When it came time to choose a successor at Green Mountain, my mental game was off when I most needed it to be on. I had not developed a clear vision of what a successful transition would look like, despite the visualization and meditation skills I had cultivated for years. I didn’t do enough to understand my successor’s way of thinking, help him understand mine, and plan how we could work as a team. I failed to consider how much a new leader could change our company culture and alter the course we were on—which I firmly believed was the right one.
But Green Mountain was growing fast, and I had concerns about running such a big company and managing the workload that came with it. We were adding board members who had leadership experience at companies much larger than us. Had I been more mindful, I would have spent more time and creativity finding a solution that was true to my values, that allowed Green Mountain to continue to thrive and to show the world how a business can drive positive change. I should have read books about the keys to a successful succession—or even just looked for advice online. I should have brought the same curiosity and hunger for research that guided me when I originally bought the company.
Leadership succession is one of the biggest challenges in running a business, and it’s a common one. Typically, somewhere between 10 and 15% of companies replace their CEOs each year, and an estimated one-third to one-half of new chief executives fail within their first 18 months. CEOs taking over from founder-CEOs face an especially tough road: On average, they have shorter tenures and worse financial performance. I think founders tend to have a deeper, longer-term view of an organization, as well as a persistence to make things work that is different from the mindset of a professional CEO. And because founders have such a powerful influence on organizational culture, their departure can be particularly disorienting.
The problem with handpicked successors
There’s no shortage of cautionary tales. When former General Electric executive Robert Nardelli became CEO at the Home Depot, succeeding founder-CEO Bernard Marcus, he dramatically overhauled the company, replacing an entrepreneurial culture of innovative product design with one relentlessly focused on cost-cutting. There are also examples of founder-CEOs who retired—only to come back and “right the ship” when their successor fumbled, such as Steve Jobs at Apple or Howard Schultz at Starbucks. Then, there are stories that fall somewhere in between: My friends Ben and Jerry, the founders of the fabled ice cream company, had to try out a couple of CEOs before finding a long-term fit.
My successor, Larry Blanford, was personable and well-liked by many Green Mountain employees. But looking back, I wonder if he was really the best choice to lead the organization, arriving at a time when the company was already in transition. Once he had taken over as the new CEO, I started to worry that his leadership style—which I considered more “top-down” than my own—could put the brakes on innovation and engagement across the company.
Larry recognized many core Green Mountain strengths. As he told me and others at the time, “It’s like being handed the keys to a high-performance sports car.” But I didn’t do as much as I could have to help him understand what made the car run so well and the work that went into maintaining it.
I underestimated the importance and the challenge of transmitting the essence of a unique culture like Green Mountain’s to someone who was coming in from the outside. And I could have worked harder to cultivate a board of directors that was solidly aligned with the way I had grown the company, that believed in our social and environmental mission and in honoring our commitments to stakeholders across the organization.
Green Mountain’s biggest competitive advantage had long been our ability to leverage the collective intelligence of the organization to grow and improve. Yet when it came to deciding who should run the company after me, I didn’t make my usual effort to hear everyone’s opinions. Many people questioned what I was doing, but I didn’t listen to them. I neglected to value our diverse stakeholders in the succession process and to think hard enough about how my decision would affect them, too.
I made my decision to hire Larry on intuition. I was a little burned out, and he was an experienced leader who was, at the moment, between jobs. I thought it would make my life simpler to work with him to deliver on the plans and strategy that we’d laid out. In practice, I should have known this would require detailed communication—and I did not think about what could go wrong without that communication. Had I imagined that Larry would take the company on such a different path from what I had set out, I would not have hired him. Had Larry been given a clearer sense of what I was looking for, perhaps he would not have taken the job, either.
How a company loses its culture
When I handed over the reins in 2007, Green Mountain was firing on all cylinders. So much so that it was hard to imagine anything stopping our momentum. At the end of 2006, our sales had hit a 40% growth rate. We were on track to be a billion-dollar business in a few years, with Fortune listing us as one of the fastest-growing small companies in the United States. The same year, our stock was added to the Russell 2000 Index. We had surpassed the $1 million mark in our 5% donations to social and environmental initiatives. In 2005, we’d become 100% carbon-neutral and published our first corporate responsibility report. We had clear strategies for immediate and long-term growth. Why not relax a little and let someone else handle the details of execution?
While Bill Davis later told me that he and other board members were surprised at my suggestion, they considered it. In spring 2007, we had recently brought in a new board member, Mike Mardy, who had been executive VP and CFO of the luggage maker TUMI. Larry brought similar big-company experience, which we needed at the time. After interviewing Larry, they supported the decision to hire him.
Research shows that boards will often defer to long-serving, revered CEOs in their choice of a successor—holding back on reasonable questions and concerns. According to an analysis of corporate boards by leadership advisory firm ghSMART, in almost all failed CEO successions, there are one or more board members who are uneasy about the chosen candidate, but who for some reason hesitate to contradict the consensus or feel that they are not fully heard.
Candidates who are handpicked by an outgoing CEO more often than not disappoint. Stanford professor David F. Larcker’s 2022 study of the largest companies run by handpicked successors found that most underperformed the S&P 500. This included GE after Jeff Immelt took over and Microsoft after Steve Ballmer followed Bill Gates. (Tim Cook at Apple is a rare exception.)
Between my initial interview with Larry and the announcement of his hire, in May 2007, just a few months passed. In retrospect, that wasn’t enough time to make a fully considered decision. If possible, board governance experts suggest that companies start to plan for a leadership succession three years or more in advance of an expected departure.
In 2004, Green Mountain employees had created the Purpose and Principles statement to guide our work and personal development, but at the board level, we hadn’t had much discussion about the “pillars of success” that we wanted to continue to rely on going forward. And I never specifically discussed these pillars with Larry.
I never really took Larry under my wing and introduced him to “my” version of the company culture, nor did I feel he wanted me to. After all, Larry had already managed larger companies, and because of that, I think he believed he knew everything he needed to know to run Green Mountain without input from me or the board.
As I saw Larry in action, my feeling was that he didn’t value the collaborative way of working that had gotten Green Mountain to where we were. I’d always advocated guiding and educating people but still letting them figure out the best ways to do their jobs. I did my best to let Larry do that as CEO, but it was scary for me when it felt like he was going off the playing board. Still, I was not all that sure of myself at the time and thought that perhaps I was wrong about what the company needed. So especially when the changes Larry made were small, I kept my opinions to myself.
Like many company founders, I chose to stay in my role as board chairman after I stepped down as CEO. This is a common transition: According to research by PwC, in 2019 nearly 48% of long-serving CEOs who left jobs at the world’s largest 2,500 companies either remained as board chair or assumed that role at the time of succession. But when a former “iconic” CEO stays on in a chairman role, the successor tends to struggle. Researchers from Peking and Rice Universities found that when an outgoing CEO remains as board chair, it makes the “early dismissal” of the new CEO 2.42 times more likely.
I tried to stay in my lane. It wasn’t my job anymore to make the strategic and other operating decisions that Larry was making, and I spent a lot less in-person time at the company. As chairman, I attended board meetings—but not our companywide quarterly meetings. I did not have access to many of the people in the organization. My distance was disorienting for longtime employees, who weren’t always sure what kinds of information or concerns they should share with me.
So I didn’t notice at first all the ways that Green Mountain was changing under Larry’s leadership. But soon enough, it felt to me like we were butting heads over important strategic decisions, decisions that reflected a different understanding of what our company stood for and a departure from what had made us successful so far.
In November 2012, Larry was replaced as CEO by Brian Kelley, a former Coca-Cola executive, who, to my mind, effectively dismantled what remained of Green Mountain’s culture. In 2014, the company was renamed Keurig Green Mountain, and over the next year, its stock dropped almost 70%. In December 2015, it was sold to an investor group led by JAB Holding, which also owned our former rivals Peet’s, Stumptown, and Caribou Coffee. Now, we really were just another coffee company.
Excerpt from Better and Better: Creating a Culture of Purpose, Excellence, and Transformative Human Engagement by Robert Stiller (McGraw Hill, August 2024).
