Editor’s Note: Here, Robert Deprez, the founder of Deprez Leadership, gives some expert insights on the impact of a CEO-owned business upon the death of the CEO/founder, and ways for this difficult succession to be handled. This issue is particularly applicable to family businesses and family offices – where the personality of a matriarch or patriarch is often hugely influential. Part two of this feature will run tomorrow.

Very little has been written about the impact of grief in the workplace and its effect on businesses. Even less attention has been given to “leading” a company shocked by the death of its CEO or business owner. Grief is defined as “the conflicting emotions caused by the ending or change of a familiar pattern of behavior.” The death of a business leader is the ultimate behavior change that affects every part of the company from the boardroom to the stockroom. In most cases, the impact of grief and its threat to a company are not well understood or properly addressed. 

A CEO’s death profoundly affects virtually every person connected to the company and can trigger strong emotional reactions and a loss of mental focus. The scope of such an impact is routinely underestimated or ignored. The notion that people can or will separate themselves is false. Employees and executives are human beings who cannot park their emotions at the door. They may try to put on a strong façade, but behind the mask can be powerful emotions and distracted thoughts. The successor CEO must be aware of the implications of these emotions and act to mitigate their negative impact or they will significantly diminish the company’s performance. Unfortunately, even well prepared successor executives are usually ill-equipped to lead grief-burdened companies through the crucial 90 -180 day period immediately following the death of its owner or CEO.

The universal reactions to a death in the workplace

The death of the CEO creates an uncertain future. Employees, family members, board members, customers and suppliers will all ask themselves the question: What is going to happen to the company and how will this affect me? Such a reaction is normal and triggers heightened feelings of fear and vulnerability. There is nothing wrong with these feelings. They are automatic and natural human reactions to a highly unusual situation.

The other nearly universal reaction is a loss of focus. When a person’s emotional energy is consumed by grief it becomes difficult to concentrate. Simply put, when the heart is heavy, the head does not function. (This is not limited to just the death of someone close, but also for other losses such as divorce). Following the passing of the CEO, people will find themselves lost in their thoughts and mentally preoccupied with feelings of insecurity, sadness, shock, concern, uncertainty and more. The lack of concentration can affect everyone and often results in an increase in mistakes, poor decisions and diminished energy.

Loss of focus is pervasive following a death. In fact, 90 per cent of participants in grief recovery programs indicate that “loss of concentration” is the most common reaction to a death, divorce or other major losses.

The impact of past losses

A common misconception is the belief that only those closest to the late owner/CEO (family, senior executives, lifelong business associates, etc.) are affected. Even those who were not particularly close with the CEO may relive the pain experienced from past deaths of loved ones and bring these emotions to the surface. For example, they may think about their parents or other authority figures they have lost in their lives. The resurfacing of past emotions amplifies reactions to the current death.

You may wonder how pervasive and common is the cumulative impact of grief? To put it into perspective, the Grief Recovery Method, which conducts grief workshops, finds that 66 per cent of the people who attend their workshops end up focusing on a loss that is other than the current loss. For the majority of people, the current grief event triggers memories and emotions of even more significant past losses. 

The executive running a company after a CEO or owner has died should expect many employees to have heightened emotional reactions and possibly display unusual behavior. Reactions could range from numbness to outward aggression or agitation. It is also common for employees to withdraw or internalize their emotions, thus diverting their focus from the business at hand.

The evidence of the impact of grief on business

The prevalence and magnitude of grief are usually underestimated despite significant evidence of its impact. Grief affects all levels of the company including the executives, the board of directors and employees. 

The Grief Recovery Institute in its research report The Grief Index found that 85 per cent of senior executives acknowledged their decision making was “poor” to “fair” following the loss of a loved one (measured in weeks and months). In the same study, 60 per cent of the executives admitted that their decisions definitely had a negative financial impact on the company. Another 30 per cent indicated their decisions may have had a negative impact. (There could be a similar emotional impact when a CEO faces a terminal illness.)

These high percentages underscore the magnitude of mental distraction and impaired focus. Undoubtedly, the successor CEO and senior executives of the company will find their own energy and decision making affected. This could manifest itself not only in poor decision making but also in increased risk averse behavior and/or indecisiveness resulting in the company failing to aggressively pursue opportunities. 

At the blue collar level, there is significant evidence that grief can lead to increased rates of injury. At the white collar level, reduced concentration can result in errors in data input, forgetting to follow through on tasks, poor customer service, reduced productivity and more. 

Impact on outside stake holders

The death of a CEO also is a significant change for other stakeholders in the business. It is natural for the company’s suppliers, customers, lenders, shareholders and others to ask themselves the same question as the employees: How does this death affect the company, our investment, or our business relationship? All too often the outside stakeholders’ need for assurance or request for information on how the death affects them is seen as calloused or insensitive. However, these reactions are perfectly natural and their uncertainty must be immediately addressed.

(Part two of this feature will run tomorrow, delving into the specific issues a successor CEO must address to successfully manage the transition.)