Crucial in the Launch stage is to rigorously scrutinize whether any playbooks you may have found effective in the past should be applied in making first moves or cast aside. Joe Hogan advised, “Throw out the playbook filled with actions and instead bring one full of questions.” Leaning hard on past experiences may be setting yourself up for failure.

CEOs often get swept up in a powerful “honeymoon” tailwind of optimism during this phase. Not only is the board of directors flush with confidence in their choice, but so are the markets. New leaders also commonly inherit an array of low-hanging-fruit problems to solve that their predecessor, no matter how successful, neglected dealing with or expressly put off; the market generally anticipates these quick solutions and their existence can drive up the share price. Yet the intensity of the daily demands and the huge learning curve tend to make new CEOs doubt that they’re getting this vote of confidence.

Practicing sober selling from the beginning of your tenure will stand you in good stead if a honeymoon lift gives way to a slump. The market will always make its own judgements. But if you’ve noted possible headwinds before they are widely apparent, your credibility will grow all the stronger.

The other key takeaway about honeymoon enthusiasm is the importance of being wary about tailwinds of support that may be short-lived. Working intensively in your first year to build a strong foundation of trust with the board and key stakeholders inside and outside of the company is vital. A good first step is demonstrating that you know you have a great deal to learn.

3. Calibration

Recall that our CEO Life Cycle analysis found that three out of four (73 percent) CEOs with a successful start that beat the market in year one did worse in year two. On average, the dip in TSR was a whopping 21 percent, underscoring that a slump should be taken very seriously. That said, it’s also important to keep a clear head about why share price is being battered. Often, the slide— as with the honeymoon spike— is a market overreaction. Analysts and investors often overshoot in punishing shares, mainly due to sentiment rather than the facts of performance and company initiatives being undertaken.

Another factor at work here, though, is the status quo bias, a powerful and widespread psychological force in business. The concept was introduced by researchers William Samuelson and Richard Zeckhauser, who showed in studies with many kinds of decision-makers, including managers, that “when making an important choice, people are more likely to pick the option that maintains things as they are currently.” When you’re enjoying success, your status quo bias is reinforced, which might be just fine. But given that after five, six, or seven years, market conditions will surely have evolved, it usually won't be fine to stick with the status quo later. When responding to those changes would involve making a substantial alteration to or even reversal of a winning strategy or to operational engineering you have orchestrated, the status quo bias makes recognizing the need for change and making the case for it to your team and board a good deal more challenging.

In general, board engagement in the succession process is limited until the time of the decision, which is usually within a year of the transition. Then, they might rush to judgment based on just one or perhaps two interviews with candidates, people with whom they’ve often had little or no other interactions. So little hands-on knowledge of candidates fuels the numerous cognitive biases in their decision-making. One bias is the preference for simplifying narratives, or relying on stereotypes about what a CEO should look and sound like to privilege candidates who are super confident or have a powerful physical presence or can claim bold, even brash, achievements.

We confronted this bias when we were advising about a succession and recommended the board take a more serious look at a candidate. They’d dismissed Alex as not having the needed smarts and being just a solid “doubles hitter” rather than the star slugger they were looking for. But our assessments indicated he had the smarts in spades, and as a doubles hitter, he was a real standout. We brought some of his accomplishments that had been underappreciated back to the board’s attention. We also coached him to project a stronger image, including sprucing up his attire. The combination did the trick, and the board selected Alex, who went on to achieve a great deal of success in an eight-year tenure.