From Chairman to CEO in a Crisis

Asking a board member to step in as chief executive officer in the midst of a corporate crisis -- whether it's a Securities & Exchange Commission investigation or a financial meltdown -- may feel like offering someone a trip from the frying pan into the fire. Yet in these turbulent economic times, more directors may find themselves confronting this situation.

Michael Roth, the former chairman and CEO of Mutual of New York [MONY], had served on the board of directors of Interpublic Group (IPG) for less than a year when Interpublic faced an SEC investigation. Recently out of his corner office after MONY was acquired by AXA (AXA), Roth was asked if he'd be willing to step in first as chairman and then as CEO at Interpublic. Michael shared with me his advice for other directors who may be asked this tough question. Edited excerpts of our conversation follow:

What are the most important things for a board member who is asked to step into management during a crisis to consider in deciding whether to do it?

There are three key questions to ask yourself: The first is whether you think you have a chance to be successful, which depends on whether the situation is fixable or not and what will be necessary. The second is whether you feel confident that you have the support of the entire board in taking on this mandate. The third is whether you feel that you are going to receive the support of the organization if you take this on.

You also need to determine if you have the time. This is by no means a part-time commitment. If you have other business interests or serve on other boards, you may need to forgo these or scale them back pretty sharply.

What should someone stepping in as the new CEO in these circumstances do first?

Visibility and communication are critical. You need to get out in your first few days, weeks, and months on the job and meet as many people as possible. First, you need to meet with the internal business people to get their perspectives on the situation. It's critical during any crisis to maintain your client relationships; this is your lifeblood that keeps the company going while you sort things out.

Find out who the key clients are and develop strategies to communicate with them right away. Let them know what's happening and reassure them that they're still going to be well served.

In my first few weeks at Interpublic, I spent a lot of my time visiting the agencies. The CEOs of each agency would bring in their top people and we'd talk about the situation and their key clients. We developed letters and other communication strategies for the most important clients. For example, I met someone with responsibility for a key multinational client and told him that when he spoke with the client, he could say: "If you have any other questions or concerns, I can have our new CEO talk to you further about what's going on."

I wanted to be clear that if this is what it would take to reassure our key customers, I would be there to support the people who were responsible for those customers.

What do you need to communicate to company employees in this situation?

It's important for the employees to feel that you're here to try to help them and that you sincerely believe the situation is fixable. But it's not a good idea to come in as if you have all the answers; you probably don't, and this is a critical time to get as many perspectives as possible.

The employees are concerned that you've come in to fire everyone and sell the company. They'll ask you this question directly and you need to be able to reassure them that this is not the case, which it certainly wasn't in our case. That's not to say that you aren't going to have to make some changes; everyone knows that, and the whole organization is watching to see what you're going to do.

Don't keep them waiting. Assess what you have to do as quickly as you can and then move as fast as possible to make the changes you need to and get on with business.

Are there advantages to having a board member step in as CEO in a crisis?

There can be. From serving as directors, board members know about the company, its people, and its issues. That understanding helps you get up the learning curve as CEO and make decisions more rapidly than an outsider could do, which is important in a crisis. But because you haven't been a member of management, you can also take a fresh look at what's going on; you're not wedded to any of the old company taboos.

However, not every board member could step into the CEO role successfully. In my case, I had been a CEO at MONY and I had taken MONY through a difficult time. I brought both CEO experience and crisis management experience to the table. Company executives who work with the board know which directors ask good questions and have meaningful input in board meetings. If you're going to ask a board member to step in as CEO, it has to be someone who has built up a track record of credibility as an effective director. Otherwise, that person will never be able to gain the support of the organization.