Managing Unplanned CEO Turnover: Leveraging External Interim Leaders for Successful Transitions

Welcome to the seventh installment of our thought leadership series, Dynamic Leadership: Interim and Fractional Executive Insights. In today’s volatile business environment, unplanned CEO departures are a growing concern for organizations. Sudden exits can cause significant disruption, straining the confidence of stakeholders and potentially impacting bottom-line performance. Christian Buhagiar explores the implications of unplanned CEO departures, the benefits of appointing external interim CEOs during these transitions, and the critical importance of pre-planning for leadership changes.

The Reality of Unplanned CEO Departures

Unplanned CEO exits can arise from various circumstances, including termination, resignation, death, health issues, or crises. Boards and stakeholders are demanding higher standards of ethics and accountability from leaders, and activist investors and institutional shareholders are increasingly impatient and holding CEOs accountable for underperformance, leading to more forced departures. These pressures contribute to a more volatile environment that must be planned for.

A series of high-profile cases highlights the urgency of these challenges.

• Rodney McMullen of Kroger was abruptly ousted in March 2025, following a board investigation.
• Stephen Gardner of Amtrak stepped down in March 2025 after the White House requested his resignation following a change in administration.
• Lidiane Jones resigned in January 2025 for “personal reasons” after a significant drop in Bumble’s stock price during her tenure.
• Wendy McMahon departed CBS News in May 2025 amid legal and reputational issues at CBS.
• Andrew Witty of UnitedHealth Group resigned in May 2025, which led to a dip in UnitedHealth’s stock and the suspension of its 2025 guidance.
• Laurent Freixe was recently fired from Nestlé in September 2025 after about a year in the position, reportedly due to alleged romantic relationship with an employee.

Another noteworthy incident occurred recently when Andy Byron, the CEO of Astronomer, found himself at the center of media scrutiny after an incident at a Coldplay concert spiraled into a public relations crisis. Within days, both he and the company’s Chief People Officer resigned, compelling the board to appoint an interim CEO quickly to manage operations amid heightened concerns from investors and employees.

These incidents illustrate how swiftly leadership vacuums can emerge, leaving organizations vulnerable. The repercussions of unplanned CEO departures are substantial. Unplanned departures are costly, involving severance packages, retention bonuses, and lost productivity. These changes can disrupt strategy; research shows that organizations facing abrupt leadership changes typically experience an average market value decline of approximately 6%. Furthermore, studies indicate that firms often experience a decrease of around 3% in return on assets and a significant drop in return on equity, averaging about 7% following such transitions. Additional analyses underscore that forced CEO dismissals can lead to an average loss of almost $2 billion in shareholder value – figures that starkly contrast with organizations that have well-prepared succession plans in place. Alarmingly, it has been shown that nearly one-third of CEOs leave their positions within just a few years, often with inadequate succession planning, meaning that a significant number of companies will find themselves facing an unplanned turnover.

The Value of Appointing External Interim CEOs

Given the challenges associated with unplanned CEO departures, organizations often turn to external interim CEOs as a vital stabilizing force. Appointing an external interim CEO provides several key advantages, enabling boards to navigate transitions with increased confidence. An external interim CEO offers immediate leadership, ensuring continuity while the board conducts a thorough search for a permanent successor. Their expertise and objectivity are critical in maintaining confidence among stakeholders, bolstering market perception, and sustaining operational momentum.

Mitigating Market Reaction and Performance Declines

External interim CEOs instill confidence among investors, helping mitigate market volatility during tumultuous times. Firms that promptly appoint external interim leaders generally encounter less severe stock price declines, which reinforces stakeholder confidence. Research from financial studies on CEO transitions and market responses has consistently shown that timely leadership appointments are critical for maintaining investor trust and mitigating market volatility during periods of uncertainty. Firms that promptly appoint these leaders generally encounter less severe stock price declines, reinforcing stakeholder confidence.

Prolonged vacancies at the executive level can lead to serious economic implications. Continued leadership voids may suppress innovation, hinder strategic decision-making, and cause dissatisfaction among employees. Research has found that companies with prolonged leadership gaps can see as much as a 10% drop in productivity and an increase in employee turnover. Furthermore, customer relationships are at risk; without consistent leadership, organizations may fail to deliver reliable service, potentially leading to the loss of key clients.

The context surrounding a CEO’s departure can dictate how stakeholders react. Companies that delay announcing interim leadership risk compounding potential losses, while those that act swiftly often mitigate adverse market reactions. Previous analysis of S&P 500 companies highlighted that organizations making prompt interim announcements generally experience significantly better stock performance compared to those that delay such communications. This trend underscores the critical importance of effective and timely communication during leadership transitions.

For advisors to corporations, such as legal, public relations and crisis communication firms, it’s important to understand these issues and to advocate for the inclusion of external interim executives in their action plans, ensuring a comprehensive approach to maintaining organizational stability. Recognizing when to recommend engaging external interim executives should be a key part of the strategy they develop with their corporate clients – whether in the heat of a crisis or during proactive crisis management planning for leadership transitions.

Internal vs. External Interim Appointments

Relying on internal candidates for interim leadership can carry notable risks that undermine effective transition management. While promoting from within may seem expedient, it often inhibits the organization’s ability to implement necessary changes during transition periods. Internal leaders can be influenced by existing company dynamics and politics, which may hinder their objectivity. External interim leaders, on the other hand, bring fresh perspectives and are less likely to be swayed by past decisions or relationships. This allows them to implement critical changes without biases.

Additionally, interim leaders viewed solely as placeholders may struggle with authority, which can create uncertainty among employees and stakeholders. External interim CEOs, with their previous executive experience and demonstrated capabilities, are typically perceived as authoritative figures, thereby enhancing their effectiveness during transitional periods. This underscores the necessity of bringing in external talent to stabilize operations and maintain stakeholder confidence.

Importance of Timely Announcements

The timing of interim CEO announcements significantly influences organizational stability and market perception. Companies that delay such communications risk exacerbating investor uncertainty and operational disruption, with delays increasing the risk of prolonged leadership vacuums, further compressing financial performance. Rapid announcement of interim leadership diminishes confusion and concern among stakeholders. Studies have shown that organizations with clear communication strategies report less adverse market reactions during leadership transitions.

Embracing strategic pre-planning is imperative for organizations to minimize risks associated with unexpected CEO departures. By establishing a robust plan for appointing an external interim candidate, and developing the right communications strategy, organizations can respond efficiently when leadership crises arise.

The Benefits of Pre-Planning:

1. Operational Continuity: Pre-identifying specific skills, experiences and attributes needed from an interim CEO allows for swift appointments, preventing disruptions across the organization.
2. Mitigation of Market Reactions: Rapidly announcing interim appointments can minimize the average market value drop typically experienced during unplanned scenarios.
3. Strategic Readiness: A structured succession plan ensures that boards are prepared to align interim candidates with the organization’s immediate needs and long-term objectives.

Engaging a search firm or your professional network to create a roster of potential external interim candidates as part of the succession planning process can bring additional value. By discussing industry-specific needs, company size, and strategic goals with an experienced firm, organizations can ensure they have a ready pool of candidates that align with their operational requirements.