When it came time to choose a successor at Green Mountain, I was mentally unprepared when I needed it most. I didn’t have a clear vision of what a successful transition would look like, despite the visualization and meditation skills I had developed over years. I didn’t do enough to understand my successor’s mindset, help him understand mine, and plan how we could work together as a team. I didn’t consider how much a new leader could change our company culture and alter the course we had set—which I firmly believed was the right one.
But Green Mountain was growing quickly, and I was concerned about leading such a large company and handling the workload that came with it. We hired board members who had leadership experience at much larger companies. Had I been more attentive, I would have spent more time and creativity finding a solution that aligned with my values, that would allow Green Mountain to continue to thrive and show the world how a company can create positive change. I should have read books on the keys to a successful succession or simply looked online for advice. I should have brought the same curiosity and thirst for research that guided me when I originally bought the company.
Executive succession is one of the biggest challenges in corporate leadership, and it’s common. Typically, between 10 and 15 percent of companies change their CEO each year, and an estimated one-third to one-half of new CEOs fail within the first 18 months. CEOs who succeed founder CEOs have it particularly tough: They stay in office for shorter periods of time on average and have worse financial performance. I think founders tend to have a deeper, longer-term view of a company and a persistence in making things work that’s different from the mindset of a professional CEO. And because founders have such a strong influence on company culture, their departure can be particularly disorienting.
The problem with hand-picked successors
There are many cautionary tales. When former General Electric executive Robert Nardelli succeeded founder and CEO Bernard Marcus, he fundamentally rebuilt the company, replacing its culture of innovative product design with one that was relentlessly focused on cost-cutting. There are also examples of founder-CEOs who retired—only to come back and turn things around when their successor messed up, like Steve Jobs at Apple or Howard Schultz at Starbucks. And then there are stories that fall somewhere in between: My friends Ben and Jerry, founders of the fabled ice cream company, had to try out a few CEOs before they found one that was a long-term fit.
My successor, Larry Blanford, was personable and well-liked by many Green Mountain employees. Looking back, however, I wonder if he was really the best choice to lead the company, as it came at a time when the company was already in transition. After he took over as the new CEO, I began to worry that his leadership style – which I found to be more “top-down” oriented than my own – might stifle innovation and engagement throughout the company.
Larry recognized many of Green Mountain’s core strengths. As he told me and others at the time, “It’s like being given the keys to a high-performance sports car.” But I didn’t do as much as I could have to explain to him why the car runs so well and how much work went into maintaining it.
I underestimated how important and difficult it is to convey the essence of a unique company culture like Green Mountain’s to someone from the outside. And I could have put more effort into building a board that is firmly aligned with the way I built the company, believes in our social and environmental mission, and honors our commitments to stakeholders across the company.
Green Mountain’s greatest competitive advantage has long been our ability to leverage the collective intelligence of the organization to grow and improve. But when it came to deciding who would lead the company after me, I didn’t make the effort I usually do to listen to everyone’s opinions. Many people questioned my approach, but I didn’t listen to them. I failed to value our diverse stakeholders in the succession process and to adequately consider how my decision would impact them as well.
My decision to hire Larry was intuitive. I was a little burned out, and he was an experienced leader who was currently between jobs. I thought it would make my life easier to work with him to execute the plans and strategy we had developed. In practice, I should have known that this would require detailed communication—and I didn’t think about what could go wrong without that communication. If I had imagined that Larry would take the company down such a different path than I had envisioned, I wouldn’t have hired him. If Larry had had a clearer idea of what I was looking for, he might not have taken the job either.
How a company loses its culture
When I handed over the reins in 2007, Green Mountain was running at full speed. So well that it was hard to imagine anything could slow our momentum. By the end of 2006, our revenues had reached a growth rate of 40%. We were well on our way to becoming a billion-dollar company in a few years, with Assets We were listed as one of the fastest-growing small companies in the U.S. That same year, our stock was added to the Russell 2000 Index. We had surpassed the $1 million mark in our 5 percent donations to social and environmental initiatives. In 2005, we had become 100 percent carbon neutral and had 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 implementation?
Bill Davis later told me that he and the other board members were surprised by my suggestion, but they thought about it. In the spring of 2007, we had just brought on a new board member, Mike Mardy, who had previously been executive vice president and CFO of luggage manufacturer TUMI. Larry brought similar experience in large companies that we needed at the time. After interviewing Larry, they supported the decision to hire him.
Research shows that boards often rely on long-serving, respected CEOs when choosing a successor and hold back on reasonable questions and concerns. According to an analysis of corporate boards by management consultancy ghSMART, almost all failed CEO succession processes have one or more board members who are unhappy with the chosen candidate but for some reason are hesitant to go against the consensus or feel they are not being heard sufficiently.
Candidates handpicked by an outgoing CEO often disappoint. Stanford professor David F. Larcker’s 2022 study of the largest companies led by handpicked successors found that most underperformed the S&P 500. These included GE after Jeff Immelt took over and Microsoft after Steve Ballmer succeeded Bill Gates. (Tim Cook at Apple is a rare exception.)
Only a few months passed between my first conversation with Larry and the announcement of his hiring in May 2007. In retrospect, that was not enough time to make a well-informed decision. Board leadership experts recommend that companies begin planning for leadership succession three years or more before a new board member is expected to leave, if possible.
In 2004, Green Mountain employees had created a statement of goals and principles to guide our work and personal development. However, at the board level, we hadn’t talked much about the “pillars of success” that we wanted to continue to rely on going forward. And I never discussed those pillars specifically with Larry.
I never really took Larry under my wing and introduced him to “my” version of the company culture, and I didn’t feel he wanted that. After all, Larry had run larger companies before, so I think he thought he knew everything he needed to know to run Green Mountain without input from me or the board.
When I saw Larry in action, I got the feeling he didn’t value the collaborative way of working that had brought Green Mountain to where we are today. I’ve always been all for guiding and training people, but still letting them find the best way to do their jobs. I did my best to allow Larry to do that as CEO, but it was scary for me when I felt like he was going overboard. Still, I wasn’t so sure at the time and thought maybe I was wrong about what the company needed, so I kept my opinions to myself, especially when the changes Larry made were small.
Like many company founders, I chose to stay in my role as chairman after stepping down as CEO. This is a common transition: According to a study by PwC in 2019, nearly 48% of long-serving CEOs who left their jobs at the world’s 2,500 largest companies either stayed in the role or assumed that role upon succession. But when a former “iconic” CEO stays in the chairman’s post, the successor tends to struggle. Researchers at Peking and Rice Universities found that when an outgoing CEO stays in the chairman’s post, the new CEO is 2.42 times more likely to be “dismissed early.”
I tried to stay in my lane. It was no longer my job to make the strategic and other operational decisions that Larry made, and I spent much less time in person at the company. As chairman, I attended board meetings—but not our company-wide quarterly meetings. I didn’t have access to many people in the organization. My distance was confusing to longtime employees, who weren’t always sure what kind of information or concerns to share with me.
So I didn’t initially notice how much Green Mountain was changing under Larry’s leadership. But soon I felt like we were arguing about important strategic decisions – decisions that reflected a different understanding of what our company stood for and a departure from what had made us successful.
In November 2012, Larry was replaced as CEO by Brian Kelley, a former Coca-Cola executive who, in my opinion, effectively destroyed what was left of Green Mountain’s corporate culture. In 2014, the company was renamed Keurig Green Mountain, and over the course of the following year, shares fell nearly 70%. In December 2015, it was sold to a group of investors led by JAB Holding, which included our former competitors Peet’s, Stumptown, and Caribou Coffee. Now we were really just another coffee company.
Extract from Always Better: Creating a Culture of Purpose, Excellence and Transformative Human Engagement by Robert Stiller (McGraw Hill, August 2024).
