What Makes A Turnaround CEO Successful?

Elon Musk has appointed Linda Yaccarino, the former head of advertising at NBCUniversal, to be the new CEO of Twitter, the social media company that has remained in the spotlight for tumultuous six months since Mr. Musk took over. Bringing in a new chief, the “Turnaround CEO,” to take the helm when a business is in distress signals the company needs and is ready for bold, sometimes unconventional moves, a substantial effort to bring back the organization from the brink of disaster.

When a new chief is tasked with a significant turnaround in a compressed timeframe, what are the requirements that would help the CEO be successful?

Defining What Success Looks Like

In the case of Uber, the mandate for Dara Khosrowshahi in 2017 was long but clear: create a profitable business, rebuild employee morale, repair frayed relationships with investors, and eventually take the company public. James Cantalupo came out of his retirement to reverse McDonald’s consecutive years of sagging US sales, which he did by introducing health-conscious menu items to address the changing consumer trend. Richard Clark took the helm of Merck & Co when the company was battling legal woes over Vioxx, challenged with rebuilding its reputation and reshaping its pipeline of promising drugs.

In most turnaround situations, there are clear measures of success: stock price, profitability, brand recognition, and pipeline of products for investors to believe in. For private companies, the list might further include taking the company public successfully, getting acquired, or becoming the industry disruptor again. For both private and public companies, in some cases, the remit might be even more specific: turning around lagging sales, rebuilding the company’s image after a scandal, financial recovery after declaring bankruptcy, and reigniting the employee base to innovate again.

For Twitter, it will be imperative to define what success looks like and, therefore, for Linda Yaccarino, what objectives she is expected to meet. Elon Musk had articulated his vision to turn Twitter into an “everything app,” X. He tweeted, “Looking forward to working with Linda to transform this platform into X, the everything app.” Will this be her longer-term mandate beyond immediate revenue and other user and advertiser metrics, which are more clearly in line with her background and experience? And what happens if the decisions supporting revenue turnaround are at odds with Elon Musk’s ultimate vision for X?

Creating clarity for what success looks like is critical not only in ensuring the leader focuses on the right tasks supported by the board and the rest of the management team but also in rallying the employees towards a coherent mission. By the time a turnaround CEO is hired, the organization has likely been through a difficult period which may include layoffs, a disengaged and demoralized workforce, and even toxic culture that had a role in the company’s situation. Giving the workforce a vision and a realistic plan is required to get through the precarious time through refreshed commitment and engagement from the organization.

Not being scapegoated for past management’s decisions

When Barry McCarthy decided to take the CEO seat of Peloton Interactive in February 2022, he knew he was facing a long list of challenges: supply chain mismanagement, a few notable negative PRs, and lack of ability to capture a lasting consumer base after the peak demands of the early pandemic. Barry McCarthy noted at his first post-earnings call conference with Peloton in May 2022, “The nature of turnarounds is they are full of surprises.” For him, this included weaker than expected supply chain and even bleaker cash flow. Unfortunately, surprises can continue: just this month, Peloton announced a recall of 2.2 million bikes sold since January 2018, well before Barry McCarthy joined. Beyond what was already publicly known, distressed companies often have more profound issues, hopefully, discovered during the early days of the new management. For a leader already grappling with the monumental task of turning a company around on multiple fronts, facing new, unexpected challenges from past management can undoubtedly be frustrating.

For the board and investors, it’s important to remember that while the discoveries may temporarily deter the progress and plans of the new management, to not blame the new CEO for surprising setbacks. Regardless, the turnaround CEO must be exceptionally agile and resilient to handle the unknown.

For Twitter, what would this look like? It’s possible that given Elon Musk’s transparency of his decision-making at Twitter, Ms. Yaccarino may not have many surprises. However, it remains to be seen whether the advertisers and users who soured on the platform (and some who switched to Bluesky) will give her and the platform another chance, especially if Elon Musk remains in a leadership position. Not being given a clean slate of trust will make her challenges even more difficult.

A wide degree of freedom to make rapid decisions

Unlike most Turnaround CEO situations where the former CEO resigns or is fired by the board, Elon Musk is maintaining an active leadership role in the company: “My role will transition to being exec chair & CTO, overseeing product, software & sysops” Mr. Musk tweeted on May 11th, 2023. With his continued active role combined with his ownership of Twitter and his strong views on the platform’s future, what is the degree of freedom Linda Yaccarino can exercise as the new CEO to make bold decisions? Additionally, given the interconnectedness between the platform (the product) and advertiser sentiment, it remains to be seen how the two leaders will make decisions that will inevitably be impacted by the other. While it’s unclear how the two leaders will coordinate or divide their decisions, one major characteristic of winning turnaround CEOs is their ability to act swiftly with urgency, an attribute of Mr. Musk. If the two leaders can agree on a path forward and forge a way to collaborate effectively, be aligned on the platform’s future, and understand deeply how one’s decision-making impacts the other, Twitter may have a chance at meeting its objectives, given they are laid out clearly.