confidential searches. Eventually, you get busted; the question is when, not if. And when you do, it’s invariably a bad look for everyone involved.
- They are super top-down. Peers and employees are typically excluded from the process, so you neither build consensus around the final candidate nor let them meet their team.
- You bypass your normal quality assurance (QA) process. By involving fewer people you disregard a process that, among other things, helps vet the quality of candidates. If the candidate turns out a mishire you are going to feel awfully alone.
- If you somehow manage to pull one off, the candidate gets off to a rough start, typically never having had met with anyone on their team.
That said, the advantages of confidential searches are generally seen as:
- No vacant seat. There’s no awkward period where the CXO’s seat is empty and/or temporarily filled by one of their direct reports.
- Short transition period. You elminate the possibility of an extended period of ambiguity for the CXO’s team. Colloquially, you rip off the band-aid.
- One transition, not two. Some positions (e.g., CFO, CMO) have active fractional (or rent-a-CXO) markets. If you terminate first, hire an interim replacement, and then search for a permanent replacement, you end up putting the team through two transitions.
I’d argue that for conflict-averse CEOs, there’s one bad “advantage” as well — they get to put off an unpleasant conversation until it’s effectively irreversible. Such avoidance is unhealthy, but I nevertheless believe it’s a key reason why some CEOs do backdoor searches.
All things considered, I remain generally against backdoor searches because the cost of breaking trust is too high. Lady Gaga puts it well:
“Trust is like a mirror, you can fix it if it’s broken, but you can still see the crack in that mother f*cker’s reflection.”
So what can you do instead of a backdoor search? You have three options:
- Run the standard play, appointing an interim from the CXO’s directs or doing it yourself. (If you have the background, it’s relatively easy and sometimes it’s even better when you don’t — because it helps you learn the discipline. I’ve run sales for 18 months across two startups in this mode and I learned a ton.)
- Run with an interim. In markets where you can do this, it’s often a great solution. Turns out, interim CXOs are typically not only good at the job, but they’re also good at being interim. Another option I like: try-and-buy. Hire an interim, but slow starting your search. This de-risks the hire for both sides if you end up hiring the interim as permanent. (Beware onerous fees that interim agencies will charge you and negotiate them up front.)
- Agree to a future separation. This is risky, but a play that I think best follows the golden rule is to tell the CXO the following: “you go look for a job, and I’ll go look for a new CXO.” A lot can go wrong (e.g., undermining, hasty departure, mind changing) and you can’t really nail it all down legally (I’ve tried several times), so you can only do this option with someone you really trust. But it allows you to treat the outgoing CXO with respect and enables them to not have to ask you for a reference (as they’re still working for you). You’re basically starting a search that is “quiet” (i.e., unannounced internally), but not backdoor because the CXO knows it’s happening.
Hat tip to Lance Walter for prompting me to write on this topic.