In 2025, the board of Diageo, the British beverage giant, dismissed its CEO after less than two years following a 20 percent sales drop in Latin America and a profit warning that sent shares tumbling. The board faced a familiar problem with a familiar solution: install an interim to steady the ship while it searched for a permanent successor. The chief financial officer, Nik Jhangiani, took the role. He wrote down $1.4 billion in overvalued assets, restructured the marketing spend, and launched a $625 million cost reduction. Within months the board appointed a permanent CEO. Jhangiani returned to his CFO seat.
The story reads like a governance success. It is also a warning. The board had been operating without a successor ready to go. The interim worked. The board got lucky.
Interim CEO Appointments Now Drive a $300 Million Average Performance Gap
Boards treat interim CEO appointments as a low-risk holding pattern, a prudent pause while the real search plays out. The evidence shows the opposite.
In their May 2026 Harvard Business Review article, Nicolas T. Deuschel, Robert Langan, and Christoph Mât report that companies appointing interim CEOs lose, on average, $300 million more over three years than peers who appoint permanent successors. Return on assets typically declines two to three percentage points after an interim appointment, comparable to what most companies absorbed during the first year of COVID-19. Nearly one in three CEO successions now involves an interim, up from one in five a decade ago.
The accepted view holds that interim periods preserve continuity. The data shows they manufacture instability. Strategic decisions stall as executives wait out the unknown timeline. Senior talent leaves, pushed out by interims eager to fix things or pulled out by uncertainty about who they will be reporting to next year. Investors mark down the stock the moment the word interim appears in a press release. Interim CEOs angling for the permanent role have been linked to increased risk of earnings manipulation. The damage compounds long after the permanent CEO arrives.
The authors are right that the interim period itself is the problem. The deeper question their article opens but does not fully answer is why one in three successions now requires this destructive mechanism in the first place.
Four Interim CEO Archetypes Map to Different Board Crisis Scenarios
Deuschel, Langan, and Mât analyzed more than 400 interim CEO appointments at S&P 1500 companies between 2002 and 2024, conducted a matched-pairs study comparing firms that chose interim versus permanent successions, and interviewed a dozen executives and board members involved in transitions. They identify four interim archetypes that map to specific board situations.
A fixer is needed when a CEO is forced out during a struggle. Diageo is the type case. The interim absorbs the blame for hard cuts and clears the way for a permanent successor to focus on growth. A steward is needed when a strong-performing CEO leaves under scandal. The interim contains reputational damage and demonstrates that governance matters more than any individual. Astronomer's appointment of cofounder Pete DeJoy after its CEO was caught on a Coldplay concert jumbotron with the chief people officer is the recent example. A stabilizer is needed when a CEO departs voluntarily during a difficult period. Keith McLoughlin at Campbell Soup, after Denise Morrison's sudden retirement, fits the pattern. A caretaker is needed when a CEO departs while the company is performing well. Tim Cook's interim role at Apple during Steve Jobs's cancer treatment is the canonical case, and the audition that ultimately produced his permanent appointment.
Markets respond less negatively when boards are explicit about which archetype they have chosen and why. Most boards are not.
The Real Decision Point Is Eighteen Months Before the CEO Seat Goes Empty
The HBR analysis treats the interim appointment as the decision point. Pick the right archetype, set a clear mandate, decide whether the role is a tryout for the permanent job, and the worst outcomes can be avoided.
That framing concedes too much. The decision point is not the interim appointment. The decision point is the board meeting eighteen months earlier, when the question of CEO readiness should have been on the agenda and was not. By the time the seat is empty, the board has already made the choice that produces the destruction the authors document.
This reframing matters because it changes where leverage sits. If interim management is a discipline the board exercises during the crisis, the implication is to get better at interim management. If interim management is a symptom of governance gaps the board failed to close in advance, the implication is to fix the governance gap.
Robert Langan extends this argument in a separate 2026 paper in the Strategic Management Journal. Studying S&P 1500 successions, he finds that a CEO who follows an interim is roughly 86 percent less likely than a CEO who follows a permanent predecessor to be removed early when performance is poor. The board does not snap back to normal monitoring after the interim period ends. The interim period leaves a fingerprint on every succession decision the board makes for years afterward, with directors apparently more worried about the cost of another disruption than about the cost of tolerating a weak successor. The interim is not a recoverable interlude. It is a multi-year reduction in the board's freedom to act. (Earlier analysis here.)
My recent research on Canadian federal organizations supports the latter reading. Across four cycles of the Public Service Employee Survey from 2019 through 2024, board-governed organizations and minister-direct departments rated senior leadership identically before the pandemic. After the COVID-19 stress event, a four-point gap opened on a 100-point scale and held for two more cycles. Board-governed organizations lost about one point on average between 2020 and 2022. Minister-direct departments lost nearly five. The buffer that good governance produces was invisible in calm conditions and decisive under pressure.
The mechanism connecting the two findings is leadership continuity. Board-governed organizations in the federal data showed greater resilience because their boards had built succession capacity into the institution. The one organization in the sample that lost its permanent leader during the study window, the Canadian Institutes of Health Research, suffered the worst leadership-rating collapse despite identical governance architecture to its sister research councils. Same governance form, opposite outcome. The variable was bench depth.
Four Board Readiness Tests That Prevent the Interim CEO Trap
Deuschel, Langan, and Mât list four questions to ask when an interim appointment becomes necessary. A different set of questions belongs in front of those four, because the goal is to avoid the interim entirely.
Can you name three internal candidates ready to step in within ninety days? Not in theory. With the bench in place, the development program funded, and the board willing to act on any of them. If the answer is fewer than three names, the work starts at the next board meeting.
Does your director-tenure structure protect institutional memory? A board that turns over alongside its CEO has lost the continuity that stabilizes an organization at the precise moment that continuity is most needed. No more than one-third of directors should rotate in any twelve-month window.
Do directors know the executive layer below the CEO? Every director should maintain substantive contact with at least three executives one rung below the chief executive, substantive enough to describe each one's strengths and gaps without prompting. A board whose read on the organization runs entirely through the CEO has no independent basis for choosing the next one.
Have you rehearsed the transition? Some boards now run interim-transition exercises the way crisis-response teams run tabletop drills. Who convenes the board within twenty-four hours. What constitutes a quorum. Which decisions the interim can make alone. Which decisions the permanent CEO will revisit. Boards that have not answered these questions in calm conditions will answer them poorly in turbulent ones.
Governance Architecture Predicts Resilience Across Public and Private Sectors
The pattern holds across sectors and structures. Public companies face it in stock-price reactions. Private companies face it in customer and investor confidence. Regulators, hospitals, universities, and public agencies face it in the trust of the people they serve and employ. The underlying mechanics are the same. A leadership vacuum extracts a measurable cost. Boards that prepare absorb the cost. Boards that improvise compound it.
The HBR research draws from large public companies. The federal-agency evidence extends the pattern into a setting with no shareholders, no exit market, and no quarterly earnings. The buffering effect of strong governance appears anyway. What it requires is architecture that protects leadership continuity, paired with boards that build the bench before they need it.
The Best Interim CEO Decision Is the One You Never Have to Make
Deuschel, Langan, and Mât are right that interim appointments deserve their own discipline. They are right that boards underestimate the costs. They are right that the four archetypes help boards make a better choice once the seat is empty.
But the better choice is the one that prevents the seat from going empty in the first place. The boards that will outperform over the next decade are those that have stopped treating interim readiness as a problem to solve during a crisis and started treating it as core governance to build during the calm.
The next CEO transition will not announce itself. The board's response will be set before it does.
Read the HBR article: Should You Appoint an Interim CEO? by Nicolas T. Deuschel, Robert Langan, and Christoph Mât, May to June 2026 issue.
Related research on board governance and leadership resilience: https://ssrn.com/abstract=6730459